Indian Idol,
licensed from the American Idol format,went on
air on Sony Entertainment Television in October
2004. The talent hunt for singers had already
been a huge hit in the US. The show was given
all the build-up that Sony gave Kkusum or any of
its other big soaps — hoardings, teasers, and a
behind-the-scenes look at some of India’s
would-be singers crying in their bathrooms. Not
surprisingly, Indian Idol’s first season was an
instant hit. But what took Sony by surprise was
the overwhelming number of people who chose to
vote by SMS. People raved and ranted about their
favourites getting ousted; others plotted to get
the ones they wanted out — public opinion was
all about the power of texting. During the
voting period from November 2004 to March 2005,
Indian Idol got more than 55 million votes via
SMS. At Rs 3 per SMS, that is Rs 16.5 crore. The
telecom companies made Rs 11.5 crore, and Sony
about Rs 5 crore.
Eighty million people armed with handsets
want to be entertained when they are travelling,
waiting or simply living. And they are willing
to pay for it. It is a combination that is
pushing scores of media companies, eight telecom
operators and over half dozen aggregators
(mobile content or mobile solutions companies)
to offer a host of data services — from contests
and ringtones to weather forecasts, games,
banking and astrology services, among dozens of
things — on the mobile phone.
As these three main protagonists — media,
mobile and aggregators — get together, a Rs
2,300-crore market has been created, says a
Lehman Brothers report. (This includes texting
and is not just operator share.) Media companies
are using mobile phones to interact with
viewers, listeners or readers and, maybe,
generate a little money. They could be using it
to entertain them or promote a myriad products
or services. This is where aggregators such as
Activemedia Technology, Mobile2win or Hungama
act as a link between media and mobile
companies.
It is a kaleidoscopic world where the three
players hold hands, then move on, then come
together again. Yet, a few things are clear —
music, films and the power to change lives (such
as Indian Idol) have so far been the favourites
of consumers across the world. Going by global
experience (and India is not far behind), it
would seem as if TV and the ability to buy and
sell things over the phone will take off next.
As that happens, the evidence that the mobile
phone will become another media platform, just
like direct-to-home (DTH) or cable or the
Internet, is mounting.
Consider some of it: In the UK, there are six
different mobile TV technologies being tried
out. Nokia and O2 (a mobile operator) are
claiming that in the trials they ran, people
watched mobile TV for three hours a week as
compared to rival BT and Virgin Mobile’s one
hour. Nokia and O2 say that they offer more
choices with 16 channels against BT’s six. Both,
incidentally, are using different mobile
broadcast technologies. In South Korea, mobile
music is on the verge of overtaking physical
music sales. On the other hand, there is a
battle brewing between South Korean mobile
operators and broadcast companies, with the
latter bypassing operators to offer TV directly
to mobile users. Last year saw congestion on
networks that offered unlimited usage of mobile
TV and video-on-demand. As a result, prices are
dropping and analysts are worried about the
returns on expensive licences that telecom
companies paid for. They are exhorting companies
to offer differentiated programming instead of
plain video clips. Sounds familiar?
This rush to meet the demand for ‘mobile
snacking’ has raised several key questions.
Telecom companies are used to selling voice, a
plain vanilla product. They are used to being in
control of both access and billing. Can they
survive in the hurly-burly world of
entertainment, pay huge amounts of money for
film and sports rights, or create new channels?
Can they create that unique blend of short,
snappy, yet creative shows, songs or information
products that mobile snackers are demanding? Can
they, ahem, become media companies? And can
media companies remain mere suppliers? Will we
see some joint ventures soon between mobile
operators and some of the larger media
companies, a la Europe? These are questions to
which there are just hints as answers.
