What is ‘mobile’ and as a content rights holder, why should you care?
Everything that is not physically connected to a network is mobile. Stop thinking about your website as a fixed destination like a tv channel that is watched at home; it is as mobile as your audience’s ability to connect with it. For example in Canada, your cellphone is mobile by definition and uses either the CDMA (Bell, Telus) or GSM (Rogers, and 80% of the rest of the world) cellular network to connect for voice and data, and if it is WiFi enabled through the Super-High Frequency radio spectrum.
Your laptop is mobile if it has a wireless network card or a cellular Aircard (both of which you can also use to make a phone call using a headset and VOIP). So basically, you can connect to the internet either way and you can make a call on either device. One is much smaller and designed principally as a communications device, and the other has much bigger memory/computational power and a much larger screen with more real estate.
Smartphones like the iPhone, the Blackberry, the Palm Treo, and the new Google Android phone continue to break down the distinction between a laptop computer and a phone. As more and more of them enter the market, the ability to port the rich media experience of a broadband streaming media website to a handset becomes seamless. But the ad-supported broadband business models are not so seamlessly ported to the carrier networks. Carrier platform, corporate policies, network capacity, distribution of handsets, coverage areas and possibly regulatory issues are all factors to be considered.
So why should you care about mobile content rights vs. broadband content rights? Because being mobile represents the future of your online revenue, and unlike the online world where essentially everything that can be seen on screen can be acquired for free, it is in the interest of every mobile carrier worldwide to provide controlled access to its network. This ability to white list1 your content on a carrier represents an advantage that doesn’t exist in the open web, and is similar to getting picked up by a TV network. It will be some time before the mobile network walled garden2 breaks down. Even if you access the web through the mobile browser of your phone, the network operators will control which sites and how much of the content you will be able to access.
This controlled access doesn’t however translate into big bucks unless you already have a hit property with a cell phone voting or SMS component built in, like some of the talent contest shows or certain sports or awards events. Today you need to think of mobile revenue as ancillary revenue, but like merchandising revenue, it could grow to become one of the most important ways for you to maximize your library and grow your commercial relationship directly with the members of your audience.
What are mobile networks and what do they mean to your bottom line?
Mobile networks are closed networks, and going mobile is not as simple as creating a mobile game or application. Even if you don’t need a development partner, you will likely need a porting partner3 and a distribution partner. Forget about license fees unless you are the number one television series, world event or factual series in the world, and don’t expect minimum guarantees of revenue from a carrier or distribution partner until you have established consistent and sustainable mobile take-rates from your audience. So far, no one except a few top platform game publishers with top-performing titles on Playstation, Xbox and Nintendo consoles (and one or two Not-Safe-for-Work content owners – which responsible Canadian aggregators and carriers won’t touch) have been able to do it consistently. Remember that because of data charges at the end of every month, your audience will know exactly how much it costs them to enjoy your content, in addition to their cellular subscription, application cost or content subscription fees, and they will value it accordingly. It must be small enough to be affordable, and valuable enough or time critical to them personally, to be worth it. This is at least until advertisers step in to offset the cost, and carriers set reasonable all-you-can-eat mobile data plans in place.
Where Canada Ranks
Canada ranks poorly in mobile phone penetration at 61.7 per cent (the States is at 83.5 per cent, Mexico at 62.5 per cent and many European countries, such as Spain, Italy and Ireland are home to more cell phones than people with penetration rates over 100 per cent. Italy has 153% penetration with many Italians having 2 or more phones). Nevertheless, it’s not impossible for an independent Canadian producer to make money through distributing content to mobile devices, but it takes a specialist’s knowledge of the market, the technology, the handsets, and access to the appropriate partners with access to global markets and content that will have a global audience.
So where does your content fit in?
