The Future of Mobile VAS in India. The Consumer, the Market, and the Possibly Happy Marriage between Content and Distribution?
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ESPN Star Sports has recently introduced Star Sports Mobile, a mobile content service that is similar to Mobile ESPN that was launched across multiple markets in Asia Pacific in May 2006. The service works on WAP and can be downloaded from espnstar.com.
The content that ESPN – Star distributes will mainly revolve around the football clubs Arsenal and Liverpool. The content would include exclusive chat sessions, video interviews, Java Games, ringtones, wallpapers, match highlights, goals etc.
The distribution of content through mobile is nothing new, there are great opportunities and ESPN, I would say has realized this quite late – or at least its plan has been put into action in a not so timely manner.
Manu Sawhney, Managing Director, ESPN Star Sports, said, “As Asia’s leading sports broadcaster and content provider, we are focused on serving the fan any time, any place via any device”
One must also keep in mind that clubs like Arsenal and Liverpool enjoy a great fan following in Asia and they should expect to earn sizeable revenues along with ESPN Star and the respective mobile phone operators.
To give you an idea of how the revenue sharing model actually works, here is an insight into the Indian Idol revenue model.
During the voting period from November 2004 to March 2005, Indian Idol got more than 55 million votes via SMS. At Rs 3 per SMS, that is Rs 16.5 crore. The telecom companies made Rs 11.5 crore , and Sony about Rs 5 crore.
So as one can see, the creators of the content as of now do not demand as much of the revenue margin as the distributors (i.e. the mobile phone operators). I don’t see that changing too much except in specific cases where the content has a great market ‘pull’. The sole reason behind this is that even though content is supposedly king, distribution has access and without access there would be no content. In short, the supply of mobile phone operators is relatively inelastic i.e. they are fewer in number and not growing that fast. The supply of content makers however is relatively elastic - there are loads of people trying to produce exclusive content and there is a certain level of quality that is being made due to the proliferation of so called ‘exclusive’ content creation tools. So obviously the distribution takes a higher premium because there are scores of people lining up with content for distribution while everything cannot really be distributed.
One may even see a scenario where distributors may create or buy over content and handle its exclusive rights to gain a better control over revenues (which is what I hope to explore in this post).
As of now a lot of the football content that ESPN Star Sports produces is centered around the South East Asian fans – which is where all the monies lie with respect to football, especially EPL content frankly. Of course a market exists in India as well but the scope and magnitude of it will be much more in the countries that have the numbers in terms of football fanatics.
Let’s try and define the 3 main ‘stakeholders’ when it comes to mobile distribution of content more clearly:
1) Mobile Phone Operators (the distributors)
2) The Media companies: They have exclusive content to share that viewers like to watch
3) The aggregators: They are the people who modify content exclusively to suit it for viewing on the mobile screen.
As stated before, the mobile phone operators have an upper hand because of the strong media they own. I see a diminishing role for the ‘aggregators’; there is also a great likelihood of them being bought over by the mobile phone operators who will use the aggregators to create exclusive content for them and take a greater share of the pie.
Another development I foresee in the near future is that TV over mobile is going to be easily accepted . I doubt TV over mobile will ever be like TV as we currently know it. We definitely will see exclusive content but due to limitations in bandwidth primarily and due to the nature of the screen and short attention time spans, we will see mostly TV ‘munching’ or short TV shows (like our very own WATShow).
In the past, the impression was that content over the mobile will be paid for, and the revenues will be much bigger on the Mobile phones than on the Internet. This was primarily because of the mindset that exists in the consumer’s mind who thinks that everything on the Internet is (or should be) free, while everything on mobile phones is/ or can be paid for.
The other is to do with logistics. Mobile phone companies can charge premium content directly to a persons bill or even cut money from his/ her prepaid balance. This is something your cable operator cannot do because he does not OWN the content you are viewing! And that’s the key – so far, mobile phone operators have OWNED content. That will change once users start to generate exclusive content through the Internet – which then will not be owned by the mobile phone operators (which is what they must try and do in order to retain their steady stream of revenues).
Once users start accessing exclusive content from the Internet, it may then be supported by advertising as I have previously written (especially with the advent of companies such as Mobile Worx who provide VAS for mobile over the Internet for free). So if mobile phone companies want to maintain their VAS revenues over the Internet in the future, they must start building strong brands from now so that they can leverage on the brand equity that such services may accumulate when the phenomenon of accessing VAS and TV from the Internet really takes off (which I don’t think is too far away). If they do not do so, they will be reduced to mere service providers which quite clearly is where they do not want to be.
