Les contenus mobiles:

business models et
opportunitiés de croissance
Screen Digest
June 14, 2007
Today’s agenda
• Introduction
– Ben Keen, Chief Analyst
• Playing the mobile content game
– David MacQueen, Senior Analyst
• Mobile music – no money?
– Dan Cryan, Analyst
• La révolution mobile sera télévisée
– Ronan de Renesse, Analyst

2
Screen Digest Mobile Intelligence
• Data on 25 countries
– Europe, North America, Japan, South Korea
• Basic Metrics
– Subscribers, 3G subscribers, ARPU split by voice, messaging
and content
• Market Share
– Provided by mobile operator for subscribers, 3G subscribers and
content market
• Revenues
– Blended, prepay and contract ARPU; voice, messaging and
content ARPU
• Mobile Games, Music and TV
– Service overviews
– Historical data and forecasts for downloads, subscribers and
revenues 3
Playing the mobile content
game
David MacQueen
Why is content important to operators?
140000

130000

120000
Revenues (€m)

110000 Content
Messaging
100000 Voice
90000

80000

70000
2001 2002 2003 2004 2005 2006

• Growth in messaging and voice revenues slowing

• Content revenues mean linear growth rate continues
• Content worth over €6bn in 2006 in these markets 5
Considerable variation in Europe

France

Spain
2

Netherlands
Italy

Belgium
UK
Germany

1.6

Portugal

Sweden
Greece
Data ARPU (€)

1.2

0.8

0.4

• Myth that prepay users don’t pay for content 6

US around double European average

USA
2.5

France

Spain

Netherlands

Belgium
Italy
2
Germany

UK

Portugal
Data ARPU (€)

Sweden
Greece
1.5

0.5

0
• Operator promotion of content; little off portal
• Flat rate data common 7
•
•
Data ARPU (€)

0
4
8
12
Germany 16

Italy

UK

Most mature markets

France

Spain

Netherlands

The future for Western markets?

Portugal

Greece

Belgium
Far East dwarfs Western markets

Sweden

USA

South Korea

Japan
8
 Not all operators are created equal
150000 1500

Content revenue (€m)

Subscribers (000s)

100000 1000

50000 500

0 0

Vodafone Orange O2 T Mobile 3

Subscribers Content revenues

9
What do Vodafone and 3 have in common?
• Both operators routinely offer free content
– Users become accustomed to buying content in a risk-
free transaction
• Both early to offer more advanced content such as TV
• Both advertise content to users
– Other operators typically only advertise on price of
voice/text
• Vodafone typically strike deals with premium content
suppliers such as Sky for TV and EA for games
• 3 typically looks for content which is current or fits in with
current trends – not always big name brands
• Most other operators do not have such an obvious
content strategy 10
Mobile games – the ‘daddy’ of mobile content

• Snake appears in 1997, predating ringtones by 2 years

• Games is the most mature content category
• What can we learn from the development of this market?
• How will this impact other content types?

11
Japan and South Korea mature

800
Mobile games revenues (€m)

600

400

200

0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Download Subscription Pay per play

12
Europe reaching ‘tipping point’

800
Mobile games revenues (€m)

600

400

200

0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Download Subscription Pay per play

13
Further growth expected in North America

1000
Mobile games revenues (€m)

800

600

400

200

0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Download Subscription Pay per play

14
North America to be biggest market from 2009
2500
Mobile games revenues (€m)

2000

North America
1500
Europe
South Korea
1000
Japan

500

0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

• New markets will add to growth

– China, India and South America key territories
– BUT significantly lower price points 15
Different business models in different regions

• Subscription largely in Japan

– Mis-sold subscription services often cited as a reason for
lack of popularity elsewhere
– i-mode has not been popular outside Japan
• Pay per download popular in Europe, North America
and South Korea
• Pay per play (rental) popular in US, services
launching in Europe
– Pay per week/month options very like subscription, but on
a per title basis rather than subscription to service

16
Who are the main players in the game?

Network
Consumer Publisher IP Owner Developer
Operator

Typical revenue shares Often up Typically

(Operator/publisher) front 10% from
payment publisher
Europe: 50/50
and/or revenues
North America: 30/70 revenue
shares
Japan: 9/91
from
publisher
revenues