See the credits at the beginning of any
Indian film and compare it with Hollywood
releases. Almost every major Indian film company
now has a mobile partner promoting the film
through contests, wallpapers, et al. It also
makes a neat packet on ringtones and ringback
tones. Ninety per cent of ringtones is film
music. In 2005, the Indian music industry got
about Rs 140 crore or 20 per cent of its
legitimate revenues from mobile music. “These
days film producers stress on mobile marketing,”
says Shatadru Sarkar, deputy manager (new
media), Saregama. “A hit film can generate Rs 1
crore-1.2 crore (about 5 per cent or more of an
album’s sale) on mobile revenues,” says Shridhar
Subramaniam, managing director, Sony-BMG. Its
big mobile hit of the year is Rang De
Basanti.
The big media firms — Star, Sony and BCCL,
among others — have set up entire divisions to
plug into these 80 million consumers. Compare
that to the number of TV homes (108 million) or
Internet subscribers (7.5 million), and you get
a true picture of its size and potential. Star
CEO Peter Mukerjea has maintained that mobile
telephony should eventually bring in 30 per cent
of the company’s revenues. And Sony will set up
its own backend for digital downloads this year.
This is not only about mobile operators being
pressurised by voice margins and media companies
looking for an extra buck. Advertisers are
trying their best to get their two bits in. So,
Thums Up has a game it designed with Mobile2Win,
Castrol has its own ringtone (and 100,000 people
actually downloaded it), and Reliance offers
bill payment on R World, railway bookings, and
even exam results. “The idea is to create a very
happy marriage between distribution and
content,” says Rajesh Sawhney, president,
Reliance Entertainment.
The sentiment is, well, bullish. “2006,”
declares Gautam Advani, director (multimedia),
Nokia India, “will be the kick-off year for
mobile entertainment.”
For instance, last year, Star launched
‘mobisodes’ — one minute clips of its popular
comedy show The Great Indian Laughter Challenge.
Says Viren Popli, senior vice-president,
(interactive), Star India: “The VCR gave back to
consumers the concept of time; the mobile will
give them back the concept of space. You can
consume entertainment when you want and where
you want it.”
“The mobile phone has become part of your
persona and is an extension of your
personality,” says Naveen Chopra, chief
marketing officer, Hutchison Essar. Agrees
Mahesh Prasad, president (applications and
solutions group) Reliance Communications: “A
ringtone is what you are saying about yourself.
You can’t put a price to it.”
Maybe you can’t, but operators do put a limit
to what they share with media companies — about
20-30 per cent. There is already a feud going on
about that. With the limit on spectrum,
operators’ scope to offer broadcast quality TV
or other things is restricted. Then there is a
limit to handset capacity. Just 15-20 per cent
of the phones in India have colour screens
and/or cameras (though the number is growing
very fast). And there is a limit to what music
and SMS can do. “SMS and ringtone is a
low-hanging fruit, film music is a commodity,”
says Kaushal Modi, head (licensing and
telephony), Sony Entertainment Television.
The pushing and shoving to offer the next
level of services — mobile TV, Internet and
commerce — has already begun. “It is clear that
VAS (value added services or mobile data) will
move beyond voice and SMS,” says Kanwalinder
Singh, president, Qualcomm India. Qualcomm’s
MediaFlo is one among half a dozen technologies
such as digital video broadcast - handheld
(DVBH) that is battling to become the standard
for mobile TV broadcast services.
For two years, Nokia has been spending time,
money and effort in educating dealers and
consumers on high-end applications. By the end
of April, it will probably launch the Nseries, a
range of phones with the capability to receive
multimedia services like radio, TV or the
Internet. This also contains what is internally
referred to as the ‘iPod killer’, the N 91.
India’s largest media buying company Group M
announced a tie-up with Tagit, a Singapore-based
mobile technology firm, earlier this year. Tagit
is a tagging software. Think of the
possibilities: if you could just aim your phone
at a hoarding or a TV or a theatre screen and
respond to an advert or take part in a contest.
Why We Are Plugged In
Shankar Narayanan, president, Tagit,
refuses to share much except that Tagit is
talking to a host of Indian companies to offer
everything from marketing to ticketing products.
