Mobile Entertainment

Anyone familiar with hip hop outfit Public Enemy would associate the band with politically charged lyrics, disparagement of the media and the concerns of African Americans.

Perhaps what the New York-based act were less famed for was their insight into the mobile entertainment market. Back in 1998, they released one of their most anthemic tracks, Don’t Believe The Hype, which dealt with cultural misinformation.

Twenty years on it hits an appropriate note for the current shenanigans taking place in the mobile content market.

The UK is seen as the vanguard of the European mobile content market. In 2005 it was worth an estimated £600 million. Start-ups emerged in their droves, each looking to execute a successful business model and claim their share of the riches. And why not?

Problems arose, however, when those business plans failed to entertain the notion that the UK market might still be worth £600 million in 2006. It was. And worse is to come – the figure is most likely to decline in 2007 and at best remain stable.

But the veneer of prosperity remains. As the worlds of entertainment and mobile converge, the glitz and glamour of Hollywood are replacing the grey suits of wireless, sky-rocketing the content hype in the process. The burning question now is: how long will it last?

The bad news is that ringtone revenue – the foundation upon which the mobile content market has been built – is now in decline. The good news is that mobile content revenues as a whole are yet to wane. That trend indicates the new categories of content are making up the shortfall.

Assuming the average piece of content in the UK costs £3, approximately 200 million transactions occurred in 2006 (and 2005 for that matter). Based on a UK mobile subscriber base of 45.3 million, that equates to content ARPU of £13.2 (4.4 transactions) per annum.

Crucially, this does not account for the fact that only 20 per cent of the UK’s mobile users purchase content. Therefore, the MEARPMEU (Mobile Entertainment Average Revenue Per Mobile Entertainment User) was £22.1 per annum in 2006, based on an average of 7.4 transactions by 9.06 million users.

The bottom line is that the overall number of mobile content transactions per UK mobile user is less than one per month. For this reason, the operators have sought to introduce flat-rate data bundles (FRDB) as a means of increasing data APRU.

Whether FRDBs will in turn drive mobile content revenues remains to be seen – anecdotally, 3 UK has not seen an uplift in content sales since launching X-Series.

It seems then that the mobile content proposition is compelling, but only for the 20 per cent of mobile users that parted with £600 million of their hard-earned cash last year and in 2005 – it’s not sufficient to encourage continued market growth.

How can this be changed? Operator portals are the first port of call for most consumers. But Vodafone UK now has the Google search box on the live! homepage, despite the fact that it has signed high-profile content deals with the likes of BSkyB.

Quite simply, operator portals are now competing against consumer desire to browse the wider internet. Content revenues reflect this trend – 70-75 per cent are generated off-portal, equating to £180 million for the operators. The good news is that the operators are adapting their content strategies accordingly.

But perhaps the best news of all is that the UK market is worth £600 million despite the fact that the jigsaw is still missing a number of vital pieces. Until mobile broadband speeds approach anything near the fixed-line experience, consumers will not consider mobile a viable content delivery apparatus.

What’s more, the 20 per cent of mobile consumers that are using mobile content have already overcome one of the last remaining hurdles: the UI.

In 2008, the time will be right for the rest of the market to follow suit. So don’t believe the hype, at least not yet – 2008 will see the resurrection of the mobile entertainment market in the UK… and beyond.