Mobile Content – Emerging Business Models and Opportunities Screen Digest 8th May 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 The mobile content revolution will be televised – Ronan de Renesse, Analyst
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Screen Digest Mobile Intelligence • •
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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
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Playing the mobile content game Screen Digest David MacQueen May 8, 2007
Why is content important to operators?
Revenues (€m)
Operator revenues, top 10 European markets
130000 Content Messaging Voice
110000 90000 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 across top 10 European markets
5
Sweden
Spain
France
UK
Belgium Greece
Portugal
1.2
Netherlands
Data ARPU (€)
1.6
Germany
2
Italy
Considerable variation in Europe
0.8
0.4
0
•
Myth that prepay users don’t pay for content
6
USA
US around double European average
Sweden
Spain
France
UK
Italy
Belgium
Greece
Portugal
1.5
Netherlands
Data ARPU (€)
2
Germany
2.5
1
0.5
0
• •
Operator promotion of content; little off portal Flat rate data common
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Most mature markets The future for Western markets? South Korea
USA
Sweden
Belgium
Greece
Portugal
Japan
Netherlands
Spain
France
UK
Italy
Germany
Data ARPU (€)
Far East dwarfs Western markets 16
12
0
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Not all operators are created equal
150000
1500
100000
1000
50000
500
0
Content revenues (m)
Subscribers (000s)
Top 10 European markets
0
Vodafone
Orange
Telefonica/ O2
T-Mobile
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What do Vodafone and 3 have in common? • Both operators routinely offer free content – Users become accustomed to buying content in a riskfree 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?
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Mobile games revenues (â‚Źm)
Japan and South Korea mature 800 600 400 200 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Download
Subscription
Pay per play 12
Mobile games revenues (€m)
Europe reaching ‘tipping point’ 800 600 400 200 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Download
Subscription
Pay per play 13
Mobile games revenues (â‚Źm)
Further growth expected in North America 1000 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 Mobile games revenues (€m)
2500 2000 1500 1000
North America Europe South Korea 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
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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
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Who are the main players in the game?
Consumer
Network Operator
Publisher
Typical revenue shares (Operator/publisher) Europe: 50/50 North America: 30/70 Japan: 9/91
IP Owner
Often up front payment and/or revenue shares from publisher revenues
Developer
Typically 10% from publisher revenues
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A gap is opening up Revenues (€m)
1500 1000 500 0 2002
2003
2004 Total top 3
2005
2006
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
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Investment activity peaked in 04, on rise again
Deals
15 10 5
250 200 150 100
Deals Investment ($m)
50 0
19 99 20 00 20 01 20 02 20 03 20 04 20 05 2 Q 00 1 6 20 07
0
300 Investment ($m)
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• • •
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 Portfolio mix
Profitable publishers
5%
42% 58%
Unprofitable publishers
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 •
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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
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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?
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Thank you david.macqueen@screndigest.com
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