For instance, if it had a deal with PVR Cinemas,
you could choose the film from your mobile, book
the ticket and also make the payment . The fact
that Tagit is already seeking to market its
technology in India says it all. In Europe,
where mobile telephony is way ahead on the usage
curve than in other parts of the world, mobile
data is a healthy 10-20 per cent of most
operators’ revenues (the operator’s share is
just one part of the mobile data market; it does
not represent the entire pie). In South Korea
and Japan, it forms 20-25 per cent. In India, it
is between 7-10 per cent of most operators’
revenues, which is a level that China Mobile
reached at 20 per cent mobile penetration,
according to the Lehman Brothers report (one of
the best pieces of research on the mobile
market). India hit it at under 10 per cent
penetration. By 2010, the report estimates
mobile data to be a $10- billion (Rs
43,000-crore) market in India.
There are some generic reasons for this
surge. India, with its love for films and
entertainment, is one of the world’s fastest
growing mobile markets. But the real reasons are
linked to consumer behaviour and culture. The
first is that India is similar to Japan, Korea
or the EU where mobile data has taken off. “All
these countries have a mass transport system.
Studies show that a big reason behind the
success of mobile VAS in Japan is the fact that
people have a lot of time on the go. The US is
mostly about self-driven cars,” says Prasad.
The second reason, says Surendra Jain,
managing director, WestBridge Capital Partners,
is that “customers are cool with paying for
information on the mobile unlike the Internet”.
This point cannot be over-emphasised. Even if
competition brings the price of data services
down, which it will, the fact is that consumers
will continue to pay for it. The basic context —
that this is not free — has been set for
good.
The third is that mobile data services are,
at times, plugging in a very real need for
entertainment and information in smaller towns
and villages, where the mobile phone is bridging
the digital divide (that the Internet was
supposed to). The ability to check on railway
data or weather is a real enabler that people in
poorly- connected parts of India are more than
willing to pay for. In others, where the reach
of cable and cinema is limited, the mobile is a
great stand-in. “The demand for more localised,
regional content is increasing. For operators,
the growth is going to come from non-metros.
Only 60 million people know English. Hindi is
where the eyeballs are,” says Raj Singh,
director, Activemedia Technology. Note that
mobile data growth is coming not just from the
metros but from across the spectrum of A, B and
C class cities.
The fourth is that Australia and India are
the only countries in Asia that have collecting
societies — the Indian Performing Rights Society
(IPRS) and Phonographic Performance Limited
(PPL). According to rates prescribed by PPL,
anywhere between 25-40 per cent comes back to
music firms. That has helped Indian mobile
operators quickly hook on to music — the most
natural (and lowest bandwidth hogging) driver
for data services globally. “In other Asia
Pacific countries, you have to go to each music
company and collect separately,” says Sudhanshu
Sarronwala, CEO, Soundbuzz. The lesson will
prove to be important for other industries
eyeing the mobile data market. If licensing is
difficult, it puts off aggregators and
operators, and leaves the market open to pirates
like in Indonesia.
Why Mobile And Media
Want It
Airtel started offering
services like Dial-a-Pizza or travel information
in 1995. It launched Hello Tunes in 2004. That,
says Hemant Sachdev, director (marketing and
communications), Bharti Tele-Ventures, was the
first big learning on mobile data. “The Indian
consumer is willing to pay a premium for VAS,”
he says. And mobile companies need that premium
as the pressure on voice revenues keep
increasing. Consider the math. The effective
rate per minute has moved from Rs 1.50 to Re
0.95. Most telecom operators have squeezed costs
as much as possible. According to Don Price,
director (networks), costs per minute have been
chopped from Rs 1.25 to Re 0.87. “It is on its
way to becoming Rs 0.8.,” he says. Yet average
revenues per user and margins keep falling. The
sheer momentum of growth, the number of
operators and the volume of usage means that the
downward pressure on costs continues. At Rs 6
per minute, Airtel’s 646 services make much more
money than the average Rs 1-2 per minute that
voice does. Typically, data sells at anywhere
between Rs 3-30. The Lehman Brothers report says
that as data share goes up to 60 per cent or
more, the earnings before interest, taxes,
depreciation and amortisation (EBITDA) from data
revenue could go up to 65 per cent or more.
