Let’s talk about money. Making money

The forthcoming MEM show will avoid the usual fixation on tomorrow’s technology to focus on genuine revenue.

Mobile entertainment is a huge business.  At just over $32bn a year earned from nearly one billion users, mobile entertainment is not far off the $50bn generated by internet advertising. 

Ours is a grown-up business selling digital goods on a truly impressive scale.

That’s why this year’s Mobile Entertainment Market (MEM), the annual event of the Mobile Entertainment Forum (MEF), is going to be so interesting.  Gone are the sessions on the latest cool technology, or on ways of building up huge valueless audiences.

Instead, we’re going to talk about money, and how to earn it. At MEM everyone knows what they are talking about, usually by having learned – and survived – some hard lessons on their way to success.

Almost all the discussion is going to be about growth – through new products, new territories and new business models. This may seem odd in the current climate, but a look at the MEF’s quarterly Business Confidence Index proves otherwise.

In February the first survey showed an industry anticipating 27 per cent growth this year.  At MEM, KPMG will announce the results of the second survey. What will it show? Watch this space.

In general, mobile content is in a great position. The smartphone transition is happening, taking over 13 per cent of new phone sales in Q1 2009 according to Gartner. Meanwhile nearly 200 networks now offer 3Mb/s HSDPA access, with population coverage in some countries reaching 90 per cent.  And the uptake of applications show that customer demand for this content category is real.

As consumers get faster data, the opportunity for replacing ringtone revenues with broadband-dependent content such as mobile video, mobile social networking and mobile advertising becomes ever greater. 

Key lessons have been learned, the industry is going beyond the early orthodoxy that mobile would just be a wholly-owned subsidiary of the internet, with the same content, user propositions and business models.

An interesting example of this is the way owners of traditional media are integrating mobile into a multi-channel entertainment strategy. At least the mobile entertainment business has a tradition of transactional revenues, and other media owners sigh with relief when they encounter that. But what does this look like and how can it work?  How will they leverage their brands over costly data and tiny screens? 

Our industry’s great strength is its revenue model and payment mechanisms.  No one can claim with a straight face that they are perfect, but they do work.  But now the first apps stores have challenged operator billing - just as internet businesses are discovering mobile billing and exploiting it with unbridled enthusiasm!  Something very odd is about to happen in this part of the mobile entertainment business.

Of course, the core businesses of ringtones, music, games and chat are under pressure.  Some say D2C content vendors are destined to crumble because of this, and because of tougher regulation. But such opinions usually come from outside our industry, betraying an ignorance of the skills involved in the selection, presentation, promotion and delivery of idiosyncratic mobile content products. Can they turn these skills to apps?

Apps will undoubtedly be a focus at this year’s MEM. But we’re more interested I business that development platforms. After all, behind all the enthusiasm, there are real challenges here – the structure of the value chain, discovery and so on.  There is also the question of how operators can actually make money out of this business, when so many proclaim it as an instrument to reduce them to “dump pipes”. 

MEF’s “Smart Pipe Enablers” Initiative aims to explore this, addressing how operators can provide some services and information mined from the core of their network to make apps simpler and more fun to use – and earning everyone more revenue.

The nice thing about MEM, apart from the discussions, is the chance to meet seasoned colleagues and brilliant newcomers. Amongst them are execs from emerging economies, where mobile entertainment has been embraced with a zeal that excites admiration.  By now we are used to seeing leading innovation from areas like Russia, India, South America and the Middle East, all represented on our Growth Markets panel.

That’s the funny thing about our industry – even after nine MEMs, it just refuses to get dull.