NeoMedia Technologies, Inc (NEOM)

[ss9173]

DD Content costs confound customers
08 March 2006

http://www.telecoms.com/itmgcontent/tcoms/news/articles/20017340178.html

One of the questions raised by a large number of attendees at the 3GSM World Congress in Barcelona, concerned the issue of when content will become the market-driving force behind the mobile industry, replacing the aesthetic appeal and desirability of the handset that persuades consumers to part with their money today.

Handsets are made more appealing by the fact that they are subsidised by the operator. Which begs the question: when will such a business model transfer to mobile content, if ever? The expense of mobile content is the primary deterrent for users, according to a recent poll by SurfKitchen. While research conducted by Buongiorno Vitaminic at the end of 2005 revealed that mobile users were allocating more budget for mobile content purchases.

Either way, the price of mobile content is too high.

Despite a fairly muted 3GSM for mobile advertising, it has the potential to become one of the hottest topics in mobile during 2006. Primarily because advertising revenues could help drive down the cost of content. The Mobile Entertainment Forum is certainly backing such a model. For instance, a free mobile TV service funded by advertising would not only extend the service beyond the early adopters and high spenders, it would give the opportunity to upsell premium content. And that is speaking in a language that the operators and content providers understand.

While timeframes for mobile advertising are yet to be disclosed, most of the industry openly claim to be "looking at it". And while they might, the fact remains that a lot more companies are attracted to the potential of advertising revenue, than the number of mobile users attracted to - and actively downloading - content. Mobile content remains a largely undetected world by the majority of mobile users.

Figures released by Qpass, highlight that only a startling 10% of its mobile-operator-customers, subscriber-base look at and/or use mobile content. That's some 17.5 million users, but when divided into socio-demographic groupings, is that a sufficient number to warrant big brand companies advertising on mobile?

There is undoubted potential for mobile content, but that will only be unleashed providing there is an engaging user experience founded upon search mechanisms discovering compelling content - worthy of searching for. Are we at that stage, or indeed, anywhere near that stage today? Mobile content revenue forecasts from Informa Telecoms & Media, suggest not.

The mobile content industry will be worth $21.3bn by the end of the year, and $42.3bn by 2010. Substantial sums indeed, but are these figures revealing the whole truth about the mobile content industry?

No.

A breakdown of that 2006 figure reveals that the total annual mobile content expenditure per user (mobile content revenues divided by the number of data users including messaging users) is $15.96. The average monthly spend is $1.33 and the average daily spend on mobile content is $0.04. By 2010, the average annual mobile content spend rises to $21 per user - which equates to a daily spend of $0.06. Put another way, assuming the average mobile game download costs about $5, that is only three downloads on average this year, and four in 2010.

Clearly a number of factors are holding the industry back. None more so than the lack of compelling content and the high prices associated with that very same less then compelling content. The former can only be addressed over time, but the latter can have an immediate effect. For example, Orange UK dropped the price of its Connect4 game from £4.50 to £1.50 when it believed the game was coming to the end of its shelf life. The 66% price cut resulted in sales rocketing 500%.

Yet some companies steadfastly maintain that consumers are prepared to pay a premium for mobile - and that extends to content. Musiwave, for instance, resolutely believes that operators do not have to revise their mobile music download pricing, despite the glaringly obvious fact that full-track downloads can cost up to $2.63, while music download via iTunes costs US$0.99.

Without compelling content, there is a strong argument to delay the inevitable introduction of flat data-rate pricing. Mobile content usage is a snacking phenomenon, where users dip-in, dip-out - so why trap the user on a monthly subscription? There is a growing need for flexible pricing schemes that reflect the mobile industry, hourly, daily and weekly prices. 3 is one operator that is allowing its users to rent content and this is proving to be very successful. As no doubt would content previews. But none more so, than just lowering the price.

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