Compare that to 30 per cent or so from voice.
Getting those margins is a bit chicken and
eggish. Till there are enough subscribers, it
makes no sense to invest and subscribers will
not ask for it if there isn’t enough on offer.
If data revenues jump substantially, then a 3G
network (with more bandwidth or ability to carry
data) is a necessity. That would mean an
investment of about $50 million-88 million
depending on the options. This is just for one
operator. Does a Rs 2,300-crore market, growing
at 30 per cent, justify it? Yes, say operators
across the world. All of them have bid crazy
prices for 3G licences.
For media companies, currently, the mobile
connection is more about interactivity and less
about revenues. Radio Mirchi gets 40,000-45,000
SMSes a day. As a radio station, it is a great
tool for engaging listeners. Ditto for TV,
newspaper or outdoor companies. Even within this
interactivity, there is some money to be made
like Star did with KBC2. For media buying and
planning firms such as Group M, all the work
with mobile phones is “brand centric”, says
Tushar Vyas, its national director
(interaction). That means that if Fa’s creative
and media plan demands that there should be a
mobile play, say, a contest, poll or plain
branding, then Group M will look at content or
partnerships where it can promote Fa on the
mobile phone. The only segment where it has
converted into serious money is music. Now music
companies are moving a step further. Saregama
makes half its money on ringtones through its
catalogue. It “sells nothing but ringtones. With
new releases, we have the rights to images and
wallpapers”, says Sarkar. That brings in more
revenue from mobile rights.
Why Do They
Fight
Of Reliance’s 18 million
subscribers, more than 10 million use data
regularly. At the end of December 2005 R World,
its mobile portal had 5.3 million visitors.
About 32 per cent of the portal’s (undisclosed)
revenues came from ringtones and 20 per cent
from films. That means roughly half the data
revenues of one of the largest operators in
India come from film-related content. Games and
cricket form a respectable 8-9 per cent each.
That is one of the reasons why the Anil
Dhirubhai Ambani Enterprises find that having a
share in all pieces of the media pie — TV,
radio, film production, distribution and retail
— makes sense. Other operators, too, are trying
to create in-house content, some to avoid
commoditisation and others to keep a higher
share of revenue. This is where we come to the
big bugbear between the two; revenue sharing.
Currently, the Indian market is split
roughly at 60:30:10 between mobile operators,
media companies and aggregators. Mobile
operators argue that they make the investment
and control the consumer, so they should keep a
lion’s share of the mobile data pie. Prasad of
Reliance says that internationally, operators
pay revenue share only on the basis of actual
downloads. In India, the figure on which this is
calculated includes network usage and
subscription fee and, therefore, the percentage
that comes back to the operator has to be
larger. Media companies protest about this but
are largely helpless. That is because mobile
companies simply use the fact that media is a
fragmented business, where the next guy will
undercut you to its advantage.
Eventually, this will change. “In most
developed mobile entertainment markets, we have
seen operator share come down to the 10-20 per
cent range. It has in consequence led to
fantastic growth,” says Sarronwala. In Japan,
the operator share is 9 per cent, in the
Philippines, it is 60-70 per cent and in China,
the second largest VAS market after Japan, it is
15 per cent. As the total amount of data
revenues go up, the operator share goes down and
his dependence on the content companies
increases. So, expect the friction levels to
rise as mobile TV and much more richer content
come closer.
What Is The Way Out?
Mobile companies might do well to
take a leaf out of media companies’ books —
owning a platform does not necessarily make you
good at content. Many of the good film companies
and almost all the music companies do not own
any retail presence. A user is willing to pay to
watch on Ten Sports the same cricket match that
he gets on Doordarshan for free. It is not
control over content, but the ability to offer
loads of it that is relevant and connects, which
will distinguish one good mobile data service
from another. Maybe joint ventures or equity
stakes in content companies will help. But they
are just security blankets. Ultimately, in a
fragmented, oversupplied content market, it
should be easy to get good stuff if you have a
sense of what will work and what won’t. Media
companies have a nose for it, mobile companies
don’t. You could argue that, maybe, even media
companies are not clear on how to create
programming for this new ‘mobile snacker’.
