Mobile content growth slowing down ..

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Many of you know that Tony Fish and I are working on a book called ‘Mobile web 2.0’ – to be released later this month. Web 2.0 (and by extension – mobile web 2.0), is about user generated content. I have always believed that ‘broadcast content’ i.e. content created by the media industry – has a very limited lifespan – especially on mobile devices.

It’s in that context that I find this Forbes article fascinating

The entire text reproduced below but my key take home points and insights are:

a) Every month in the U.S., only 10% of mobile subscribers download a ring tone to their phones, and less

than 4% download games. Text messaging is holding steady at about 33%.

b) Two years after the introduction of video on cell phones, 2 million Americans, just 1% of the market, pay

$10 to $15 per month for the service

c) Industry journal Mobile Entertainment notes that the average price of a mobile game fell from 4.30 to 3.49

in 2005!!

d) It took AOL 15 years to reach 30 million subscribers, while iMode did it in three years – but iMode stumbled

in the adoption of 3G and the third place operator (Vodafone) was annihilated

e) At $400 to $700, the retail price rivals that of a PC, too. But because mobile operators subsidize the

purchase of the handset when a customer signs a two-year contract, most consumers get these phones

for around $200.

f) The content team at the typical mobile carrier is understaffed and under resourced, tucked away in the

bowels of the marketing department. These hardworking souls attempt to match the output of an entire

cable TV company on a shoestring budget. So true!!!

g) Failure to segment the market is another reason for the lag. They have NOT been listening to Tomi

Ahonen!

h) Every mobile operator offers a content mall, but these shops fail to match the ease of use of Apple Computer’s iTunes store. Most mobile content storefronts are difficult to browse, which makes

the process of discovery tedious. Small wonder that only die-hard enthusiasts have the stamina to find new content

i) Mobile operators hate to admit that consumption per handset tapers off six months after a new phone

is purchased.

It’s these last two points that I think encapsulate the biggest issues

j) In the content business, the best way to defeat consumer fatigue is peer marketing.

k) The winners in this race will establish annuity- billing relationships with millions of consumers of new digital-

entertainment services. Having created this new market, the mobile operators will have no one but themselves to blame if it slips from their grasp.

My view is ..

I don’t think the mobile operators ever understood this market! It’s not about media content; it is about peer to peer (but user generated content) and its certainly not about annual billing relationships because I don’t think Mobile operators are a consumer brand in the same way as iTunes is!

Complete article as below

Despite the recent buzz about entertainment on cell phones, the

mobile-content market has hit a speed bump.

After an initial burst of growth, mobile content–which can include

everything from ring tones to video clips–is struggling to break out

of the early adopter segment and achieve mass consumption. It is too

soon to forecast the demise of this promising new field, but it is

evident that wireless entertainment is wavering during a crucial

transition to third-generation mobile telephony, or 3G.

According to Seattle-based mobile-market research firm M:Metrics,

consumption of wireless content has flatlined. After eight quarters

of rapid growth, sales in the two main categories, ring tones and

mobile games, have stalled. Every month in the U.S., only 10% of

mobile subscribers download a ring tone to their phones, and less

than 4% download games. Text messaging is holding steady at about 33%.

On advanced 3G handsets, consumption is about three-times stronger

than on the older, more widespread 2.5G phones. But 3G unit numbers

remain tiny. Two years after the introduction of video on cell

phones, 2 million Americans, just 1% of the market, pay $10 to $15

per month for the service. Unless the 3G audience expands rapidly,

current levels of investment in the creation and delivery of rich

content such as 3-D games and video may be unsustainable.

Meanwhile, in Europe there’s troubling evidence of price erosion.

Industry journal Mobile Entertainment notes that the average price of

a mobile game fell from 4.30 to 3.49 in 2005. The value proposition

for paid mobile content is in danger of crumbling further before

subscribers migrate en masse to 3G. At February’s 3GSM convention in

Barcelona, European cellcos speculated hopefully about the prospect

of embryonic mobile advertising revenue to offset the dwindling

consumer fees for content.

It wasn’t supposed to be this way.

A lot more is at stake than games and ring tones. With revenue from

voice dwindling, mobile carriers need to sell content to drive mass

takeup of new data services. Cheery forecasts for consumer adoption

of mobile media were initially supported by evidence from leading-

edge markets in Japan and Korea.

The world paid attention when iMode, the wireless Internet service

run by Japanese giant NTT DoCoMo, surpassed AOL as the largest ISP on

Earth, with 35 million subscribers in 2003. It took AOL 15 years to

reach 30 million subscribers, while iMode did it in three years. It

appeared that mobile was the fastest-growing new content platform in

history.