The mobile content distribution chain is currently comprised of the following participants:
In order for the content rights holder to get revenue from the consumer they must first be on-the-deck, available to be found through the WAP (Wireless Application Protocol) portal of the carrier network on a subscriber’s handset, or be enabled on the carrier’s mobile browser. A WAP browser provides all of the basic services of a computer based web browser but simplified to operate within the restrictions of a mobile phone, such as its smaller view screen. WAP sites are websites written in, or dynamically converted to, WML (Wireless Markup Language) and accessed via the WAP browser. These include interactive feeds such as email, news, stock market, and sports updates, or music downloads where user interaction is required. A carrier will select and decide which order these are presented to a user on their phone like cards in a deck, so position ‘on-the-deck’ is often a key component to how many users find their way to your content.
Because the network operators differentiate their service offerings, some content will be featured more prominently than others, and some content that is available on the web will be blocked. This has a specific impact on its ability to generate revenue. Most Canadian carriers are carrying content based on channels like The Weather Channel, Sportsnet, TSN, CTV NEwsnet, Newsworld, Much, and MTV, or applications like Facebook, MySpace and Flickr. Some shows are exclusive to specific carriers, like Canadian Idol, which is on Telus, or Kenny vs. Spenny on Bell.
Content rights holders will deal with a publisher or aggregator, most often on a shared-revenue basis. Aggregators have contractually-defined relationships with the carriers, to ensure that the content delivered is compatible with the carrier’s environment and deployed handsets to ensure a standard quality of service. There has been a lot of consolidation in the marketplace over the last couple of years, but large international players like EA Mobile, Gameloft, MobiTV dominate the North American market along with companies like WirelesStudios, Oplayo, and numerous others who have a foothold in Europe. Even large international rights-holders (like Endemol, IMG, and ITN) will find that having an aggregator with carrier relationships in a given territory or market will increase the likelihood of generating mobile revenues in a given market. Aggregators will use the services of a provisioning partner (see definition below) as part of their contribution to the value chain.
Provisioning and porting companies (like Quickplay, myThum, MPP etc.) ensure that the content (video, games, etc.) is properly configured and delivered to the end-user handset so that the user experience is correct on each specified device in a given carrier’s network. Provisioning companies will also provide an interface to the carrier’s billing systems and ensure that the user commands from the handset are properly interpreted. To accomplish this they need to work closely with OEMs (Original Equipment Manufacturers; they assemble the handsets for the manufacturers), OS developers (programmers who specialize in Operating Systems: Apple iPhone Operating system firmware version 3.0, Blackberry API’s) and handset manufacturers as well as the carriers. This is most often done on a fee-for-service basis. This cost is borne by the content provider/aggregator or the carrier. In some cases, it can be done out of shared revenue.
Handset manufacturers and OEMs produce devices configured specifically for a particular carrier’s market and network environment (ie. Rogers 3G iPhone) with certain features locked or unlocked. In some cases, it can be possible for content developers to deal directly with a handset manufacturer to brand a phone with content (Sony Ericcson’s Quantum of Solace phone or their recently announced Facebook phone), but this must be part of a much bigger sales and marketing effort.
The next and most significant player in the distribution chain is the carrier. The carrier owns the network but more importantly owns the billing relationship with the customer. For this reason, they have traditionally charged 70%-80% of gross revenues on downloaded content. Tracking and accounting for the individual subscriber’s activity is a costly business, with so many different data plans and handsets in the market. Even with a consistent platform, Apple charges 30% for every application a developer wants to place in the App Store.
Sources of mobile revenue
1. Shared-revenue vs. license fees
Based on the above breakdown in the value-chain, it is not uncommon for a deal with the content rights holder to be done on a 50%-50% share of net revenue on the proceeds with an aggregator/publisher after dividing the gross revenue with the carrier and paying for the provisioning of the content. If you can generate 5000 downloads per month at $7.99 per download (as is the case with some highly-rated TV game shows on Canadian carriers), then your share of the revenue will be $3,000-$4000 per month. If you have paid a developer $10,000 – $20,000 to develop your application you will need to be in the market for 4-5 months to break even unless you are working with a partner with multiple carriage deals.
