Jeff,
I think you bring up an excellent point about Europe - and consequently
about other markets - including the US - by using the example of the success
of SMS-based polling and games linked to TV, radio and other media, in
addition to functions like deliver screen savers, ringtones and the like.
Certainly, in terms of a per-download or per usage basis, Europeans pay far
more (prices ranging from $0.10 to $10 dollars per usage) for mobile
entertainment than the Japanese. Moreover, many TV and radio production
companies have been far more entrepreneurial than their Japanese
counterparts in finding ways to utilize SMS services to extend the
interaction with various types of content and services. Shows like Pop Idol
in the UK and others across Europe regularly find that about 1/2 of their
total polling is enabled through SMS - and with a per usage charge of around
$1 - $2 multiplied by millions, have generated significant steady new
revenue streams as a result.
There are a wide variety of factors that make the European model so
successful in driving profits, but the overriding factor is that of content
providers using SMS as a delivery point for a variety of services with a
level of independence that Japanese content providers can only dream of.
Specifically, content providers seized on the opportunity to use SMS short
codes (codes that can be input to send and ask for delivery of messages,
content and downloaded applications) to deliver services while the European
mobile content market was starting to develop. SMS short codes allowed
European content and application providers to create stand alone billing and
delivery mechanisms independently of the mobile operators, allowing content
providers to move faster than they would have on a telco timetable, set
their own pricing and to create a direct channel with between them and the
consumer.
Moreover, in Europe it was the content providers that set cost expectations
rather than the telcos, tightly tying mobile content options to existing
content in other mediums, and creating pricing models that were most
attractive to content providers (almost wholly based on pay per use),
allowing market competition and the attractiveness of content to ultimately
determine the relative cost level of mobile content.
This in turn created a situation, unique to Europe (at present) where the
content providers (rightly) dominate the pricing, promotion and development
of the mobile content market. Using SMS rather than WAP (which the mobile
operators will admit was a disaster of their own making) as an entry point
for their services, the content providers circumvented the telcos to connect
directly with the consumer, hence creating a new market for services.
Of course, all major content providers also work in consort with the telcos
concurrent with their independent efforts, but their development of the
content market has given them a power in the mobile content market that is
the envy of content developers outside of Europe.
The same holds true in other GSM-based markets such as Australia and
Singapore, though to a lesser degree.
All well and good, but the question is, how much of this model's success can
be repeated in the US and Japanese markets?
In Japan, obviously, the system for the development and dissemination of
content is much more tightly controlled by the mobile operators, and the
model for the most part is packet-switched charges split between content
provider and telco, with a good degree of premium rate and subscription
services in the mix.
And, as the content providers rely to a much greater degree on the standards
and expectations set by the telcos for pricing and billing for services,
they make a much smaller degree per item sold of profit, and on the whole do
not control the ultimate pricing of services (e.g., one of the main
complaints of content providers - this comes straight a conversation I had
recently with the largest business information provider in Japan - is that
DoCoMo, KDDI and J-Phone do not allow a flexible enough content pricing
model to justify the development and dissemination of their highest quality
- and hence, most attractive - content for mobile users) as in the case in
Europe.
Of course, the whole idea in Japan is that you make back what you lose on a
per unit basis relative to Europe in terms of greater volume, and to some
degree this is certainly true, but at the end of the day, the fact that
Japanese content providers do not control the process of distribution and
cannot set attractive pricing results in a more conservative attitude.
After all, if you cannot set what you feel is the ultimate best price for
your services, will you risk your brand and investment money in creating
mobile services that truly tie into your offline content? It's must harder
to justify.
Personally, I think that all the talk regarding the desire on the part of
Japanese content providers to avoid the risk of server overcapacity is a
polite excuse that masks the actual reality that it does note make economic
sense to risk their offline revenue and brands by tying them more tightly to
mobile content.
Please don't misunderstand me, I think that the Japanese model works well in
many ways, and that there are many, many successful efforts tying Japanese
content to mobile platforms, but in comparison to Europe, there is much less
convergence between mobile and offline media.
