White Paper
Written by Pinal Gandhi & Andrew Ferguson
Contents In this paper we explore how and why the acceleration in user demand for
off-portal browsing through mobile devices is creating a whole new order in
the mobile communications arena.
Dynamics of the new order 1 We examine the issues and challenges, the opportunities and the threats for
Pressures on the network operator 1 each of the key player elements within the digital content market, and
outline the strategies and mechanisms we believe each needs to adopt in
Multi-channel strategy 1 order to sustain a profitable position in this fast-changing environment.
Solution infrastructure 2
The advance of technology 2
The battle for market share 3
Mobile operators 4
Content owners 6
Content aggregators 8
New entrants 9
Conclusion 10
Independent research by JupiterResearch reveals that off-portal sales in Europe
already account for between 40 and 70 per cent of mobile content revenues.
CONTENT
REVENUE
Dynamics of the new order Pressures on the network operator
Public appetite for mobile access to ever more inventive So where does this leave the mobile network operator?
services and content has led to the growth of a new Once at the very heart of the value chain, operators are
phenomenon: the provision of off-portal content and now finding themselves sidelined by service providers
services by third parties from sites that are not under and content owners who are seeking innovative ways to
the control of the mobile network operator. develop their own share of the burgeoning mobile
content market.
Independent research by JupiterResearch reveals that
off-portal sales in Europe already account for between Users discover these off-portal sites via a wide
40 and 70 per cent of mobile content revenues, spectrum of distribution channels beyond the carrier
depending on operator and territory, with the US also portal – television commercials, search engines,
rapidly gaining traction. magazines, contextual links on websites, media reports,
word of mouth and even in short codes under bottle
Other research reports confirm the burgeoning growth in caps or on cereal boxes.
off-portal activity. For example, Berg Insight estimates that
by 2012 the mobile entertainment market could be worth With their control and influence over service offerings to
$32 billion, with games being the leading content category. the customer thus compromised, operators now have
Strategy Analytics estimates that global revenues from little choice but to review their conventional walled-
mobile data will grow from around $61 billion in 2006 to garden approach and find new routes to market.
just over $189 billion in 2009, and Qpass Inc reports that
about a third of global digital content sales – nearly
$1.4 billion – went off-portal in 2005. Multi-channel strategy
Meanwhile, ingenuity and technology continue to Media companies and content rights owners, as well as
stimulate the growth of off-portal commerce further. fixed-line ISPs, want to make their mark in the mobile
Greater bandwidth, more powerful handsets and arena. As a result they are branching out into new
increasingly sophisticated protocols and payment media platforms. For example, big players like MTV are
software make it ever easier for consumers and content shifting to a multi-channel strategy, putting viewers in
owners to reach one other – regardless of operators’ control as they transform themselves from conventional
garden walls. broadcasting businesses into multi-platform digital
media companies.
The operator may have a business relationship with
off-portal content providers, such as payments Broadband users are increasingly interested in receiving
processing arrangements, but the key factor here is that triple and quadruple play services from a single provider
off-portal providers can also sell to consumers without and expect digital content and services as a core part
any direct operator involvement. of the bundle.
The emergence of triple and quadruple play service offerings is leading to the
creation of a broadening digital content marketplace, with previously diverse
players extending their reach into new channels.
Off-portal will represent the majority of content delivery, One of the key forces of change is the emergence of
increasing in domination if Java applications become a more sophisticated mobile internet-optimised handsets
new way to bypass mobile operators. The BBC’s and improved network capabilities, giving customers an
Headlines Tracker mobile application, which grabs the increasing breadth of choice as to where they source
headlines for you either on demand or automatically, is and purchase content.
a good example. There are also now Java-based SMS
services trying to wrest service from operators. A key future technology enabler for off-portal content
services will be the growth in content management and
distribution systems based on the IP Multimedia
Solution infrastructure Subsystem (IMS), a network architecture and framework
that enables the convergence of data, speed and
With increasingly sophisticated content delivery mobile technology over an IP-based infrastructure.
platforms at content providers’ disposal, consumers are
likely to enjoy a better quality of user experience. This As such, it helps to eliminate the cost and difficulty of
will stimulate more usage, in turn encouraging more creating separate silos for each new service and will in
content providers to deliver direct-to-consumer sites. many ways be an enabler for wider content access
from mobile devices. IMS is emerging rapidly from the
Investment is required to provide an end-to-end standardisation work undertaken by the Third
infrastructure that can keep pace with these Generation Partnership Project (3GPP) for 3G mobile
developments. The mobile operators and service phone systems in UMTS networks and is becoming the
aggregators are well positioned to play a part in de facto standard for real-time multimedia
developing the technology needed; they have the communication services.
existing infrastructure and market experience. Due to
the high level of investment required to provide end-to- At the same time, advancing technology also enables
end infrastructure, the smaller content providers will service providers to extend their offerings across
need to consider a range of options in finding their previously diverse channels: fixed, mobile, PC and
optimum route to market, such as partnering with digital TV. The emergence of triple and quadruple play
system integrators, billing vendors and managed service offerings is leading to the creation of a
service providers. broadening digital content marketplace, with previously
diverse players extending their reach into new channels
Atos Consulting believes that in considering strategy – and thus increasing competition.
and positioning, the business needs to look closely at
the long-term investment case for IT, taking in issues
such as digital rights management (DRM), streaming
and content management. Changes to market
conditions – for example, legislation, taxation on content
and development in standards – will also have an
impact on IT and hence the return on investment.
