Mobile operators have focused on becoming successful content service providers during the past five to six years to avoid being marginalised into mere ‘bit pipe’ providers. They have invested heavily in building own-branded portals (such as Planet 3 and Vodafone live!) and have attempted to operate across many areas of the content value chain (for example content acquisition and aggregation, marketing, billing, delivery and customer care) to gain greater control over the mobile media and entertainment (MME) market.
Despite these efforts, mobile operators’ portals have only managed to capture the minority of revenue in the MME market to date in major Western European markets – for example, on-portal revenue accounts for only 20% of total MME revenue in the UK – and they are likely to come under increasing pressure. The trend towards unrestricted mobile Internet access, as well as the increasing number of established online brands and handset vendors that are entering the mobile market, pose a significant competitive threat to operators’ portal businesses. In addition, mobile operators may find it increasingly challenging to compete directly with established content specialists if they lack the skills, resources and marketing budgets required to sell own-branded content services successfully.
In the context of the changing competitive environment, Analysys Mason believes that mobile operators will have more scope to increase revenue by adopting a ‘service enabler’ approach, rather than a ‘content service provider’ approach, to MME. Mobile operators are best placed to become ‘service enablers’ in the content value chain by using their unique assets, which focus on transmission, billing and consumer insight. These assets are essential to the success of third-party content service providers in the MME market.
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Asset type |
Core assets and description |
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Transmission |
- SMS and MMS are viable platforms for the delivery of mobile content. MMS has the potential to become a major channel for delivering rich media content
- Data pipe: operators determine data traffic charges, which have a major impact on the take-up of content providers’ services
- Network quality: operators are primarily responsible for the quality of the content transmission
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Billing |
- Premium SMS is the most prevalent billing method in Western Europe. Most off-portal content is billed via premium SMS messages
- Mobile Internet billing, which enables users to browse mobile content and then purchase selected content directly, has started to emerge in the market
- Operator billing is likely to continue to dominate the market because operators have trustworthy brands and alternative billing methods (such as credit card billing and PayPal) tend to be cumbersome
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Consumer |
- Demographic information, such as age and gender, for contract subscribers
- User behavioural profiles: operators are best placed to understand users’ interests and behavioural patterns because they act as gatekeepers to both on-portal and off-portal activity and can analyse search keywords and WAP or Web access histories
- Continuous presence information, such as user location and handset status
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Table 1: Mobile operators can apply their unique assets to the ‘service enabler’ role [Source: Analysys Mason, 2008]
The revenue potential of acting as a service enabler for a wide range of content providers appears to be significant. Mobile operators can obtain three major types of enablement revenue: traffic, billing and advertising-related revenue. For example, mobile operators in the UK can harness about 15% of total content revenue by offering billing services to off-portal content providers. Advertising revenue is limited at the moment, but has the potential to grow into a sizeable revenue stream in the medium to long term if operators can successfully sell their user profiles to advertisers and brand owners.
The addressable market for operators’ portals is likely to become limited as more consumers adopt mobile Internet access services and gain access to off-portal, direct-to-consumer offerings. In addition, the conflict of interest between the service provider and enabler roles could restrict the MME market’s growth and, as a result, operators’ long-term revenue.
Mobile operators are likely to maintain their content service provider roles in the short to medium term because of the many vested interests entrenched in their on-portal businesses. However, Analysys Mason believes that they need to move quickly towards a ‘service enabler’ approach. By doing so, mobile operators will accelerate the growth of the mobile content market, which will in return offer mobile operators much higher traffic, billing and advertising-related revenue in the long term.
Mobile Media and Entertainment in Western Europe: value chains and business models discusses the state of the Western European MME market, identifies key players, analyses the value chains and business models that are emerging in eight MME sectors (personalisation, games, music, TV and VoD, adult content, gambling, social networking and mobile advertising), and assesses how they are likely to develop.
