A glimpse of the near future can actually be seen by looking at the palm of a South Koreans hand
|– but the price of a prediction is just too high.|
|Before now, very few people could tell a story by looking at the palm of another person’s hand. Today, more and more people can see a story unfold in the palm of their hand – and many of those people live in South Korea!|
This is not because the population of South Korea have all suddenly acquired psychic gifts, but because more and more people out there can put their mobile phone in the palm of their hand and watch video on it using the service “Video on Demand” (VoD).
South Koreas biggest mobile operator SKT launched their CDMA 1X mobile network in late 2000 and were the first in the world to thereby offer their customers download speeds of up to 144 Kbps. In practice the mobile users are getting download speeds of around 70 Kbps. At these speeds it is no problem to transmit multimedia content like VoD and Audio on Demand (AoD) over the network and – after the first mobile phones that could handle VoD and AoD were introduced on the market in July 2001 – directly to the consumers mobile phones.
However, it is not just the South Korean mobile market that has been looking forward with great expectation to these new and exciting mobile possibilities. The European mobile operators and terminal manufactures have also been quietly hoping that these types of new multimedia services could help close the economic gaps that the huge investments in 3G licenses and infrastructure have left unanswered. Video and audio services is a new frontier that the market players are quietly praying for will have a future in the palm of their customers hands. But right now the reality is that the users in South Korea have not really adopted these new services on the scale that had been hoped for – and content providers have not really developed very many new attractive mobile services based on these new possibilities. Not because it doesn’t work, or it is slow or anything like that, but simply because the pricing structure on these types of new services has been – to put it mildly – a catastrophe.
The analysis and conclusion about these new types of services are part of Strand Consults new report about the market for mobile services in South Korea “The Korean market for Mobile Services – a window to 3G”, which describes and analysis in detail many of the new and media-rich mobile services available to mobile consumers in South Korea.
The movie trailers that the South Korean mobile operator SKT offers its customers are up to 30 seconds long, while music videos are up to around 4 minutes. When the services launched, SKT charged just under 1$ for the transmission cost of a 30 second movie trailer and 8$ for a 4 minute music video! Needless to say, these prices were just too high for the South Korean mobile consumers, who you must remember, do not have the same income level as most western European countries. Add to this that traffic fees of that size leave no room for content providers to add a content fee and you do not have to be a rocket scientist to work out that a) mobile consumers will not use these services and b) content providers have no incentive to develop any services at all that they cannot earn any money on. One solution could have been that the SKT offered a revenue share on the high traffic cost -but SKT was not prepared to do that.
In 2002, SKT halved the price of traffic fees on these types of services in an attempt to boost the market. But even at half the price the mobile consumers still find these services expensive, making the situation for content providers exactly the same as before – little or no room for content fees and therefore no incentive to create new services.
So that is the status today for media-rich services that could really boost traffic on mobile operators networks. The content providers are staying away from these services, waiting for better pricing models and revenue sharing opportunities. The mobile consumers are now using VoD and AoD services to some extent, mostly shorter promotional movie trailers and music clips being offered without any content fee as part of promotional marketing for new movies in the cinemas and new CD launches.
If there is to be a mass-market for VoD and AoD mobile services, the mobile operators will have to find a much more flexible – and cheaper – pricing solution that is much more in line with what the mobile consumers are willing to pay for these types of services and that gives content providers much more room to add content fees on top of traffic fees. So for now, even though more and more South Korean mobile users are looking at the palm of their hands and predicting what will be showing in movie theatres in the near future, we predict that mobile operators around the world will have to look again in their crystal balls for more flexible pricing models, before innovative video and music services on mobile phones become one of the success stories that mobile operators are hoping for on the coming 3G platforms.
|More information on the report|