Research Notes


– an often ignored, but in fact crucially important element in the market for mobile services

There is no doubt that the mobile services market is developing at an astounding speed. But there is also little doubt that if this speed of development is to continue, it is crucial that all players on the market receive a share of the revenue generated by mobile services. But that is not a matter of course, as the historical facts on the Internet have clearly shown.

The media and content industries have extensive experience in using the Internet as a distribution channel. Right from the start, the Internet has been characterised by pirated content. Free music and free films on the Internet emerged in the early days due to the lack of legal possibilities to purchase the content. Websites like Napster and Grokster pioneered this area and quickly developed to be de facto standards on the market for P2P file sharing programs, which gave enormous problems for the intellectual property rights owners within the film and music industries, that were thereby not making money on their content.

But the mobile services market is different than the traditional Internet, as mobile users are used to paying for – and want to pay for content services, which the thriving premium SMS market has shown. It is therefore important to take advantage of this willingness to pay from the premium SMS services market and develop and launch new advanced mobile services, while at the same time limiting or completely avoiding piracy. The solution to save the mobile services market from ending up like the Internet is called DRM.

In Strand Consults report – ”How to get success in the 3. generation VAS market” – we describe and analyse the importance for the content providers to control how their content is distributed and how the Digital rights are handled. For content providers to have control over their content, they will need to have implemented a DRM (Digital Rights Management) system. The report contains an analysis of different DRM systems and examines their advantages and disadvantages. DRM is a technology that ensures that end users only have authorised access to copyright protected content and DRM will thereby prohibit users in using and distributing content unless they have purchased access to do so.

Today it is difficult for content providers to know how their copyrights are being handled, e.g. how the digital distribution is being handled after a ring tone, Java game or logo has left the content providers systems and especially after it has arrived on the customers mobile handsets.

Only when the mobile distribution channel is a guaranteed end-to-end pay channel, will it be possible to create a profitable and healthy market – and a market that can continue to be profitable and healthy for all players in the value chain.

Content providers should demand that DRM is fully implemented throughout the whole value chain so they thereby have a functioning end-to-end DRM system, as the content owners have very little influence on the distribution process.

The widespread use of a common DRM system will be the key to have a common platform that is financially attractive and ensures interoperability. It is crucial that there is an open common DRM standard, like for example OMA DRM, as having different and incompatible DRM systems will affect the growth and development negatively and prohibit the interoperability and harmonisation of the business models.

But no rose without a thorn as some people say. There is no doubt that many end users have a negative attitude towards DRM. But a lot of that negativity stems from the Internet, where users have been used to being able to freely copy and distribute digital content without limitations. On the mobile market, users are used to paying for content and therefore mobile users are not nearly as reluctant about having DRM on mobile services – even though many customers both use mobile telephones and content from the Internet. 

the 3. Generation Value Added Service Market

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