Recent research by MultiMedia Intelligence shows that cellular subscribers are purchasing more premium content, such as music and mobile games, but content sales are falling short of expectations. In research we released this week, we found that the digital commerce segment grew at slightly less than 10%. We also found that the market for premium mobile platforms grew almost 20% to $3.4 billion.
Many industries would be thrilled with 10% to 20% growth. While the mobile content platform and digital commerce services companies find it disappointing, much of the issue is out of their hands. The ringtone market is softening while other content categories are failing to live up to expectations. Additionally, the mobile content platform and digital commerce services companies sit in the mobile content ecosystem stuck between the more powerful operators and content owners. The operators have tremendous power as they own the subscriber. The content companies have power as they own the content that individuals want. The revenue distribution among the different industry segments reflects this power imbalance.
One to the key trends in the platform market is that questionable and unprofessional market activity by some off-deck providers is drawing the ire of carriers such as Sprint Nextel, which recently enacted strict guidelines and is enforcing them with penalties for content partners. MultiMedia Intelligence sees other carriers following suit, not only in the US but in Europe as well, in hopes of cleaning up rogue off-deck providers.
A subscriber can receive content on a mobile device in one of three methods. (1) Content can go through an operator's deck and/or be billed to the subscriber's bill using tradition mobile content method (On-Deck). (2) Consumers can find content from a third party, purchase the "off-deck" content and have it billed through their operator (3) A subscriber can access content on the open Internet on open platform devices such as the iPhone and bill the content to a credit card, PayPal or other similar means. In the third scenario, operators do not see any of the mobile content revenue.
As a result, MultiMedia Intelligence defines premium mobile content is content that is delivered to a mobile handset for which a subscriber needs to provide payment and that payment is made directly to the carrier's bill. The billing can happen via premium SMS, WAP billing or any similar method. The key characteristic is that the content must be billed to the subscriber's bill. Content that is delivered to a subscriber's handset that is billed to a credit card or other payment method and delivered over an open data pipe is defined as broadband content.
Alternative forms of mobile premium content have failed to develop at the rate most had hoped. Mobile music is still dominated by ringtones; however the growth of the category is muted as the decline of polyphonic ringtones eats away at the gains made by music ringtunes. Ringtones will remain the dominant music category through out the forecast period, despite strong growth in full track downloads, streaming music and ringback tones.
Additionally, the transition to an off-deck dominated content market is developing in North America. However, a stronger transition is stymied as the mobile content discovery and purchase process is still too challenging to consumers.
Finally, the market will begin to see the emergence of advertising in premium content. Video will be the dominant driver, yet other content types will see growth as well.
For more information, see MultiMedia Intelligence's report Mobile Content Platforms: Mobile 2.0 and Advertising Join the Party.
About the author
Frank Dickson is Co-Founder & Chief Research Officer at MultiMedia Intelligence. He has in depth expertise in focus areas including Internet TV, IPTV, video on demand, home networking, mobile video and content platforms. Frank has over a decade of industry and market research experience. In his most recent prior role, he was Senior Director of In-Stat's Convergence Groups. Frank has a Masters Degree with Distinction from The American Graduate School of International Management and an MBA from Arizona State University. He also holds a Bachelors of Science Cum Laude Degree in Operations/Production Management from Arizona State University.