Players in the mobile communications market are now having to recognise the
natural symbiosis that exists between the various market contributors and to
collaborate in ways not previously explored.
Established players in the mobile content marketplace For all these reasons, players in the mobile
include network operators and device manufacturers, as communications market are now having to recognise
well as film studios, broadcasters, record labels and the natural symbiosis that exists between the various
game publishers. Determined to preserve a significant market contributors and to collaborate in ways not
stake in the success of their mobile content operations, previously explored. Mergers, new strategic agreements,
each is now vying for a central position in the new market. alliances and partnerships, as well as both vertical and
horizontal consolidation, are inevitable. Indeed these are
The outcome of the battle for market share will ultimately already happening.
be decided by the end-user. In this respect, the new
mobile value chain is similar to the fixed line internet, Atos Consulting believes that the mobile content
where control is driven increasingly by customer choice, experience will converge with today’s online internet
and where brand recognition and customer acquisition experience. While, in the early days of the internet, ISPs
strategy count above almost everything. such as AOL had great success with their walled-
garden strategy, there is growing recognition that a new
way of thinking is required. The challenge now is to
attract and retain customers through appropriate
marketing and the sourcing and bundling of compelling
content in line with market demand.
A major question for mobile operators is how to incorporate off-portal content
successfully as part of their next-generation mobile data strategy.
It follows that a major question for mobile operators is how to incorporate off-portal content successfully as
part of their next-generation mobile data strategy, built around personalisation, rich content and a more
converged user experience.
To enable the industry to grow, mobile operators need to work with new
entrants, content owners and service providers rather than attempting to
grow the market themselves.
There is now the opportunity for content owners to work with operators to
design handsets jointly and to interact closely on development and rollout of
new models.
However, most content owners lack the infrastructure for delivery and charging, as well as experience of
managing customer relationships. While operator portals continue to be fundamental to the business and
marketing models for a brand, content providers need to determine what method of delivery works best for
their target consumers.
To date, network operators have had the biggest influence on handset technology. But there is now the
opportunity for content owners to work with operators to design handsets jointly and to interact closely on
development and rollout of new models. For content owners this encourages consumers to access their
content through intelligent hardware design — and for the operators such collaboration can help strengthen
customer relationships.
Voice and SMS services are essential competitive offerings in this market –
but the real driver is the ability to unleash the revenue potential that the content
market has to offer.
While operators tend to prefer dealing with a small number of content partners,
they need to provide a huge choice of content that reflects customer demand.
While operators tend to prefer dealing with a small number of content partners, they need to provide a huge
choice of content that reflects customer demand. They can do this by working with a small number of content
aggregators who bring large catalogues of content to the table.
To remain successful, aggregators need to deliver the widest variety of high quality content, while ensuring fast,
accurate transaction routing and payments settlement among multiple operators and content providers.
Aggregators may well feel the pinch as content owners > expansion of charging mechanisms to ensure growth
seek to maximise revenue through stronger direct and increase of customer loyalty
relationships with the operators. However, Atos > readiness to extend infrastructure to support
Consulting believes that operators, as well as large more content providers and take over customer
media brands and niche media/technology players, will relationships from the mobile operators
be looking for managed service solutions to reduce the > exploitation of experience and infrastructure to
cost of content delivery – presenting aggregators with provide managed services to content providers
an opportunity to leverage their existing systems, > provision of commercial models for content
customer base and channels to provide managed appropriate to the specific service, allow for
solutions. differentiation of service such as Digital Rights
Management (DRM), content delivery assurance and
quality of service
> strong focus on branding and advertising.
Exploring the market to see what works best for each player before committing
further investment, both in revenue share and customer base, is becoming
increasingly common.
Also among these new entrants is AOL, anxious to expand beyond its mature dial-up internet access market.
By leveraging current fixed content, AOL has introduced new and enhanced mobile services, including new
mobile browsing that adapts web pages to mobile screens.
BT also plans to launch a mobile content portal and potentially integrate this with its broadband and wireless
services including BT Fusion, the world’s first seamless fixed and mobile phone service. Services, including a
mobile media portal and customised handset client, will be accessed by the new generation of wi-fi enabled
handsets, featuring a wide variety of new content such as branded Java games, video downloads and
ringtones.
