I'm happy to welcome Michele MacKenzie from Ovum to review the market of mobile content here at Xellular Identity. Michele is a Senior Analyst and a Service Manager for the Ovum advisory service and Practice Leader for Ovum's Consumer Practice. Michele has over seven years' experience in the telecoms industry, specializing in mobile communications and wireless Internet.
Michele, the stage is yours:
A few years ago the mobile content market grew quickly, but growth was fuelled solely by a special kind of content: personalisation, that is ringtones, logos and wallpapers. People regard their phones as highly personal items, and content for making them even more personal quickly proved to be highly popular.
However, in the more general content areas such as news and music, mobile has taken longer to develop and has grown more slowly. Mobile operators have had to deal with big challenges in re-purposing themselves as content media, in terms of technology, internal organisation, relationships with other businesses and relationships with their customers. Progress on all those fronts has been slow, and it is not over yet.
So although the availability of mobile content has taken big strides forward in recent years, we expect revenue growth to be steady rather than spectacular over the next few years. We forecast that global revenues will grow from around US$31bn in 2005 to US$55.5bn in 2010. In 2005 and until the middle of the forecasting period, personalisation applications continue to dominate. But from 2007/8 onwards other application groups such as Alerts and mobile TV and video will increase their contribution to revenue growth. Ovum expects revenues from rich content - music, games and video and TV - many of which are core 3G applications, to drive wireless content revenues from 2008 onwards.
The market place for mobile content was dominated, in earlier years, by the closed portals of the mobile operators. Those days are over now. We estimate that in Europe 50-70% of content revenues are driven from outside the operator-branded portal. The figure is lower in the US, around 40%, but is growing fast. Operators need to move fast in order to capture and maximise these revenues, by putting in place a well thought through off-portal strategy. An on portal and off portal strategy are not mutually exclusive, they complement each other and are both needed. The walled garden is no longer viable: a single portal will not meet all of consumers’ growing demands. And operators benefit from off-portal content too: it drives revenues from data traffic, and we believe it will also help open the way for advertising revenues going forward.
On the global level, mobile content, including data traffic, is around 5% of total consumer service revenues at present. We expect this to hover at around 5 or 6 % throughout our forecast period. The wireless content market still faces a huge number of challenges. Many of the new higher value services such as music, video and mobile TV will go through a bedding down phase and will take some time to reach the mass market, not least of all because of low handset penetration supporting the new services and other key enablers such as DRM. Many players have now made those initial investments and have done the groundwork to either launch the service or prepare for launch. Many are now addressing the early market and looking at how to bring those services to the mass market. Two new areas of great potential are social networking and mobile advertising. These two key areas are intrinsically linked: mobile social networking services can drive mobile advertising revenues. But both are embryonic at present, and wireless players are still grappling with the issues they involve: they are a long way from mass-market uptake.
The key challenges that wireless players are facing when it comes to growing the wireless content market are:
- Increased competition in a convergent world
Consumers are targeted with content and entertainment services by their TV providers as well as their fixed and broadband service providers and in addition by their mobile providers. On top of that, they may well already have their email or instant messaging account with one of the large Internet portals such as Yahoo! which will also be offering them a range of services. This is where mobile players need to think more carefully about a multiplatform strategy and partnering with other players out there. The market is very crowded with many players looking for a share of both the end-user revenue and the advertising revenue.
- Wireless players move out of the comfort zone
Providing music and TV services is a different business to personalistion. Wireless players are now exposed to greater competition (see above) which means lower margins. Many will struggle to differentiate and build the business and some will do well to take on the facilitator role rather than compete head on as a service provider. These roles are not mutually exclusive.
- Wireless operators need to harness the off portal opportunity
There is a growing trend for wireless operators to absorb or subsidise the traffic charges for on portal services. This of course is an area of contention for off portal players, many of whom are reviewing their options having seen increased barriers to entering the rich content market due to prohibitive traffic charges. In order for the rich wireless content market to grow it will be critical for the wireless operators to look at a wholesale data strategy for third parties or flat rate data packages. If you don’t do it somebody else will so it is better to plan your strategy early on.