There is probably another insight with respect to TV and other Value Added Services (VAS) over mobile. It has been noticed that in America, where people commute mostly using cars that are self driven, the revenue through TV over phones is not as high as in markets like Japan where people use a lot of public transport and spend a lot of time commuting. The Indian Market seems similar to the Japanese market does it not?
Even handset providers are joining in the fray especially Nokia who currently has about 70% of the market share with respect to GSM Handsets. Nokia is spending a lot of time, money, and resources to ensure that dealers are educated with respect to the usability of high end applications and services.
Estimates from various sources project the value of the Mobile Data Market to touch $10 Billion by 2010.
A lot of the reasons have already been outlined – another aspect to add is that the mobile can fill a real hole with respect to the rural entertainment space in India. The number of Cable connections in India are currently at only 70 Million. The potential for handset penetration in numbers is 500 million plus.
Apart from having access to entertainment, rural consumers would also be willing to spend a little more on the mobile space primarily because it is a device that places a lot of ‘power’ in their hands. The ability to know the weather or book railway tickets without moving from your room is something that will boost both the ego as well as morale of the rural consumer.
The stage is set for a lot of momentum in the mobile space – expect a lot of changes, a lot of forecasts and a lot of new players (and expect WATBlog to report and analyze everything as it happens)
Very detailed analysis! Will probably take weeks for me to have review of it!
The analysis is quite detailed. I will like to add one more thing here is that in India mobile operators still control the contents being passed over Internet. Take example of Reliance which has complete control of what you access. There is a high probability that the operators will block the applications which are getting popular and force you to share the revenue. Alternatively they may block the application and come out with a similar application of theirs. Ultimately they may end up like a toll plaza for the VAS content on mobile, unless either competition or government forces them to.
Nice article. We surely expect a lot of changes as technology is evolving..
Thanks all of you - yes Rohit your point is pertinent and i think some operators will definitely do it - but one must also keep in mind that once people start accessing the internet on independent browsers there is very little mobile companies can do - it would not be in their interest or the users’ interest to block popular sites.
There is very little an operator can do if 1 million people a day are visiting Orkut from their phones.
Reliance i think is a one of example and they have played their cards smartly because they retain a lot of control over VAS.
we will be the most lazy people in the future
Shantharaju,reliance mobile blog is creating that barrier. They are trying to replicate popular content in order to hold consumers back.
Also, the observation in the blog that Japanese and Indian markets are similar is incorrect since the income groups that travel by local transport ( barring few in mumbai due to practical reasons of time), is very different from those driving cars. If one were to look at it objectively, the heavy users of mobile VAS will be high income, car owning individuals.
Chirayu - i actually disagree with your observation. Mobile VAS as of now is terribly expensive - in time it will become cheaper… as mobile operators will be forced to become more liberal and more consumers start accessing the internet through their phones. Then possibly VAS will be free - supported by ads. Im not trying to be the expert here or anything but just looking at trends and speaking to a lot of people in the mobile industry i get the sense that:
a) Everyone from mobile wants a marginally higher consumer’s share of wallet - so they want consumers to go beyond the realm of text, and voice. Right now ‘VAS’ is through text - so its restricted. Even then consumers are using a lot of the so called VAS services that operators provide.
b) Consumers themselves - and im talking about the common man - they are looking for more to do with their phones. Opening up their phones to the internet gives them a whole new dimension of empowerment (granted that it may be confusing for some) - just observe what 20 somethings from middle and lower middle income households are doing on the trains. Try and observe what a phone means to them
And true the guys in cars will use VAS - but then they wont spend as much time on obtaining VAS - the guys who are sitting in a train for a few hours a day - they have the time, and also the motivation.
As I said on Rajesh Jain’s post (emergic.org - check it out, its really good) in order for VAS 2.0 to flourish, there is a requirement for a change in the mindset of Telcos, that of ‘enabling smaller players’. I believe that TRAI’s approval of MVNOs will prove to be a step in that direction. With a relatively low entry cost, I imagine that a number of mobile service entrants, focussed on targeting a specific customer demographic. In order to drive revenues from this demographic, not only will they develop text/minute plans that are in line with that segments need, but will themselves push VAS to further drive revenue. Right now the Bhartis and Reliances of this world are more focussed on mass marketing to drive penetration - more customers, more customers, more customers is their mantra. But the MVNO that focusses on a segment will chant, ’same customers, more revenues, same customers, more revenue’ - hence a greater adoption of VAS. Check out my related post: http://www.moneyvidya.com/blog/?p=171
Gautam Kshatriya
gautam.kshatriya@moneyvidya.com
http://www.moneyvidya.com/blog