17
A gap is opening up
1500
Revenues (€m)

1000

500

0
2002 2003 2004 2005 2006

Total top 3 remainder

• Top tier publishers taking a larger market share

• Top 3: EA, Gameloft, Glu
18
Why is this happening?
• Operators focus on smaller number of higher quality
relationships
• Slowing growth leads to increased consolidation and
more M&A activity
• All of this means market leaders continue to capture
a larger market share
• Life will become more difficult for smaller publishers

19
Investment activity peaked in 04, on rise again
20 300
250

Investment ($m)
15
200
Deals

Deals
10 150
Investment ($m)
100
5
50
0 0
99
00
01
02
03
04
05

1 6
07
Q 00
19
20
20
20
20

20
20

20
2

• Around 50 deals and over $700m invested in Western markets

• Peak in 2004 (start of ‘hockey stick’ growth)
• 2007 a ‘busy’ year so far (growth slowed to 14%)
20
Acquiring IP is a typical publisher strategy
Profitable
Portfolio mix Unprofitable
5%
publishers publishers
42%
58% Licensed
Unlicensed
95%

• Licensing IP clearly affects profitability

• Competition through brands has not been a successful
strategy, particularly for smaller publishers
• Quality and scale becoming more important

21
Publishers under pressure despite content
revenue growth
• Can publishers increase profitability?
– IP affects profitability
– Fragmentation decreases profitability
– Will 3D adversely affect profitability?
• So if content ARPU has strong growth, why not games?
– Promotion of other content types
– Limited deck space
– You can’t treat games in isolation
• Limited audience
– It’s been 5% for years
– After 10 years of mobile games the audience has reached a cap
• Is the challenge to increase ARPU from existing players?
22
The challenge is to prove us wrong
• Our forecasts are based on the existing market and
what we feel is likely to change
• So if the current business models are not enough,
what can make the market grow?
– Not 3G
– Search
– Simplicity
– Service not product – subscription and PPP

23
What can we learn from games?

• Can we expect this to happen to all content types?

• Can music and TV attract a bigger audience?
• Will that audience pay?
• How much will they pay?

24
 No Money?
The state of mobile music

Dan Cryan

25
In 2011 the physical music market will be
worth less than ½ its value in 2001

26
In 2000-2005 European music market dropped
35% as consumers switched to buying DVDs

27
The mobile music market began to mature in
2006
• Worldwide mobile music market was worth €198m in 2006,
up from €60m in 2005 a growth of 230 per cent

• In 2006 Sony Ericsson and Nokia combined sold 130 music

phones worldwide, in comparison Apple sold 46.4m iPods

• Over 75 mobile music services are now offered by operators

worldwide

• The market is dominated by on-portal services (i.e. over 95%

is operator driven)

28
Music can be delivered in a number of
different ways
• Operator portal
– Vodafone Live!, O2 Active, Virgin bites

• Off portal
– Browser based
– SMS/MMS can be both a payment & delivery mechanism (e.g. Jamba/Jamster)

• Sideload - content is moved to the phone from the PC

Select
On Portal range of
content
OTA Sideload
Wide
Off Portal range of
content
29
What we mean by mobile music

• Focused on OTA services

• The types of content we are concerned with are:

– Full track downloads
– Music videos

• Dual download services are classified as mobile services when the billing
relationship is with the mobile operator and the focus of the service is still
the OTA download

• Not looking at ringtones because:

– Accurate figures are almost impossible to obtain
– Many of the companies involved are off portal and don’t share revenues with
operators, labels or music publishers
– It’s a rapidly declining market
30
Global mobile music market is dominated by 4
business models
• A la carte – single transactions
– The preferred business model in Europe and USA
– 65% of major European operators run ALC music services

• Subscription comes in two types

– Rental - users can listen to as many tracks as they want to an
unlimited number of times for as long as they continue to pay the
subscription
• Few services have been rolled out so far
– ‘Book Club’ - users pay a regular fee and can download a certain
amount of content per month
• Effectively the same model behind 3’s bundled content

• Free – generally for single downloads

31
In Europe the mobile music market is growing
rapidly
• Mobile music has been getting
promoted on operator portals at
the expense of mobile games

