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

The Moolah Movement –Revenue flow of VAS Industry…

This is a sequel to my profiling post. I will try and bring to light the following things about specific set of applications/services in the following set of posts:

1. The Application Set – A gamut of applications that fall in this category that would help and define the category.
2. Entities Involved in offering the services – This is where I would depict how the different entities in the value chain are related in providing these services.
3. Current business models prevalent – This would be information about the revenue sharing arrangements between the various entities.
4. Future possibilities and their effects – This is where I would convey my beliefs of the future possibilities of business.

I would start with the Content Download Applications/services. This would be followed up with Applications wherein the user can’t download the content but experience of the application is completely dependent on content. I would focus myself on CRBT as a service.

Then in a separate post I would be discussing about the applications and services that are not dependent on the content provider and come straight from the VASP’s innovation factory.

Jatin Madan
jatinmadan@aol.in

Value Added Services – Profiling based on Value Chain…

I have spent a lot of money and time downloading ring-tones, configuring music for my CRBTs, hunting for newer mobile games, et al. There are a lot of ways in which we download the content to our mobile handsets or use a plethora of other VAS services.

In this post I am trying to put across new light by segregation them in accordance to the similarity of the value chain and thereby revenue share agreements pertaining to services.

I have tried to broadly segregate the services in two sets – Content Based and Content Independent.

Content Based can be further segregated into:

1. Download Content – The applications that allow downloading content on the mobile hansets like ringtones, wallpapers, etc.
2. Experience Content – The applications that enhance the customer experience by using content like Back Ground Music, CRBT, etc.

Content Independent Applications are the ones that are closely integrated with the operator’s network and do not require content. These services have a higher dependency on the subscriber data rather then content delivery or experiencing. Services like Missed Call Alert, Wake-up alarm services etc are the applications in this category.

Although all the downloadable content today is available in the form of subscription packs which is like bundled offering for duration of time thereby subsidizing the costs involved. There is much more to subscription packs than just the content. I would try and explore the subscription model as well in a later post.

I would be using a few services as examples that are selling like hot cakes today. They have been positioned greatly with the subscribers and can be delivered in various manners leading to maximum penetration of these services.

1. Download Content
   1. Astrology
   2. Bollywood ring-tone and wall papers
   3. Cricket
2. Experience Content
   1. Ringback Tone
3. Content Independent
   1. Missed Call Alert
   2. Voice Mail

I will pick each one of them individually and discuss the various business models that exist today and the future evolution of the same in my next post.

Jatin Madan
jatinmadan@aol.in

The Value Chain Proceedings…

Now that I have described all the players present in the VAS business arena, I am just trying to put some light on the relationships they share. I would also try to highlight the interdependencies among them and the information flow as I understand it happens.

There is a constant innovation happening in the mobile space with all the players in the value chain trying to reverse or forward integrate. They are able to move up and down the chain but can’t replace the network operator as the customer is still owned by them. This can only happen if the retail strategies by VAS players come out to be successful.

The ongoing major movements that I understand are happening are:

1. The content owners and developers are moving towards the aggregation playfield
2. The aggregators are starting to own the content and develop applications around them
3. The technology enablers and VASP’s are beginning to won and aggregate content as well and are constantly raising the bar for each other.
4. Teclo’s, technology enablers and VASP’s are looking forward to replicate the web experience on mobile thereby the focus of telco’s is moving towards data revenues.
5. Handset Manufacturers are tying knot with the content and application providers providing added value for the subscribers.
6. Telco’s have started to get in direct relationships with content right owners and promoting the uptake.
7. New entities are adding up in the value chain with new ideas to explore the subscriber needs. Mobile advertising, retail and mobile TV are just to name a few here.

All these movements (and many more) are leading to constant innovation in the industry and making it a better place for the subscriber as he is offered so many options. This has also led to many application and services that are offered to customer which he did not feel he needed.

On the application development and offering side, there are a couple of means in which they appear in the market. Either the operator profiles the customer demands or the VAS providers come up with a new idea.

1. Operator Pull (Showcasing customer requirements)
2. VAS provider push (Showcasing Industry Innovation and movements inside the industry)

The operator pull is based on analyzing the customers need and pulling the other player to offer those services whereas the second approach is more focused on offering new services and content and ensuring their uptake by the customer.

I would be discussing them in the next post. Keep visiting…

Jatin Madan
jatinmadan@aol.in

The Composite VAS Business…

This is just another post in the series to introduce the player in the Mobile VAS industry. It does nothing more than trying to explain that the consumer and the enterprise value chain are not mutually exclusive but are just a virtual overlap of the same player having a different role to play.

Basically the role of each individual player gets modified when it comes to the composite value chain or the business model. I’ll take a specific example of VASP who may play the role of a content aggregator for a specific application in the consumer model but act as just a technology facilitator in the enterprise model.

Although the mobile operator seems to play the same role of facilitating the delivery of information or content, it is the minimal role it plays for the enterprise customers.

