Mobile Entertainment

Zed has just announced this amazing $100 million in a month figure. Can you talk about that?
Yes, we are a private company, we can talk about anything. I’m very proud. It must be the first time a pure play mobile content company has generated $100 million revenue in a month. We were delighted to show a turnover of $454 million for last year, so you can see what kind of growth it represents. We’re basically growing a 100 per cent year on year.

How much bigger can it get?
There’s plenty more growth left. We know that only three per cent of the market is now active compared to the overall penetration of handsets and subscriptions.

How do you account for the growth?
We now have 35 million paying subscribers around the world, and the $100 million represents a bit of everything. Yes, the traditional products are still significant, but the new wave of products – the web 2.0 element – and the new business models around them are growing fast. Also, we’re expanding geographically and that’s making a big difference.

What’s happening to Zed over in the US?
We’ve been active in the US since 2003. And as 9 Squared, which we inherited when we made the Monstermob purchase earlier this year, since 2001. We have a D2C operation that’s now live across all major operators. Eventually, we will use the Zed name, but we’re in a soft transition now as 9 Squared has brand equity in some B2B markets.

Is the US lagging as far behind Europe and the East as most people think?
It has been. But it caught up fast in 2006 and even faster in 2007. Our US revenues were $25-$30 million in 2006, but will be $120 million this year. We’ll have between three and four million subscribers. The US represents around 25 per cent of our business, with Europe at 40 per cent and rest of world 35 per cent. We’re aiming for a 33.3 per cent split.

How tightly is the D2C market in the US controlled by operators?
Well, you have a lot of freedom – but only if you go along with the rules set by the carriers. Basically, you have to certify that everything works. I think it’s a fair approach. It eliminates distortions like the Crazy Frog affair in the UK.

How is it that Zed has avoided the fate that befell so many D2C companies in 2005 and 2006?
It comes down to one thing: you must own your IP and therefore control your own destiny. Only on top of that do you build relationships with third parties. 85 per cent of our products are internally developed. People talk about low barriers to entry in this market. I say it’s the opposite. We have 700 people working in R&D, and we invest 50 million Euros a year in new products. But you also need scale. That way you amortise investments across the world. This is what’s driving the recent spate of major consolidation in our sector.

So I take it that your dependence on ringtones is reducing?
Personalisation is slowing down, so our exposure to ringtones is small. Only five per cent of our revenues come from major label tones. Generally, there’s a huge change from solo products to social products. It’s why we’re building competition and dialogue around gaming, for example. And we find that people are as interested in these additions as they are in the game itself. We’ve also introduced new services that let people message each other across web and mobile, create blogs, and upload pics and video. Our users currently upload 150,000 item a day, for example.

Monstermob was preparing to launch a full-track music service before you bought the company. Will you still roll it out?
No. It’s too easy to get music free on the internet now. It’s certainly not something I approve of, but it’s a fact. Instead of trying to fight the impulse to share, we have to harness it. That’s why we have proposed a new concept to the labels. They’re very interested. I hope to see a live service in six to nine months.