• The average cost of a download

has fallen from €1.75 in 2005 to
€1.57 in 2006

• As a result the number of ALC

downloads has increased from
6m in 2005 to 30m in 2006

• At the same time online services

grew from €23.7m in 2004 to
€147m in 2006

32
Pricing varies a lot with country

Vodafone Live! full track download prices

Country Launch date Provider Min Price Max Price

Germany
July 04 Sony Net Services €0.99 €1.49
Greece
Jan 05 Sony Net Services €1.79 €1.79
Hungary €1.50 €1.50
2006 Musiwave
Ireland
May 05 Sony Net Services €0.99 €1.99
Italy
Nov 04 Sony Net Services €0.99 €1.50
Netherlands
Apr 05 Musiwave €2.00 €2.00
Portugal
Nov 04 Sony Net Services €0.99 €1.50
Spain
Nov 04 Musiwave €0.99 €1.50
UK €2.20 €4.40
Nov 04 Sony Net Services
33
There is considerable variation by territory

34
European market is small compared to the
USA
• In 2006 the US market was more than
double the size of the European ALC
market

• Operators have been promoting

mobile music much more aggressively
in the US

• The US buy rate was around ~0.7 in

2006, in successful European markets
it is normally <0.2

• With an average price of $2.25 (€1.66)

downloads are typically more
expensive in the US than in Europe

• This is in line with typical mobile

content ARPUs –the US is almost
double the largest European markets 35
Japan & S. Korea – making subscription work
• i-mode style payment model dominates Japan – content has to be
sold via subscription
– KDDI and NTT allow multiple music services to operate over their networks
• KDDI alone allows customers to access over 100 different services
– The ‘book club’ model dominates
• 100m tracks have been delivered though KDDI within a subscription
environment
• Napster to launch over NTT – questions remain over the business model

• The Korean digital music market is dominated by SKT’s Melon

– Subscription service
– Generated 70bn WON (€55.4m) in 2006
– 7.3m subscribers
– Users can either download music OTA or download to their PC and sideload
• 90% of Melon users prefer to sideload
– The 730,000 OTA customers account for ~65 per cent of the S. Korean
mobile music market 36
Subscription is off to a slow start in Europe &
the US
• 11 subscription services launched in Europe and are only available
in 7 European markets
– Big European launches have been planned but have so far failed to
materialise
• 2 Services in the USA – both on AT&T
• After the ringtone debacle Europe will probably remain sceptical of
subscription services for the short term

• For standalone subscriptions to work they will have to go beyond

just providing tracks and need to cover the entire spectrum of
music-based content (Exclusives, Live and session tracks, News,
Blogs, Ringtones and wallpaper)
– So far none of these have materialised as part of a subscription model, but 3
UK has had success with this additional content offered on an ALC basis
• The alternative to standalone subs is bundling content in with
user’s monthly call and text allowance (e.g. 3 UK) 37
Mobile music services will generate €1.7bn in
2011

38
Subscription will become more important
Western Europe North America S. Korea & Japan

2007

ALC
Subscription

2011

39
Mobile will be 28% of digital music revenues
in 2011

40
Online music downloads will not offset the
shortfall in revenues

41
The potential for labels is clear - mobile offers
the potential of stabilising the market…

42
…but for operators questions remain

• In Western Europe and the US mobile music has not met with the
same level of consumer success as online services

• Nokia and Sony Ericsson combined sold 130m music phones

worldwide in 2006
– At a conservative estimate this puts the worldwide mobile music revenue per
music phone sold at €1.22

• In contrast the 35.1m MP3 players sold in Western Europe and the
32.6m sold in the USA
– Western European revenue per unit sold: €4.80
– US revenue per unit sold: €38.70

• How long can operators continue to subsidise hardware for content

services that are not seeing significant uptake?
43
In Western Europe growth will be limited
based on existing business models
• Repeating the business models that have been successful online
will not be enough to foster a significant mobile music market

• The lesson from 10 years of selling mobile games is that the user
base will flatten out quite fast and that the great majority of users
won’t start buying content.

