Feature: The market for mobile content - May 2007  

Kick-started by the boom in downloadable ringtones, the market for content on mobile telephones has grown rapidly and in 2006 created more than €6bn of revenue for network operators in Europe alone, writes David MacQueen, senior analyst, mobile at Screen Digest.

The growth of the market has always been consumer-led. Network operators were (and many still are) focussed almost entirely on voice and text message communication, often paying little more than lip service to content. This attitude led them to lose out on the multi-billion dollar market for ringtones as visionary entrepreneurs picked up on the user desire to make an individual statement with this most personal of communication devices.
Network operators woke up and smelled the money. In Europe, regulation on voice and messaging had begun to shrink ARPUs; could content save the day? Throughout 2001 and 2002, operators deployed and aggressively marketed content portals. Some of the hype led to consumer disappointment in early services, but today these portals dominate the market for all types of content except ringtones.

Network technologies

The vast majority of subscribers in Europe use GSM (Global system for mobile communications), also known as 2G, devices. These only allow for connection speeds approximately equivalent to a dial-up modem. This rather limited the market for richer content such as TV, video and full track music.
3G, or UMTS (universal mobile telecommunications system), networks offered the promise of broadband connection speeds. Network operators rushed to acquire spectrum; in the UK alone £22bn was spent in the auction. 3G uptake proved disappointingly slow, hampered perhaps by the bulky devices. For many users, mobile phones are fashion items.
After a slow start from the early launches in 2003 (less than 1m at year end) 3G penetration has finally started to show some serious growth. At the end of 2006, there were more than 52m subscribers in the western Europe. 3G handsets today are now as small and desirable as 2G handsets. This mass market acceptance has significantly improved the prospects of music, TV and video services.

3G TV Services

Since early 2004, live TV streaming has been transmitted to mobile customers through mobile networks capable of handling high data traffic. Mobile operators across Europe used mobile TV to promote 3G services. TV programmes were typically free to access on the operators’ portals until adoption was significant enough to start monetising services.
Most European operators have 3G TV services. The content portfolio varies between 10 and 53 channels and subscription prices between €7 and €15 per month. Operators have experimented with a variety of business models. TV on mobile can be paid per day, per week, per month, per MB, per minute, per channel and per package. As with mobile music, prohibitive data transfer charges have prevented off portal providers getting involved in this market.
In France and the UK, pay TV companies Canalsat, TPS and BSkyB stepped into the mobile content market. This has always been through partnerships with network operators. Network operators typically source content from a variety of providers.
There are very few firm figures available. BSkyB has 230,000 mobile customers across multiple operators in the UK and Ireland. Network operator Orange had an active base of 450,000 users at the end of 2006. Screen Digest’s discussions with the mobile industry indicates that consumer uptake of 3G TV services has been very mixed.
More recently, led by UK-based network operators, user generated video services have found success. Whilst not TV (although network operators often market video services as such), the success of these services could lead to an uptake in mobile TV as users become accustomed to the advanced functionality of the handsets.

Broadcast mobile TV

European operators are looking into alternative technologies for mobile TV. Broadcast technologies such as DVB-H and DMB are potential candidates. Deployment costs, spectrum availability and handset choice are all hindering the launch of services. It is almost impossible to launch a mobile TV service with a wide choice of channels before the analogue switch off date in any country.
In Europe, DMB and DVB-H mobile TV broadcast services have been commercially deployed in Germany, Italy, and the UK. Italy’s DVB-H services offered by Hutchison, Telecom Italia, and Vodafone are relatively successful. Screen Digest estimates that the Italian market was standing at 400,000 users in December 2006. Meanwhile, DMB-based services launched in Germany and the UK during the second half of 2006 have attracted no more than 10,000 users in each market at the same period. Each DMB service only offers a maximum of 5 TV channels because of the limited spectrum availability, while the Italian DVB-H services offer up to 17 channels.
Subscription is the business model favoured in Italy and Germany, while in the UK the TV service is free to consumers signing a monthly contract of £25 or more. One of the drivers in operators launching these services is a desire to move the user base from pay as you go (also known as prepay) to contract, and it is no coincidence that it is the network operators with the highest number of prepay customers that have launched these services. Italy has the highest proportion of prepay customers in Europe. In Germany and the UK, the services have launched on the operators which have historically had a higher than market average proportion of prepay users.

The future

While the future of mobile content is bright, with content ARPUs growing rapidly, the prospects for each category of content gives a more varied picture. The potential of none of the markets has yet been reached, so all will grow.
In Europe at least, mobile games is a market rapidly reaching maturity. Full track mobile music is experiencing high growth as the number of music capable handsets increases to reach mass market devices. However, some of this growth has undoubtedly been at the expense of the ringtones market.
Mobile TV, and broadcast mobile TV in particular, is a complex market and Screen Digest expects the market to develop very differently in different countries. The timing of the availability of spectrum is critical to this market. Ultimately, it is anticipated that most countries will have a broadcast mobile TV network over which mass market channels are broadcast, with 3G providing the distribution platform for more niche viewing.

A longer version of this article appeared in the March 2007 issue of Screen Digest’s monthly newsletter.

Screen Digest has recently added coverage of mobile content to its ground breaking online business intelligence services. Mobile Intelligence offers clients the most up-to-date picture of the global mobile market. Drawing on Screen Digest's existing expertise in global media markets, Mobile Intelligence comprises constantly updated historical and forecast market data. Covering mobile operator subscriber numbers, ARPUs, end user spend on a quarterly basis, as well as comprehensive five year market forecasts for content revenues by genre, 3G subscribers and much more besides, this intelligence service ensures you have the information required to make the best decisions possible.

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