The Moolah Movement – Revenue Flow in Offering Content Based Applications (Part 2)

2. The Content Experience Applications

2.1 The Applications

As discussed in my previous post the content is playing an important role in the entertainment and infotainment based value added services in India today. This post is focused on the various aspects of applications wherein the customer can experience content but does not require downloading it.
The major advantages of such services is they are independent of the handset used making it reachable to all and not a particular target segment. This is the reason that I believe they are important as the next set of acquisitions in India would be in the low ARPU subscriber segment using low cost handsets.

The following applications in this category have been welcomed by subscribers in India:

1. Caller Ring Back Tone (CRBT) – The subscription of these services allow you to make the caller to your number hear your chosen song/voice clip rather than the boring tring-tring. This has become a rage in VAS industry today and has seen a subscription of as high as 25% subscriber penetration at places.
2. Music Radio Services – This service allows the customer to all a particular short code and he/she can listen to a large number of songs of their choice made available under various categories. Songs can not only be listened to but dedicated to your number of choice as well.
3. Back Ground Music – This service allows the subscribers to play a chosen voice clip/Music in the background while the conversation is going on.

I would use the example of Caller Ring Back Tone (CRBT) wherever required since this has been the killer application in this segment. There are companies surviving on this single product and a lot more is about to happen than we have seen in this arena.

1.2 Current Value Chain Entities

1. Mobile Operator
2. VASP/Platform Owners
3. Content Aggregator
4. Content Owner

The VASP/Platform owners generally play the content aggregator role in this arena as the investment is very high as compared to the other content based applications. Since the investment is significantly larger, the margins need to be more for which the VASP take up the addition responsibility of aggregating the content as well.

1.3 Prevailing Business Model

Subscription Model: To my understanding the, the subscription model is the only prevalent model that is offered to the subscribers today for CRBT and Background music service. Subscriber pays out a monthly subscription fees to the operator for availing the services. This revenue is also appended with the content sampling charges and the content uptake charges (change of clip for the service).

This revenue is shared generally in the manner explained in the previous posts. But the payout can be higher for latest and exclusive content being provided by VASPs.

Whereas, the revenue flow for Music Radio Services works in a very similar manner for the content download services.

1.4 Future Possibilities
I would again want to believe that what I foresee happening is in the right light but I may also want to stand corrected in case this volatile and unpredictable industry takes a different turn. The future possibilities are enormous.

All players would be having a roadmap of features and functionalities they want to offer in addition to the existing services and also their innovation teams would be working hard to come up with new applications like CRBT that has a great Moolah factor.

I see this set of services as a great revenue potential for VAS industry. The reasons for my belief are:

1. The dependency on the handset is removed thereby reaching the entire subscriber base. This increases the target market and thereby greater uptake.
2. Next generation of mobile services are focused with customer at the centre of the ecosystem. This would make user generated content availability on these channels very important as services like CRBT and BGM are more of a personal statement.
3. Since these services can be subsidized to customers using the advertising model, the uptake would be further triggered.
4. Applications like Video RBT would be triggered with the advent of 3G in India. The personal video display is far more personalized than the subscribers can think today.

The move of the industry towards mobile 2.0 and bringing the web experience to the mobile would play an important role in this arena. It would give the content providers a run for their money and the application providers (read VASP) a mandate for innovation.

The future of these services can be seen from the perspective of innovation in terms of features and services and the evolution of business models.

Features and Services Evolution:

The content story is turning the web 2.0 way i.e. the user in again the KING and he picks only what he wants. This user generated content generation would have a direct impact on the service and application:

• The service innovation to offer UGC to subscriber via various means like mobile web or IVR to be provisioned for a service would be seen within next 12-15 months.
• Reverse CRBT and Video CRBT may make the net wave of applications inspiring innovative features and functionalities.
• The feature innovation like playing a user recorded message when busy or otherwise would add on to personalization factor influencing the uptake of services positively.
• User Generated Content (UGC) would be the next generation of content that subscribers would be hooked on to. This would give the content providers a run for their money and exclusivity would rule the roost for them. Features of CRBT would see enormous shift towards offering UGC as a part of the playlist.
• Ease of UGC uploading and tags would play an important role in defining the next generation of CRBT services.

Business Model Evolutions:

1. Freemium Business Model: Subscriber can hook on to services for free and the commercial jingles are played for such subscribers. Whereas, the high end segment is offered the royalty paid content at prevailing rates. This model will focus on the customization of the package for every subscriber segment.
2. Mobile Advertising Supported Model: Since the charges for these applications are as high as 10% of ARPU, there is a need for these services to be subsidized so they can be targeted to the low ARPU segment. This can be achieved by using it as a marketing tool by using commercial jingles as a promotion tool here. CRBT and BGM can be used as a promotions tool for B2C enterprises trying to promote their brands via the mobile way. I am hinting towards using it as a mobile marketing tool.
3. All-You-Can-Eat: The music radio services may see a completely subscription model evolving – One time service enablement appended with monthly charges and use as much as you want. Though I believe subscribers would be reluctant to take up such services with the cheap handsets available with radio functionalities.
4. Operators Eliminating Middle-Men – With a lot of movement by the players trying to take up additional responsibilities of other players in the revenue chain, the agenda is clear. They need additional revenue share for the content and services they are providing. This may lead to operators getting into direct relationships with various players at different levels for gaining access to premium content.

Jatin Madan
jatinmadan@aol.in