mark, what a long, but also very good post.
jeff, thanks for starting this thread.
I will comment right here:
Yes, I agree that TV-SMS interaction is en vogue generating
quite a bit of extra revenues for TV stations, SMS providers,
network operators and even TV format developers. Yet, this is
a young development made only possible by premium SMS. Before,
German operators did not share standard MO (Mobile Originated)
SMS prices (?0,19 gross in Germany) and increased MT (Mobile
Terminated) SMS from ?0,02 (net) to ?0,06 (net) in January 2002.
Keep also in mind that Premium MO SMS is a very expensive and
low-tech channel for distributing mobile content (ringtones, logos, text).
Depending on the operator and the tariff (Germany: ?0,39, ?0,59
up to ?1,99) the content provider gets between 30 and 60% of the
net price (minus VAT). Thus, the main moneymaker is the mobile
One of the main reasons why Premium SMS and TV fit nicely is that
people participate in votings and competitions and maybe chats.
Especially SMS competitions are very easy to join (just send 1 SMS
command/keyword to a cross-operator shortcode) - just a few seconds
and you have a chance to win. Cross-operator shortcodes, e.g.
82628, are easy to type in as recipient's phone number.
Most importantly, SMS is interoperable across all operators
which is a key success factor.
To sum up, I want to argue that this low-tech, fast interaction
with Premium SMS works nicely for TV mass formats but really does
not deliver useful content, rather a quick chance to win and the
feeling that your voice counts. I still believe that Japan is more
advanced as revenue shares are standardised and as fair as they
can be until operators start sharing airtime/airdata.
I still wonder how users pay Premium SMS prices for such a low-tech
service offering. Single-voice ringtones, black-white logos ... arrrgghhhh!
Jan Michael Hess
www.mobileeconomy.de | www.mobiliser.org
> I think you bring up an excellent point about Europe - and consequently
> about other markets - including the US - by using the example of the success
> of SMS-based polling and games linked to TV, radio and other media, in
> addition to functions like deliver screen savers, ringtones and the like.
> Certainly, in terms of a per-download or per usage basis, Europeans pay far
> more (prices ranging from $0.10 to $10 dollars per usage) for mobile
> entertainment than the Japanese. Moreover, many TV and radio production
> companies have been far more entrepreneurial than their Japanese
> counterparts in finding ways to utilize SMS services to extend the
> interaction with various types of content and services. Shows like Pop Idol
> in the UK and others across Europe regularly find that about 1/2 of their
> total polling is enabled through SMS - and with a per usage charge of around
> $1 - $2 multiplied by millions, have generated significant steady new
> revenue streams as a result.
> There are a wide variety of factors that make the European model so
> successful in driving profits, but the overriding factor is that of content
> providers using SMS as a delivery point for a variety of services with a
> level of independence that Japanese content providers can only dream of.
> Specifically, content providers seized on the opportunity to use SMS short
> codes (codes that can be input to send and ask for delivery of messages,
> content and downloaded applications) to deliver services while the European
> mobile content market was starting to develop. SMS short codes allowed
> European content and application providers to create stand alone billing and
> delivery mechanisms independently of the mobile operators, allowing content
> providers to move faster than they would have on a telco timetable, set
> their own pricing and to create a direct channel with between them and the
> Moreover, in Europe it was the content providers that set cost expectations
> rather than the telcos, tightly tying mobile content options to existing
> content in other mediums, and creating pricing models that were most
> attractive to content providers (almost wholly based on pay per use),
> allowing market competition and the attractiveness of content to ultimately
> determine the relative cost level of mobile content.
> This in turn created a situation, unique to Europe (at present) where the
> content providers (rightly) dominate the pricing, promotion and development
> of the mobile content market. Using SMS rather than WAP (which the mobile
> operators will admit was a disaster of their own making) as an entry point
> for their services, the content providers circumvented the telcos to connect
> directly with the consumer, hence creating a new market for services.
> Of course, all major content providers also work in consort with the telcos
> concurrent with their independent efforts, but their development of the
> content market has given them a power in the mobile content market that is
> the envy of content developers outside of Europe.
> The same holds true in other GSM-based markets such as Australia and
> Singapore, though to a lesser degree.
> All well and good, but the question is, how much of this model's success can
> be repeated in the US and Japanese markets?
> In Japan, obviously, the system for the development and dissemination of
> content is much more tightly controlled by the mobile operators, and the
> model for the most part is packet-switched charges split between content
> provider and telco, with a good degree of premium rate and subscription
> services in the mix.
> And, as the content providers rely to a much greater degree on the standards
> and expectations set by the telcos for pricing and billing for services,
> they make a much smaller degree per item sold of profit, and on the whole do
> not control the ultimate pricing of services (e.g., one of the main
> complaints of content providers - this comes straight a conversation I had
> recently with the largest business information provider in Japan - is that
> DoCoMo, KDDI and J-Phone do not allow a flexible enough content pricing
> model to justify the development and dissemination of their highest quality
> - and hence, most attractive - content for mobile users) as in the case in
> Of course, the whole idea in Japan is that you make back what you lose on a
> per unit basis relative to Europe in terms of greater volume, and to some
> degree this is certainly true, but at the end of the day, the fact that
> Japanese content providers do not control the process of distribution and
> cannot set attractive pricing results in a more conservative attitude.
