Content on mobile… but where will the money come from?

The wireless world is moving beyond voice communication. In fact with the rapid growth of value added services (VAS) on mobiles in recent times, voice functions on mobile phones seem to have taken a back seat. With the mobile subscriber base crossing 98 million (source: TRAI, March 2006), service providers, developers and manufacturers are hoping to be able to dit back and relax to the ring of the cash register.

The Indian market for VAS currently stands at about Rs400 crore and is expected to grow ten-fold to approximately Rs4,000 crore by 2010. Globally, too, mobile VAS will account for 25 to 30 per cent of the total value of what operators generate.

As the need for VAS drives consumers to spend more, service providers and content developers, can capitalise on a major weakness of the Indian market — its average revenue per user (ARPU) is amongst the lowest in the world — to drive up mobile usage.

Mobile services providers can actually look forward to higher ARPUs by offering a wider range of value added services such as an expanding array of personalised ring tones, wallpapers, m-comics, mobile books (mooks), games, movies, videos, etc.

India being a cricket-crazy nation, cricket-related content such as live updates of scores, cricket games and latest news on mobiles have proved extremely popular amongst users. Bollywood soundtracks and video clips also have mass appeal and will continue to enhance VAS revenues for operators.

Content for rural markets
Today, VAS usage and consumption is greater in the urban markets, but with subscription levels approaching their saturation point, rural and semi-urban markets will potentially offer tremendous growth for the VAS industry. An increase in VAS spending would serve to arrest the declining ARPU from mobile talk time.

Localised content such as video clips, mobile comics and mobile magazines in regional languages, would provide entertainment to various rural pockets. E-learning and e-governance initiatives would meet a major need of the rural users and would have a great appeal to rural masses. Such content would help mobile services providers to open up largely untapped rural markets.

With an increasing demand for VAS from consumers, mobile services providers are turning to content developers for products. The question is can India handle this growing demand?

Developers have been ready to speed up the pace to build new content such as mobile games, mooks, m-comics, etc. but are being held back by the absence of viable business models. This is because developers face major problems with revenue realisations today, in part due to a lack of standardised and robust billing systems.

In fact this is one of the primary challenges that the entire supply chain faces. While developers have been providing operators a wide array of mobile content, they have to face extended credit periods. This places a major strain on their resources to keep innovating and developing newer content.

Service providers have worked hard to define a robust platform for voice and SMS revenue models. The systems and infrastructure for this has been developed over time and years of patient struggle. If mobile content creators, with much lighter pockets, are confronted with the same teething problem, the growth of this emerging service industry would decelerate immediately.

On the whole, these are challenging times for mobile content and value added services providers, requiring a concerted push to standardise platforms, billing, and restructure business models.

After all, rewards must be commensurate with the efforts of each player in the VAS ecosystem in order to reach the heady growth visible on the horizon.