Premium content to drive mobile industry

MUMBAI: Mobile data services are the next wave of growth for the mobile communications industry amid the increasingly saturated subscriber base.

While messaging will continue to be the main revenue contributor in most emerging and developing mobile data markets, much of the growth potential also lies in premium content. Greater 3G (third generation) coverage and deployment, expanding regional subscriber base, declining cost of advanced multimedia handsets, and the race to secure a continuous stream of content through partnerships are likely to drive growth of mobile data revenues.

New analysis from global growth consulting company, Frost & Sullivan Asia Pacific Premium Content Market, reveals that the market - covering 13 major Asia-Pac economies - earned revenues of $9.4 billion in 2005 and is estimated to reach $32.9 billion by end-2011.

Frost & Sullivan industry manager Janice Chong says, "Subscribers in most Asia-Pac countries have strong preference for local content, which creates the impetus for the fast-growing mobile content market. The pace of 3G adoption, to a certain extent, influences the development of premium content applications by providing greater bandwidth and faster data transmission."

The Asia Pacific mobile data market is forecast to grow at a CAGR (compound annual growth rate) of 17.9 percent between 2005 and 2011. Messaging revenues still constitute the majority of operator-generated data revenues. In 2005, messaging accounted for approximately 39.6 percent of total operators’ data revenues (excluding revenue share of third-party content providers).

The total premium content market, which includes both operator and third-party content provider revenues, held 29.5 percent of total mobile data revenues in 2005, and is expected to register a CAGR of 23.2 percent from 2005 to 2011.

In certain Asia Pacific countries, the revenue share ratio skews in favour of mobile operators. As a result, content providers receive a small revenue split. Moreover, content providers are required to pay hefty royalties for applications to music label companies and associations. These factors have in some ways hindered the growth of the premium content industry in selected countries. While the revenue share model employed in Japan, South Korea and China may seem relatively favourable to content providers, similar business models may not apply to other countries across the region.

Chong adds, "In markets such as Indonesia and the Philippines, mobile operators typically retain 60 to 70 per cent of the revenue from sale of content, while content providers receive the remaining smaller portion.

"Content providers in such countries believe that they deserve a larger revenue share considering that the cost of content development is entirely borne by them."

This however is inherently characteristic in markets outside of Japan and South Korea, primarily due to the high use of SMS (short messaging services) based applications which contribute to low data traffic usage. The lack of a satisfactory level of revenue from data traffic usage would mean that operators will tend to seek a higher revenue share from content downloads to compensate for the low data traffic revenue.

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