Exploration in the market However, portal appetite goes well beyond fixed and
The mobile content industry offers different business mobile services, and the internet giants could well prove
opportunities for different markets. Exploring the market a direct threat to operators’ longstanding access-
to see what works best for each player before centric business model. In fact, recent developments
committing further investment, both in revenue share are enabling them to launch full-frontal attacks on the
and customer base, is becoming increasingly common. internet access markets: virtual operators, voice, TV,
wi-fi and mobile access.
For example, Google is taking the ‘try it all’ approach,
having invested intensively in mobile search, text The off-portal content market may also offer smaller
advertisements, location-based services and localised developers big opportunities, though they face
software on mobiles. It has gone some way in challenges in marketing, quality control and billing.
establishing itself in the mobile search space, most Generating traffic and winning off-portal content sales
recently with deals signed with T-Mobile (Web’n’Walk) and will not be easy for these smaller companies, without
Vodafone. However, if Google and other competing firms the brand recognition and marketing resources to tempt
are to be successful, they need to get returns on their consumers with their content. As a result they will have
experiments and establish an identity in a specific area. no option but to partner with an independent
aggregator to drive business forward.
Thanks to a handful of extremely popular key services,
leading internet companies have enjoyed an impressive New players entering the market need to build a
rise in traffic and revenues, and have established passionate user-base that will stay loyal, while they build
themselves as powerful brands. Recent partnerships frequency of interaction across multiple platforms and
with mobile operators offer real opportunities for deliver engaging opportunities for advertisers. Atos
collaborating parties, albeit depending on the nature of Consulting’s view is that, as new content emerges, so will
the service. an advertising infrastructure to support this content which
is not currently being sustained by carrier agreements.
Now is the time for the different players to prepare their strategies and
implement positioning tactics in preparation for the wider adoption of the
technology, with alliances, mergers and joint ventures to give offerings across
previously diverse channels.
Conclusion
Strategy for new entrants At Atos Consulting, we believe that developments in the
Coming into the marketplace from an ISP or search digital content marketplace, enabled chiefly by advances
engine background, new entrants tend to show an in off-portal browsing, can provide significant
aggressive approach to positioning themselves at the opportunities to enhance revenue potential for all parties.
centre of technology developments, as well as courting
strategic alliances with key market players. The opportunities will come through the increased value
added to customer propositions and the facilitation of
These entrants need to follow through their market their experience through better access methods.
experimentation with establishment of a positive identity
and product set with which customers can clearly Now is the time for the different players to prepare their
identify. Specifically: strategies and implement positioning tactics in
preparation for the wider adoption of the technology,
> Assess the case for expansion into new areas such with alliances, mergers and joint ventures to give
as voice offerings across previously diverse channels.
> Establish an identity and areas of key focus or
competitive advantage As well as this continuing positioning activity, we will see
> Strike a balance between product placement and more definition around service propositions and
ongoing profitable business models. offerings to the consumer fuelling the wider adoption, in
line with the introduction of better handset technology
to improve access and user experience.
10
About Atos Origin
Atos Origin in the Telecom Sector
Atos Origin is an international information
Atos Origin’s turnover in the telecoms industry is close to €1 billion. It
technology services company. Its business is
delivers consulting, systems integration and outsourcing expertise to 350 turning client vision into results through the
customers around the world, including Tier 1 telecom operators in Europe. application of consulting, systems integration
Atos Origin has been active in the telecoms market for more than 20 years. and managed operations. The company’s
annual revenues are more than EUR 5 billion
Atos Origin is the European market leader in prepaid billing solutions, and it employs over 46,000 people in 40
managing 25 million users and two billion transactions a year in payment countries. Atos Origin is the Worldwide
systems. It was the first company to design and manage customer loyalty Information Technology Partner for the Olympic
programmes for the telecoms industry, serving some 13 million members. Games and has a client base of international
blue-chip companies across all sectors. Atos
For further information, including a series of detailed fact sheets, regarding Origin is quoted on the Paris Eurolist Market
off-portal mobile content and preparing for the future please contact: and trades as Atos Origin, AtosEuronext,
Atos Worldline and Atos Consulting. For more
Atos Consulting, Technical Consulting Group information, please visit the company’s web site
technicalconsulting@atosorigin.com at www.atosorigin.com
Atos Consulting
4 Triton Square About Atos Consulting
Regents Place
London NW1 3HG Atos Consulting is a leading provider of busi-
Phone: +44 (0)20 7830 4444 ness, process and technology consulting
Fax: +44 (0)20 7830 4445 services. With more than 2,500 staff globally, it
focuses on delivering proven, pragmatic
solutions to the telecom, manufacturing, finan-
cial services and public sectors.
© 2006 Atos Origin
Atos, Atos and fish symbol, Atos Origin and fish symbol, Atos Consulting, and the fish symbol itself are registered trademarks of Atos Origin SA. September 2006
1083-0706