Here the content generator and developer is the enterprise, but the technology support from the operator is of prime essence or the entire business model pertaining to mobiles from the enterprise perspective is at stake.

An important point that I would like to highlight here is that VASP’s and technology enablers, though had a different role to play in the consumer based model, play a similar role for the enterprise customers.

I would not want to delve into too many details to complicate things further as this post is focused at mapping the two models/value chains together. In my further posts I would try to put across my understanding of how this business model is evolving on a regular basis and what would be the effect of new players OR services/application providers to this value chain.

Jatin Madan
jatinmadan@aol.in

MVAS Business Model

My previous post was more focused towards a basic level understanding of the value chain but this one takes a step closer to reality. It describes the state of affairs as on yesterday. (Since this industry is evolving every hour, as I post this it is already obsolete but I thought it would be nice to showcase the transition)

This value chain is significantly different from what has been expressed in my last post. Innovators find a way to carve out a niche for themselves in the value chain and in turn add value to the services being delivered to the subscribers. The main reasons for evolution of VAS value chain at a rapid growth has been:

1. Develop alternative revenue streams to counter rapidly declining ARPU
2. Shrinking operator margins (To my understanding they would shrink further with further evolution in VAS market)
3. Customer Retention focus to curb increasing churn
4. Entrepreneurs with innovative ideas to serve customers
5. Openness of investors to support new initiatives in the booming telecom market.

I have tried to segregate the value chain in two parts:

1. The Consumer value chain
2. The Enterprise VAS value chain

Consumer Value Chain:

This part of the business is focused on providing value added services to the individual mobile subscribers. My segregation of the major players in the current Value Chain is as mentioned below. Some people may have a different perspective to this:

1. Content Generators – These are the companies that own the copyrights of the content. Examples include the music labels, movie production houses, media houses/TV channels.
2. Content Developers – These are the companies that create customized content as required by the subscriber preferences. Examples include the companies running their own mobile portal on voice, SMS, WAP or USSD.
3. Content Aggregators – These are the companies that aggregate content and make it available to network operators. Examples would include companies that are focused on the content business. They differ from the content developers in the manner that their mainstay is the rights of content and not the mechanism in which it is delivered.
4. VASP – These are the companies that provide Value Added applications to the network operators. They may also act like a content aggregator for the convenience of operator and to create a niche for themselves but focused on providing innovative applications to operators.
5. Technology Enablers – These are the players that provide the services oriented towards providing Vas to subscribers but may or may not be dependent on the content. To clarify things here, an example to with this is “missed call alert services”. This seems to be a fair example for understanding how they differ from VASPs.
6. Mobile Network Operator - They are the famous telcos like Airtel, Vodafone etc that provide the transport and support mechanism to provide content and other services to subscribers. Today in India, they own the customer and bill them for providing services. (I would be taking up the revenue flow in a separate post.)
7. Handset Manufacturers – Mobile handset manufacturers have also started playing an important role. They have their way by activities like embedding links for direct access to portals in their handsets, etc. Things like On-device Portal are where they play an important role in the value chain.

Enterprise Value chain

The enterprise Value chain is comparatively simple in comparison to the industry value chain. I would like to depict it in a more linear manner rather than complicate things further.

My perspective is that it consists of the following entities:

1. Enterprises
2. Enterprise Service Providers
3. Mobile Network Operator
4. Enterprise User

The linear model is depicted in the figure below:

In my next post I will try to map the two together and complicate things further.
And I would also like some help on depiction in beautiful diagrams. Do get in touch if you are interested.

Jatin Madan
jatinmadan@aol.in

“Traditional Value Chain…”

I was taught in my B-School that every industry has a value chain. And absolutely no points for guessing that Mobile VAS has one as well which I wanted to discuss in this post.

This industry started as a value addition to the mobile value chain and has matured itself into a vertical in the telecom arena in itself. People’s perspective of the value chain is simple – a linear line up of entities. But my understanding of the subject is a little more complicated. To my views, the mobile VAS value chain was a linear structure that would mature into 2^nd dimension whereas the VAS providers (VASPs) move towards starting a relationship directly with the mobile subscriber.
The traditional entities in the value chain are:

1. Content Generator – Online Portals, TV channels, Movies, etc.
2. Content Aggregator
3. VASP – Can be deciphered in two ways – VAS Provider or VAS Application Service Providers
4. Mobile Network Operator
5. Subscriber

These players are placed in the value chain as depicted in the figure below: (Apologies for such a raw appearing figure as my focus is on clarity of subject and not to mention that I am not great at photo editing softwares)

 

This is already a 2 Dimensional chain wherein the content generator is directly providing the content to operator and also through aggregator.
Although as of today, since the customer is owned by the operator, he bills the subscriber and provides a revenue share to other parties. But this landscape is moving towards a paradigm shift with newer players making entry into this much sought after and booming arena and adding new dimensions to it.

The new buzzwords are mobile advertising, mobile TV and retail (focused at approaching the customer directly). And the new players into this market are many more. I would discuss more about the Relationship between the various players in the value chain and how the value chain stands as of now.

Jatin Madan