> After all, if you cannot set what you feel is the ultimate best price for
> your services, will you risk your brand and investment money in creating
> mobile services that truly tie into your offline content? It's must harder
> to justify.
> Personally, I think that all the talk regarding the desire on the part of
> Japanese content providers to avoid the risk of server overcapacity is a
> polite excuse that masks the actual reality that it does note make economic
> sense to risk their offline revenue and brands by tying them more tightly to
> mobile content.
> Please don't misunderstand me, I think that the Japanese model works well in
> many ways, and that there are many, many successful efforts tying Japanese
> content to mobile platforms, but in comparison to Europe, there is much less
> convergence between mobile and offline media.
> So, to finish this letter what your last point, will the European model
> translate to the US? On a business level, I certainly hope so, but the
> actual reality is somewhat unclear. As opposed to Europe, there are three
> bad early indicators that have taken shape in the US market that were absent
> in Europe (leaving aside cultural factors for the moment) that could make
> the establishment of a European-flavored content market more difficult:
> 1. Telcos have more tight control of pricing models and billing methods.
> In the US, the telcos have defined early the pricing models for the US
> consumer for ringtones, logos and interactive SMS at a much lower and less
> attractive rate (about $1-$2 for ringtones and logos and much lower for SMS
> messages - offering flat rate instead of per usage plans for the most part)
> to the content provider than in Europe.
> By setting these price expectations early, they deflate the market's
> potential value for services, making it harder for content providers to
> maximize profit for their services.
> Moreover, US telcos are only now starting to adopt European and Japanese
> pricing models for content - where the content provider rightly receives the
> majority (70% and higher) of revenue for their services.
> 2. There are too many types of confusing billing and payment schemes in the
> US market. Between BREW, SMS, WAP, J2ME and others, US telcos are trying to
> define a pricing model based on pay per use, download, flat fee and timed
> use that at present is confusing and hence less attractive to both users and
> content providers than a standardized pay per use or packet-switched model.
> And, while they have time to experiment with the right mix, that window is
> rapidly closing as the consumer starts to use mobile content services,
> receives confusing billing statements and receives what are at present a
> widely-fluctuating quality of services.
> And in terms of pricing and billing models as they affect the content
> provider's thinking, most content providers with the best content still
> think that the market is too early and uncontrollable to justify tying their
> brands to mobile services, making small experiments while waiting for the
> market to evolve for the most part, and saving most of their best content
> for a more mature market.
> 3. As the US market has little or no usage of 900 services outside of porn
> - and chargeback rates of more than 60% for 900 in general, and SMS short
> codes for services have yet to be defined and standardized, content
> providers do not have a easy and ready way to charge for their services
> outside of the mobile operators. In Europe, content owners can circumvent
> the billing systems of European operators via the usage of both premium rate
> SMS and "0900" billing systems that are more independent of the mobile
> operators than in the US and Japan.
> There are many other factors that go into the development of the US market.
> At the end of the day, the shape of the business models and services
> provided will mirror both those of Japan and Europe as the market grows and
> content providers find ways to deliver their content for maximum profit. And
> indeed SMS will be used (especially once short codes for premium SMS
> services are standardized) as a crucial delivery system for mobile content
> in the US as in Europe, though on the whole, at this point, the telcos have
> a much tighter control of the marketplace and content providers are more
> beholden at present to the mobile operators in terms of defining business
> models, pricing structures and delivery methods.
> Mark Frieser
> +1 917 664 1606
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> On 25-09-2002 22:28, "Funk" <funk_at_rieb.kobe-u.ac.jp> wrote:
> > Hello everyone,
> > Having talked with many Japanese TV and radio broadcasters about their
> > integration of mobile Internet services and TV/radio programs I assumed
> > that Japan was light-years ahead of the rest of the world. But a report on
> > a recent seminar in amsterdam called "SMS meets TV" suggests otherwise
> > (http://www.europemedia.net/showfeature.asp?ArticleID=12767). European TV
> > stations are using SMS to offer chat services, do surveys, promote
> > interactive TV, and increase viewer ratings. Most Japanese TV stations (as
> > far as I know) are still moving very slowly to offer surveys due to
> > concerns about overloading their systems. On a wider note, this is just one
> > more example of how the success of Japan's mobile Internet has little to do
> > with culture; in fact the amounts of money that europeans pay to download
> > ringing tones, screen savers, and now participate in TV station-sponsored
> > services suggests that europeans may be more interested than japanese in
> > these services. it is probably just a matter of time before similar things
> > appear in the US as SMS services continue to diffuse there.
> > cheers,
> > jeff funk
> > http://www.rieb.kobe-u.ac.jp/~funk/index.html
Received on Thu Sep 26 18:28:04 2002