Is the content industry's future going to be mobile?

by Emmanuel Legrand

It’s the Internet, stupid!

Guess what? Consumers want to access the internet and web-based services through their mobile devices. Nothing really new here. That was on everybody’s minds – especially people in the phone biz and those in the content industry – since the beginning of the century. But it took roughly a whole decade to get there.

In fact, the tipping point was the advent of smartphones, with Apple’s iPhone as primus inter pares, and the new generation of 3G networks, capable – at last – to carry the volume of data required to offer these services.

So what we are seeing now is really the start of a new era, that of the web-based mobile business.

M. Newman

“It’s all about the internet and consumers want services from the internet,” said Mark Newman, chief research officer at Informa Telecoms & Media, at the conference Industry Outlook 2011, organised November 25 by British media and events group Informa Telecoms & Media.

This quite low-key event was a great eye opener for those trying to figure out where the next big thing is going to come from. According to Newman, the demand for services, content and applications on mobile phone – ‘stuff’ that will make these handsets really smart – will be the drivers of the mobile business for the years to come.

His views were backed by the results of a survey across the telecoms galaxy in which 67% of the people polled believed that in 2011 “content companies will successfully start to develop new business models to monetise their services”.

Newman pointed out that since 1996, mobile operators and internet companies were looking at each other without really knowing how one could benefit from the other. The mass-market adoption of smartphones makes this relationship possible now.

He also noted that the same survey listed among the key topics, companies or people in the telecoms world that will be important in 2011 the following: ‘smartphones’, ‘cloud services’, ‘Google’, ‘Apple’, ‘network sharing’ and ‘Android’.

When it comes to mobile phones, the overall figures are staggering. Informa forecasts that by 2015, close to 650 million (yes, over half a billion) smartphones will be sold in the world, about 41% of all handsets sold on that year, with Europe and Asia/Pacific leading the way. So with these phones comes content traffic.

At the moment, revenues extracted by operators from internet-related services are in the region of $95 billion a year, to be compared with global revenues of $713 billion on voice traffic. Yes, phones are still primarily used to…make phone calls!

But that’s going to change and Informa forecasts a major growth in revenues from web-based services. In a way, owning a smartphone encourages data consumption. And to provide what consumers want, operators will have to make partnerships with content providers such as Facebook (200 of Facebook’s 500 million users use the service on their mobiles), Yahoo!, Skype, Last.fm or Spotify.

K. Hart

Ken Hart, senior director, business development, at Yahoo! forecatsted one billion mobile internet users by 2013, up from 600 million nowadays. “We see very big opportunities [in mobile internet services],” said Hart. “What we see in the US is that people do not drop their PC but there are gaps in the day, and there are now usages patterns combining mobile and PC.”

For Hart, the trend in mobile phones is towards simplicity. People want easy to access services, but he warned about having over-expectations. Consumers, he stated, do not need hundreds of services – they will turn to a small number of service sthat fit their needs. “The average smartphone in US has a few dozen apps,” he explained. “A third are utilities, one third are brands like Google then there’s a small number of Specific applications. There is only a limited number of things people are using on their phones. You’ve got to have something to differentiate you in the market.”

F. Galaria

Music and video were among the examples attractive content mentioned during the conference as good playgrounds for partnerships. French streaming audio service Deezer has a partnership in France with Orange. Spotify, the music streaming service, has partnered with operator Talia in Sweden and 3 in the UK. According to Spotify global head of business development Faisal Galaria, these partnerships can be beneficial to both parties. Operators can provide a much useful service to their customers without having to set up their own infrastructure and making deals with rights owners. In return, Spotify can leverage its brand and access new users. Sometimes, added Galaria, the partership can extend to operators taking charge of billings on behalf of Spotify.

“Telcos and mobile operators say that Spotify is an acquisition driver for them,” revealed Galaria, who added that Spotify aims “to be ubiquitous because we are a cloud-based service.”

Galaria quoted some Informa research forecasting that 5% of the $365bn of non-voice revenues in 2015 will come from music. “This is quite significant,” he quipped. How these revenues are going to be shared and how much will be back to rights holders is obviously the $18 billion question!