• The challenge for mobile operators and labels is to find ways of

monetising the user base

44
La révolution mobile sera
télévisée
Ronan de Renesse
Plan
• Introduction
– Définition de la TV mobile
– Plateformes de diffusion
– État actuel du marché
• Structure
– Business models
– Chaîne de valeur
• Prévisions
– Par business model
– Par région/pays

46
TV ou Vidéo?
• TV mobile = Programmes linéaires

• Vidéo mobile = Téléchargement ou diffusion à la

demande de clips ou de programmes télévisés

• La télévision sur mobile: chaînes

• La vidéo sur mobile: clips/programmes on-demand

47
Modèles de diffusion de contenu audiovisuel
‘Side-loading’

Unicast (one to one)

2.5G
Founisseur 2.75G
Opérateur
de contenu 3G
3G+

Broadcast (one to many) DVB-H

DMB
Opérateur MediaFLO
Fournisseur
de contenu
ISDB-T
DAB
48
MBMS
Les limitations technologiques
• ‘Unicast mobile TV’: le nombre d’utilisateurs
simultanés par cellule 3G est limité (3 à 16
dépendant de la qualité)
– Marché de niche
• ‘Broadcast mobile TV’: Le nombre de chaînes est
limité (5 à 50 dépendant de la disponibilité des
fréquences)
– Marché de masse
• Ces contraintes techniques seront allégées à l’avenir
mais ne disparaîtront pas.
– Dividende numérique
– 3G+ (i.e. HSDPA), 4G (i.e. LTE)
49
 Les services de TV mobile sont enfin
arrivés: 69 services se partagent €170m
Nb. cumulatif de lancements de services
80
70
60
50
40
30
20
10
0
1Q03

2Q03

3Q03
4Q03

1Q04

2Q04
3Q04

4Q04

1Q05
2Q05

3Q05
4Q05

1Q06

2Q06

3Q06

4Q06
1Q07
Broadcast Unicast 50
Vodafone et Orange sont les plus agressifs

12
Marchés
10 Services

0
3G
ile
ne

or
a

ra
ng

ic

ne
ob
fo

le
ra

fó
da

so
m

Te
O

le
T-
Vo

lia
Te

Te
Lecture: Vodafone fourni la TV mobile dans 9 marchés sur 10
51
Qui regarde la TV mobile?
• 5.8m en Corée et au Japon (1m d’abonnés)
• 420,000 abonnés au service broadcast en Europe
(>90% en Italie)
• Plus d’un demi million d’abonnés au service unicast
en France
• SFR TV a doublé le nombre de clients durant Q1
2007
• L’utilisation du service est en moyenne de 63 min
par jour en Corée
• Facteurs clés: Prix, Nb. de chaînes, disponibilité de
mobiles équipés et qualité du service
52
 Les revenus par région
• La TV mobile génère peu de revenus aux Etats-Unis au cause d’un taux de
pénétration très bas (<1%)
• L’Europe est un marché robuste et dynamique. 7 services ‘broadcast’ lancés.
2/3 des opérateurs mobiles offrent la TV mobile. (Q1 2007)
• La Corée et le Japon offrent la TV mobile gratuite. Le nombre d’utilisateurs est
élevé mais les services génèrent peu de revenus
Revenus 2006
Revenus 2011
(€170m)

20%
Europe
42%
49% 48% Amérique du
Nord
Asie
38%
3%

53
Business models
• ‘Broadcast’
– Paiement Journalier (PPD) Part de marché
– Abonnement 'Unicast' (€m)
– Gratuit
• ‘Unicast’ 100%
– Paiement à la consommation 80%
(PPV)
60%
• Par Mo/Ko
40%
• Par Heure/Min
– Paiement Journalier (PPD) 20%
– Abonnement 0%
2004 2005 2006
– À la carte
– Gratuit
PPV PPD Abon.
54
Le choix du business model: Quels sont les
facteurs clés?
• Proportion Prepayé/Forfait
• Expérience de business models sur d’autres plateformes
de distribution (Satellite, IPTV)
• Utilisation du service (Nb. d’utilisateurs simultanés,
période, fréquence)
• Type de contenus offerts (mobisodes, linéaire,
programmes en boucle)

55
Modèle de tarification toujours fragmenté 2
ans après le lancement des services
Pay Per View
Subscription Price
Business Models
(LOC) Daily Price Weekly
Country On-demand
(LOC) Price (LOC)

Bun Subscr A La Pay Per Duration Price

Free Min Max Min Max Min Max
dle iption Carte View (Min) (LOC)

