Mobile content shapes the future of the cellular industry

There is an increasing focus on mobile content these days. Not only are consumers using a wider array of content features, but the demand for mobile content is beginning to re-order the business of mobile content production and distribution.

Network operators and WASPs (wireless application service providers) are addressing issues such as the regulation of adult content, parental control of their children`s use of cellphones to access content and premium-rate subscription content services. A key driver is that more and more consumers are downloading mobile content as cellphones become available in the market already set-up with user-friendly MMS, WAP and GPRS functionality. The network operators are stimulating consumer demand by introducing competitive pricing for added-value features such as picture messaging, video clips and mobiTV alongside ringtones, games, wallpapers, logos and other forms of "infotainment".

Globally, according to an independent survey commissioned by LogicaCMG, the demand for mobile content is due to grow three-fold from 2005 to 2006. The research estimates that mobile content will contribute R56.3 billion (EUR7.6 billion) to the cellular market in 2006. While 20% of cellphone users had downloaded mobile content in 2005, it was expected that this user base will increase to 60% in by mid-2006. The global monthly average spend per user on mobile content is nearly R48.

These trends are useful for making predictions for the use of mobile content. While ringtones, music and games will be most popular types of mobile content accessed by consumers in 2006, by 2008 there will be significant increase in the downloading of music, video clips and mobiTV as technology advantages in handset capabilities and the availability of broadband will make cellphone ubiquitous personal communication-entertainment devices.

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The opportunity gaps to produce mobile content, thereby catering to consumer demand for new mobile experiences, has already been filled by large content aggregators who develop content in-house or source mobile content from a plethora of small content development companies. Their market share, to date, has been guaranteed by their links to the network operators. However, three new developments are threatening to unsettle the mobile content distribution value chain.

The first is the role of WASPs in enabling their brand owners with SMS marketing campaigns and developing customised content platforms using premium-rate and WAP services. This has alerted brand owners to the fact that not only are cellphones a direct link to consumers but that their own Web sites should be enabled to distribute branded content, such as wallpaper and video clips, to a targeted market. The implication here is that those content aggregators producing mass content will be pushed out of the market in favour of niche content production. A further impact will be the rise of specialised WAP development technology companies geared to support the WAP-enablement brand owners` Web sites. This is not unlike the developments in the Internet industry where businesses began setting up their own Web sites to service clients rather than relying on Web-based intermediaries.

The second threat comes from the global music industry distributors, content owners in their own right. The first step will be the take-over of the ringtone market from existing content aggregators. The lure of mobile content is two-fold: ringtones currently provide the bulk of the revenue generated from mobile content and music distributors have an existing infrastructure and consumer base to supply mobile content. It follows that digital media, like video clips and mobiTV, will become favoured as promotional channels for the music companies, thereby expanding music distributors mobile content offerings.

Taken together, these scenarios spell the beginnings of a disintermediation of cellular value chain as the development and distribution of mobile content becomes the domain of content owners with direct links to consumers. The challenge to content owners will be in staving off consumer discontent by providing fresh mobile content experiences.