So, to finish this letter what your last point, will the European model
translate to the US? On a business level, I certainly hope so, but the
actual reality is somewhat unclear. As opposed to Europe, there are three
bad early indicators that have taken shape in the US market that were absent
in Europe (leaving aside cultural factors for the moment) that could make
the establishment of a European-flavored content market more difficult:
1. Telcos have more tight control of pricing models and billing methods.
In the US, the telcos have defined early the pricing models for the US
consumer for ringtones, logos and interactive SMS at a much lower and less
attractive rate (about $1-$2 for ringtones and logos and much lower for SMS
messages - offering flat rate instead of per usage plans for the most part)
to the content provider than in Europe.
By setting these price expectations early, they deflate the market's
potential value for services, making it harder for content providers to
maximize profit for their services.
Moreover, US telcos are only now starting to adopt European and Japanese
pricing models for content - where the content provider rightly receives the
majority (70% and higher) of revenue for their services.
2. There are too many types of confusing billing and payment schemes in the
US market. Between BREW, SMS, WAP, J2ME and others, US telcos are trying to
define a pricing model based on pay per use, download, flat fee and timed
use that at present is confusing and hence less attractive to both users and
content providers than a standardized pay per use or packet-switched model.
And, while they have time to experiment with the right mix, that window is
rapidly closing as the consumer starts to use mobile content services,
receives confusing billing statements and receives what are at present a
widely-fluctuating quality of services.
And in terms of pricing and billing models as they affect the content
provider's thinking, most content providers with the best content still
think that the market is too early and uncontrollable to justify tying their
brands to mobile services, making small experiments while waiting for the
market to evolve for the most part, and saving most of their best content
for a more mature market.
3. As the US market has little or no usage of 900 services outside of porn
- and chargeback rates of more than 60% for 900 in general, and SMS short
codes for services have yet to be defined and standardized, content
providers do not have a easy and ready way to charge for their services
outside of the mobile operators. In Europe, content owners can circumvent
the billing systems of European operators via the usage of both premium rate
SMS and "0900" billing systems that are more independent of the mobile
operators than in the US and Japan.
There are many other factors that go into the development of the US market.
At the end of the day, the shape of the business models and services
provided will mirror both those of Japan and Europe as the market grows and
content providers find ways to deliver their content for maximum profit. And
indeed SMS will be used (especially once short codes for premium SMS
services are standardized) as a crucial delivery system for mobile content
in the US as in Europe, though on the whole, at this point, the telcos have
a much tighter control of the marketplace and content providers are more
beholden at present to the mobile operators in terms of defining business
models, pricing structures and delivery methods.
Best,
--
Mark Frieser
Consect
+1 917 664 1606
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On 25-09-2002 22:28, "Funk" <funk@rieb.kobe-u.ac.jp> wrote:
>
> Hello everyone,
> Having talked with many Japanese TV and radio broadcasters about their
> integration of mobile Internet services and TV/radio programs I assumed
> that Japan was light-years ahead of the rest of the world. But a report on
> a recent seminar in amsterdam called "SMS meets TV" suggests otherwise
> (http://www.europemedia.net/showfeature.asp?ArticleID=12767). European TV
> stations are using SMS to offer chat services, do surveys, promote
> interactive TV, and increase viewer ratings. Most Japanese TV stations (as
> far as I know) are still moving very slowly to offer surveys due to
> concerns about overloading their systems. On a wider note, this is just one
> more example of how the success of Japan's mobile Internet has little to do
> with culture; in fact the amounts of money that europeans pay to download
> ringing tones, screen savers, and now participate in TV station-sponsored
> services suggests that europeans may be more interested than japanese in
> these services. it is probably just a matter of time before similar things
> appear in the US as SMS services continue to diffuse there.
> cheers,
> jeff funk
> http://www.rieb.kobe-u.ac.jp/~funk/index.html
>
>
> This mail was sent to address mark@consect.com
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>
>
Received on Thu Sep 26 16:35:59 2002