Mobile Entertainment

In the US (as elsewhere), mobile media first hit the public consciousness in, well, public. The trilling of ringtones announced to those who weren’t already paying attention that consumers were willing to part with cash to buy content.

The success of ringtones seemed to validate two beliefs about mobile. First, that the mobile phone was a distinctively personal technology that corresponded not to a household (like TV) or a few individuals (PCs), but to a unique individual.

Second, it confirmed that nothing is for free in mobile. This personal device, tied to billing systems, promised a nirvana of micro payments and subscription revenue.

The first belief is unquestionably true. The second is true up to a limit. Ringtone revenues continue to be robust in the US, but this is due primarily to the shift to more expensive mastertones and subscription models that generate recurring revenue.

Crucially, the ringtone audience declined by one per cent year-on-year in September, while the number of mobile phone owners creating their own ringtones has jumped 65 per cent over the same time period.

It must be stressed that those businesses won’t go away, but growth will be difficult. Instead, business models that provide uniquely mobile content or models that depend on the capabilities of the operator network have a clearer path. We see this in the 15 per cent year-on-year gain in consumers buying mobile games and the 47 per cent increase over the same period in people using operator services to send photos and videos to friends, families and web destinations.

Furthermore, our world gets more interesting and even more complicated as companies focus on a new monetisation model for mobile content – advertising.

During the summer, the press fervently covered the details of the rules being considered for the US Government’s auction of the 700MHz spectrum, the ‘beachfront property’ of the wireless world.

With Google taking the lead among potential bidders and other forces of the internet massing alongside them, the content debate was cast as a choice between new ‘open access’ services that would be possible on the new spectrum and the closed walled gardens of existing US operators.

Those ideological fault lines are important to consider, but it’s equally important to consider the business models doing battle. The economics of the internet are the economics of advertising.

The September decision by the New York Times to drop its subscription firewall doesn’t illustrate a failure to make money from paid content – they are reportedly waving goodbye to $10 million in annual subscription revenue. Rather it demonstrates their belief that there is even more money to be made through an ad-supported model.

US mobile operators know this, which is why they have spent much of the year strategising and experimenting with advertising. And it’s why AOL bought Third Screen Media, Microsoft acquired ScreenTonic and Nokia purchased Enpocket.

As we look towards 2008, there will still be US mobile consumers buying and subscribing to ringtones, mobile games and other content. But it seems increasingly clear that HSDPA, JVM and H.264 are no longer the acronyms to watch. Keep your eye on CPM, CPC and CPA.