But DoCoMo stumbled during the transition to 3G. Second-place rival

KDDI stole the momentum with innovative content, acquiring

subscribers at a much faster rate. And third place Vodafone was

annihilated in Japan during the 3G migration.

The problem isn’t the hardware. Today’s mobile phone is smarter than

you think. New models from Nokia, Samsung and Sony Ericsson boast the

equivalent processing power of a desktop computer from 1995. Such

phones come equipped with brilliant color displays, 1.3 megapixel

cameras, the ability to download a wide range of rich media content,

including 3D games, MP3 music and video clips.

At $400 to $700, the retail price rivals that of a PC, too. But

because mobile operators subsidize the purchase of the handset when a

customer signs a two-year contract, most consumers get these phones

for around $200. The handset subsidy is intended to spur adoption of

new data services. But widespread consumer demand has lagged. Why?

One reason is unimaginative marketing. Wireless carriers promote

themselves as reliable telephone services that offer “four bars” and

nationwide coverage. Content is not a primary focus because, until

recently, phone companies weren’t in the content game.

The contradictions in the telecoms’ mentality are reflected in

operating budgets. The content team at the typical mobile carrier is

understaffed and under resourced, tucked away in the bowels of the

marketing department. These hardworking souls attempt to match the

output of an entire cable TV company on a shoestring budget. In 3G,

this area requires more investment because the content is more complex.

Failure to segment the market is another reason for the lag. U.S. and

European carriers continue to repeat the mistake of selling the same

product to everybody. Over 75% of American adults own a cell phone.

Yet mobile content is presented in the same way to nearly every segment.

The success of mobile-content services depends upon the carrier’s

ability to identify lucrative niche audiences and cater to their

interests. During the past two years, U.S. carriers belatedly began

to focus on Latino and African American subscribers. This effort bore

fruit immediately, as consumption of mobile content among these

subscribers is significantly higher than average. Will the carriers

follow through on this effort by tailoring services to other niches?

The third reason for the slow takeup rate is lackluster

merchandising. Every mobile operator offers a content mall, but these

shops fail to match the ease of use of Apple Computer’s iTunes store.

Most mobile content storefronts are difficult to browse, which makes

the process of discovery tedious. Small wonder that only die-hard

enthusiasts have the stamina to find new content.

Carriers rely on content providers to stimulate consumer demand. The

resultant content offering seems tired, encrusted with the same names

that dominate conventional media.

This might change. New entrants, such as the MVNOs (mobile virtual

network operators, like Amp’d Mobile) aim to differentiate vanilla

mobile service with exclusive content. As new competitors attempt to

steal existing subscribers, the major carriers should react with

innovative content products and services.

The last reason is consumer fatigue. Mobile operators hate to admit

that consumption per handset tapers off six months after a new phone

is purchased. In the content business, the best way to defeat consumer fatigue is

peer marketing. Savvy movie marketers know that word-of-mouth can

drive box office ticket sales. Likewise, in television, the “water

cooler effect” generates awareness within a peer group.

This should apply to mobile, too. After all, a telecommunications

network ought to be the best environment for word-of-mouth marketing.

But carriers have failed to harness this powerful mechanism. They

provide no easy way for a fan to recommend content to friends.

Now, during the turmoil of the transition to 3G, a new crop of

nonphone portable media players threatens to disrupt the wireless

market, raising the question of whether the mobile carriers will

regain momentum before their best customers migrate to richer media

platforms.

January’s Consumer Electronics Show in Las Vegas showcased a dazzling

array of new pocket-sized media players at affordable price points.

The key to the success for such devices will be the quality of the

content offering. Successful devices like the iPod and XM satellite

radio are shipped with integrated access to superb digital content

services with quality programming.

Now the race is on for mobile operators to improve the presentation

of their content services before the hordes of MVNOs and CE companies

launch rival offerings.

The stakes are high. The winners in this race will establish annuity-

billing relationships with millions of consumers of new digital-

entertainment services. Having created this new market, the mobile

operators will have no one but themselves to blame if it slips from

their grasp.

Robert Tercek is the co-founder of MultiMedia Networks in Los

Angeles. He has produced content for every digital platform,

including satellite and cable TV, personal computers, game consoles

and mobile phones. He is the founding chairman of the mobile-game

summit at the Game Developer Conference, which took place in San

Jose, Calif., on March 20 and 21, 2006.

Image source: http://www.wmode.com/v4/images/services01.jpg