To expect a content aggregator or a carrier to give you a minimum guarantee to cover all of your development costs is a tough sell. Carriers have no need to pay minimum guarantees and aggregators are in the same boat as you, the rights-holder, in that they have to create enough interest for all of their products to justify an ongoing relationship with a carrier.
You can try to omit the aggregator from the equation, but you had better be as popular as Canadian Idol or the NHL in order to get the attention of Canadian carriers since the take-rate will still be in the tens of thousands per month range. As is always the case, US carriers can expect to generate approximately 7-10 times the numbers as in Canada, and European carriers will generate higher numbers than that for the right international properties based on a higher penetration of Smartphones and a propensity of their populations to use them over fixed broadband.
Gross revenues on top-rated mobile games (like Endemol’s Deal or No Deal) in Canada can average 3,000 – 5,000 downloads per month at a price point of $7.99 a download. Top Canadian television series with mobile games and a network deal in the US, could possibly net approximately half that volume. Pricing is fluid, and because of the quick tail-off of downloads during the first three months, there is some strategy needed to adjust pricing over time. People want free content and know how to get it from other sources. For this reason, most deals are done on a shared-revenue basis. There is no justification for license fees or minimum guarantees to the content owner until the content has established a consistent take-rate in the market. Even top international sports properties have yet to prove themselves in North America.
The days of making money by creating a cheap ringtone or wallpaper and charging $1.99 to download it are over. Some call those days Mobile 1.0. Frankly, unless you have already got some experience with iTunes and the App Store, you are likely coming late to the party. Recent data shows that the Apple iTunes App Store has jumped from 15,000 to 25,000 apps in just the last three months. Top-rated games and applications are averaging about 5,000 downloads per month for the first two or three months, but that after downloading, users are returning to them only about 16 times on average. At $0.99 per application, or free, the model is not likely to be sustainable for very long – ad-supported or not.
The key to success remains having a recognized brand. Obviously dealing with a partner that can deliver content to multiple mobile carriers abroad will dramatically increase your net revenue over sticking to the domestic market. In that respect it is no different than television.
2. On-deck vs. off-deck
Today carriers like Bell, Telus and Rogers are interested less in being content providers than being providers of high-value data services like must-see video (breaking news, sports instant-replays, catch-up video) and real-time social networking and chat which incorporates pictures, video and SMS. To get their attention and space on their deck (within the top selections they present to the subscriber’s handset), you must provide some indication that your audience is sufficiently interested in your content or your community to be featured on their platform. You can also create an M-site or mini-site that is stripped of much of its rich media content to make it more efficient and fast loading, in order to make it accessible from the majority of phones. Many video content providers will use a service provider like Quickplay to deliver their video to the greatest number of video-capable handsets, but it is still possible to encode and deliver video to a particular platform like Blackberry or iPhone yourself. You can also put out your content for free on mobile by making it available through Youtube, and then hope to take a share of whatever advertising revenue Google generates.
The advantage of being within the carrier “on deck” 4is that the charges for delivering the content , say NHL Center Ice, can be incorporated into the billing plan and data plan offered by the carrier, and they can ensure that heavy users will not be subject to extra charges, if they are Center Ice subscribers. If you opt for an off-deck strategy you can be accessible to anyone regardless of who their carrier is, provided of course that they have a data plan or data roaming plan that can accommodate what they wish to consume. The more bandwidth your content requires, the higher their bill will be at the end of the month. Witness the oil-rig worker in Alberta who ran up a bill for $85,000 in a month by using his cell phone to connect his laptop to the internet and then downloaded movies.