Austria Yes Yes Yes 9.00 9.00 3.00 3.00

Belgium Yes Yes 2.99 7.99 60.00 0.50

Germany Yes Yes Yes Yes 3 10 5.00 0.15

Greece Yes Yes Yes Yes 5 5 1.79 1.79

Ireland Yes Yes 1.99 4.99 1.99 4.99

Italy Yes 0.90 0.90

Netherlands Yes 10.00 0.25

Portugal Yes Yes Yes Yes 8 8 0.90 0.90

Spain Yes Yes Yes Yes 6 6 15.00 1.00

Switzerland Yes Yes 12.00 16.00 60.00 1.50

UK Yes Yes Yes 3 10

56
La chaîne de valeur: à qui appartient le
réseau?
SFR TDF Canal+ Endemol

Fournisseur Opérateur Propriétaire

Consommateur Agrégateur
de services ‘Broadcast’ du contenu

Service Coût du contenu

consommateurs Coût d’accès Coût (création, droit, licence)
au réseau d’infrastructure
Marketing Marketing

Diffuseur

Opérateur
Mobile

57
Les diffuseurs: peuvent ils y arriver seuls?
• Les diffuseurs ont besoin de l’accord des opérateurs
mobiles pour que la technologie soit intégrée dans
les mobiles.
• Les opérateurs mobiles peuvent limiter le service
aux appareils non communicatifs. (48% des
appareils T-DMB en Corée)
• Les téléphones mobiles avec une technologie
broadcast sont cher. Pas de subvention.
• Revenus liés à la publicité sont insuffisants
• Aucune implémentation existe
• Problème de régulation
58
Le marché de la TV mobile génèrera €4.7bn
provenant de 130m d’abonnés en 2011
140 5
4.5
120
4

Revenus (€bn)
100
Abonnés (m)

3.5
80 3
2.5
60 2
40 1.5
1
20
0.5
0 0
2003 2004 2005 2006 2007 2008 2009 2010 2011

Revenus (€bn) Abonnés

59
Le Broadcast dépassera l’unicast en 2008
Revenus globaux
par plateforme de diffusion (€bn)
5
Broadcast
4
Revenus (€bn)

Unicast
3

0
2003 2004 2005 2006 2007 2008 2009 2010 2011

60
 Les abonnements contrôleront le marché
Revenus globaux par business model (€bn)

5
4.5 PPD
4 PPV
Revenus (€bn)

3.5
Abon.
3
2.5
2
1.5
1
0.5
0
2003 2004 2005 2006 2007 2008 2009 2010 2011
61
 L’Europe génèrera presque €2bn en 2011

Revenus - Europe (€bn)

2.5

2 Broadcast
Revenus (€bn)

Unicast
1.5

0.5

0
2004 2005 2006 2007 2008 2009 2010 2011

62
L’Italie et le Royaume-Uni créeront plus de la moitié
des revenus en Europe de l’Ouest en 2011
Revenus - Europe de l'Ouest (€bn)
1.8
1.6 Royaume-Uni
1.4 Italie
Revenus (€bn)

1.2 Espagne
1 Allemagne
0.8 France
0.6
0.4
0.2
0
2004 2005 2006 2007 2008 2009 2010 2011

63
Amérique du Nord: une forte croissance
malgré un début difficile
Revenus - Amérique du Nord (€bn)
2
1.8
1.6 Broadcast
Revenus (€bn)

1.4 Unicast
1.2
1
0.8
0.6
0.4
0.2
0
2005 2006 2007 2008 2009 2010 2011

64
Les services gratuits vont limiter les revenus
jusqu’en 2008 en Asie
Revenus - Corée et Japon (€bn)
1.2
Broadcast
1
Unicast
Revenus (€bn)

0.8

0.6

0.4

0.2

0
2003 2004 2005 2006 2007 2008 2009 2010 2011

65
Points clés
• La TV mobile vaudra €4.7bn en 2011
– Unicast: €1.4bn
– Broadcast: €3.3bn
• Le marché de la TV mobile varie considérablement
entre ‘unicast’ et ‘broadcast’
• Les diffuseurs ne deviendront pas des MVNOs
• La croissance du marché en Europe et en Amérique
du Nord dépassera le marché Asiatique (Corée +
Japon) d’ici fin 2008
• Les abonnements représenteront 90% du marché du
revenu consommateur

66
So what’s the big picture?
9000
Revenues (€m)

6000 All TV
Music
3000 Games

07

08
01

02

03

09

10
04

05

06

11
20

20
20

20

20

20

20

20

20

20

20
• Games, the current revenue generator, grows incrementally
• Music adds to growth but remains a smaller market than games
• TV services give a significant boost to market
– Most popular category in 2010
67