Research Notes

Are the media companies and the mobile operators closer to understanding each other

Carl Williams, Strand Consult

Thursday 20th February
GSM World Congress 2003, Cannes
On the fourth day of the congress, it was the turn of the media companies to have their say and it is not every day that they get the chance to address mobile operators from all over the world, sitting right in front of them.

One of the things that slowly became apparent during the day is that the media companies and the mobile operators still have difficulty in fully understanding each other’s businesses – both still seem to have a little bit of an attitude of “Do you realise who I am” in the sense of “I am someone really important”.

This was quite apparent in the presentation from Endemol’s Williams Linder, who spent quite a while showing smart video’s presenting some of the many formats that Endemol produce – the best known of course being Big Brother.

Having travelled half way around the world to be at the GSM World Congress and sitting watching the videos that took up a good bit of Linders presentation, no one in the audience could be in any doubt that Endemol can make some great presentation videos – just as well produced as the best MTV music videos but with even faster and shorter clips, making those in the audience who had had a late night, slightly dizzy. But to be honest, there cannot have been many in the audience that did not know that Endemol produce Big Brother and a number of other successful TV shows.

Although Endemol did run through their main four areas of interaction via TV, SMS Newservices, Q&A Games, Voting and Ringtones/Logos and also showed a bit of what we can expect to see from Endemol in the near future in the form of new interactive formats and Java games, there was still something else that I would have liked to see in the presentation and that I felt was missing – namely some numbers.

Endemol did not show any figures from example Big Brother as to how many SMS’s it has generated across the countries where it has been running. Some of these figures for separate countries have previously been published, so it would have been nice to get an overview of the bigger picture. A new TV show with mobile interaction can get as many as 25% SMS’s where the user has typed in something wrong so the TV station gets the vote, but cannot use it. It would have been interesting to see figures from Endemol as to the development in the percentage of wrong SMS’s – as the mobile voters get the hang of using their mobile phones to interact with television. Another thing that might have been interesting to see from Endemol would have been a forcast of what mobile traffic they expect to generate from TV shows in the coming years.

There are many other results and predictions that Endemol could have spent their 30 minutes at the GSM World Congress on – and it would not have been to show the audience that they are a big player and can generate mobile data traffic – we all knew that before we came to Cannes.

The real reason it would have been nice to see some more facts and figures from Endemol is that it would give the mobile operators a better idea of how big the whole content market for mobile TV services could be if you add up figures from all the TV producers and broadcasters. If we had been given some indications from Endemol, we could start estimating other TV companies possibilities and start to get a bigger picture of the possibilities that a combined effort could generate.

This is one of the things that the media companies still have to realise – even the biggest media companies – that the mobile data traffic that one company can generate can be quite impressive, but it will still only be a very little part of the total mobile data traffic. Therefore, media companies should still be seeing themselves as part of a value chain that can help grow new markets in the mobile world.

Like many other media companies, Endemol is not satisfied with the revenue sharing models that they are seeing from mobile operators and would like to see much better models in place in the near future, but again, the investment Endemol has made in mobile TV interaction is still minimal compared to the costs that the mobile operators have had in both infrastructure and acquiring mobile customers – investments that have made it possible for Endemol to create mobile TV interaction. Although there is no doubt that both media companies and the mobile operators are starting to realise the need for each other, there is still some way to go – as Strand Consult wrote in an article last year:

In general there were very few facts and figures on the table from today’s line up of speakers from the media industry. Sega had some figures from the gaming market in the USA and showed some of their brand name games as mobile Java games, but as it is still early days for Java mobile phones, Sega stuck to saying that “brand sells”. There is no doubt that mobile games is going to be big and will be one of the things that could very well help push the sales of next generation mobile phones.

Microsoft had an interesting presentation about MSN, Hotmail and Messenger and how they have been working with mobile operators to offer these services to mobile consumers. With over 300 million MSN customers and 110 million Hotmail users, Microsoft can really offer some possibilities for the mobile operators. Again, these possibilities will be much more advantageous on the new 2.5G mobile phones and Smart Phones, but despite this Microsoft already has deals with some 36 mobile operators in 21 countries. As with Microsoft’s mobile phone strategy, Microsoft MSN’s strategy is to bring value to the mobile operators business and Microsoft did not state whether they were satisfied with the revenue sharing models, but simply that they were looking forward to offering many more mobile users access to MSN in the future.

Very few media companies will want to offer mobile services if they are losing money on them. For most companies the marketing and promotion value the services will have will probably not be enough in the long run to justify making a loss on the actual services. The question is, will the revenue sharing models from the mobile operators get better as the market grows? In Norway, the mobile operators are offering much better revenue splits on MMS to try to get content owners and services creators to create MMS content. Of course the SMS market is still huge, but the first indications from sales of Java games and MMS services in Norway are very positive and will help push the creation of more new services.

The media companies have a big ace up their sleeve – they can educate the mobile users on how the new mobile services work. While some media companies are moving ahead on mobile services, there are still some major players who are holding back, unsure of the return on investment in mobile services – described in an article published by Strand Consult almost a year ago:

Both the mobile operators and the media companies still have a way to go before everyone will be happy, but things do seem to be moving in the right direction and 2003 will prove to be a very interesting year.
Strand Consult 3GSM website

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