Being on-deck ensures that you have a quantifiable addressable audience, which is essential if you are trying to get sponsorship or ad-support for your content. Being on a major carrier increases your credibility and ensures a higher quality of service and more importantly, gives you the data that will be necessary to audit for your shared-revenue distribution with other partners. Some content providers and aggregators will use a hybrid of the two in order to reach the widest number of handsets. You can also generate data through the M-site host or provisioning partner, but in order to generate sufficient traffic you will need to independently promote and advertise the address to your intended audience, and warn them about the need for a sufficient data plan. Fixed rate or all-you-can-eat data plans are more common in the US and in Europe where the sheer number of active subscribers means that the very few who consume huge amounts of data are offset by the majority who don’t.
Grouping content, creating thematic channels or mobile channels organized around brands seems to be the trends that are developing. Think ‘specialty channels’ for mobile content based on your own content brand or category. The mobile carriers, unlike their cable and satellite counterparts, will not be inclined to get into a tiered service offering or give away a per sub fee, until they have established that there is a high demand for the content. Instead, however, they will be willing to let the rights-holder retain 100% of all sponsorship or advertising revenue with a brand partner who wishes to underwrite some or all of the costs to the end-user.
Some revenue models we see are related to geo-specific or GPS location (the Tim Horton’s locator – ‘Timmy Me’ for the iPhone) or opt-in alerts, sponsored contests or mobile couponing (Toronto Maple Leafs Player of the Game voters being rewarded by a discount for sporting goods or hockey tickets which is delivered to their phone and redeemable at the cashier). Some of these opt-in applications in the UK are generating conversion rates to sales in the 20-30% range for redemption of CD’s and DVD’s at HMV in London during certain campaigns. In a few limited trials in Canada, Statsfone has seen even higher rates for sports. Compare this to a 1%-3% conversion by snail mail or email coupons. If the rights-holder can divide features of the mobile user experience (video sponsored by, alerts sponsored by, game or interactive application sponsored by), then they can create a mobile user experience that is greater then the sum of the television and broadband experience combined.
Imagine being able to keep all of the advertising revenue associated with your audience and retain a direct relationship with them by providing services to them wherever and whenever they happen to be, regardless of a broadcast program schedule and without them needing to sit in front of their computer or tv screen. A truly portable media experience. This is likely within the next three years for sports and entertainment brands, and within the next five years for lifestyle and how-to/DIY, we believe.
1 “White list” – A whitelist (or white list) is a list or register of entities that, for one reason or another, are being provided a particular privilege, service, mobility, access or recognition. As a verb, to whitelist can mean to authorize access or grant membership. In the case of the mobile web, mobile network providers may choose to limit access to streaming media websites (as Telus does for Youtube), or to provide access to sites on an exclusive basis as determined by the individual carrier.
2 “Walled garden” (protected environment, controlled access; refers to a closed set or exclusive set of information services provided for users (a method of creating a monopoly or securing an information system). This is in contrast to providing consumers access to the open Internet for content and e-commerce. The term is often used to describe offerings from interactive television providers or mobile phone operators which provide custom content, and not common carrier functions. This is also done on a negotiated basis based on available rights (different from whitelisting), as exemplified by MobiTV’s carrying only certain channels in Canada.
3 “Porting partner” a porting partner is a third party supplier of services to mobile content holders who ensures that the content is properly configured to the handsets supported by a particular mobile carrier. The choice of which porting partner is largely determined by the mobile carrier based on their own quality assurance and application testing process, which is shorter for suppliers who have already been certified by them.
4 “On-deck” refers to the placement of content or presentation of multimedia applcations by the wireless carrier in their WAP portal (Wireless Application Protocol). The WAP portal or “deck” (nicknamed for its similarity to a deck of cards, and the luck of the draw) allows content to be presented to the handset with the minimum amount of user intervention. It allows users to scroll through a hardcoded homepage list of choices on their phone, which has been optimized for the particular carrier’s environment. The choices and order that these are given are determined solely by the carrier. By contrast, “off-deck” means that the user is required to actively enter a URL into a form using the phone’s keypad (which can be tricky if symbols are incorporated), the content is filtered through a gateway that converts content to WML (Wireless Markup Language or XHTML Mobile). If the site is not properly optimized, the page will not display correctly, or certain features will not function.