There are several things that could happen.
Mobile and media companies could build the
skills (difficult) or buy the talent to do it.
They could join hands to do it. A third set of
companies such as Hungama or Soundbuzz might
turn out to be better at picking and digitising
what works best.
So, as the need for differentiated content,
especially with TV, songs, news and more
audio-visual content becoming important, expect
much more poaching from programming departments
of TV channels, and lots and lots of loose
alliances.
Why TV Is Not Yet
Mobile
The moment you start
discussing mobile TV is when all the debates
over mobile data services or its possibilities
come to a halt. That is because showing TV on
the mobile is essentially about high-powered
terrestrial broadcasting that demands two
things. One is spectrum or the space on the
airwaves that mobile networks need, and two is
handset capability.
Take the first one. Spectrum determines the
quantity of data that networks can send over the
airwaves or the bandwidth. A good mobile TV
experience needs 256 kpbs. That will allow you
to watch the complete video of a song or a short
mobile film or a 8-10 minute episode of a
popular show. Spectrum, however, is allocated by
the government “in eyedrops,” says Bharti’s
Price. Much of it, due to GSM operators such as
Hutch and Bharti, has not yet been freed by the
defence services. The result is that India has
one of the lowest spectrum allocation per GSM
operator in the world, about 6 Mhz against, say,
over 25 in the UK or over 20 in China. Most of
them fool around with the existing spectrum
sometimes at the cost of voice quality, to offer
data services. “Where 3G (high-bandwidth
networks) comes is when mobile TV will happen in
India,” says Popli. The ‘when’, says Neeraj Roy,
CEO, Hungama, “has to be addressed in 12
months”.
That is if data has to keep growing. The
European experience shows that mobile TV can
push up the data revenues from 10 per cent to 15
per cent for operators. The usage is similar to
what people do at home, says Olivier Pascal,
consultant, Analysys Consulting. Pascal sits in
the centre of the action at the Analysys office
in Paris, where several tests on mobile TV are
being done. “There are already JVs between the
operators and broadcasters, for instance, Canal
Plus and TFI,” he says. In France, the regulator
has allowed some spectrum on the digital
terrestrial transmission (DTT) network for
mobile TV. (In India, any terrestrial
broadcasting is a government monopoly.)
The other challenge for mobile TV even in the
mature European market is handset technology. It
is just about beginning to offer good quality
video broadcast. “For the moment, devices sold
don’t allow you to spend much time in front of a
mobile phone,” says Pascal. In India, “only
10-15 per cent handsets are net enabled”, says
Arun Gupta, COO, Mauj Telecom. In the UK or
Japan, handsets are sold with pre-configured
buttons. So if you buy a Nokia handset, it has a
button with an Internet icon. All you have to do
is press that. In India, since bundling is not
encouraged, the kind of work that operators and
handset manufacturers can do to customise
handsets for ease of actual use of operator
linked services is limited.
The third, albeit smaller, challenge is “the
size of real estate (screen) on which the
message or content can be displayed,” says
Singh. But even he and most others agree that
eventually mobile TV will be about plugging into
entertainment or information on the go. You will
watch TV at home, listen to radio in the car,
and so on. The mobile cannot replace other
media, it will simply complement it, like the
iPod.
So, can TV go mobile and can mobile become
media? There’s no doubt that TV/entertainment
will be the flagship product or the driver for
other products on the mobile. The likelihood
that you will spend money clicking the ‘buy’
option on something while watching a good
quality short sitcom is higher than if you were
just downloading a song. The ability to make
consumers spend more time and money will depend
on the mobile operators’ ability to crack the
content game.
Wait, then, for some new movie moghuls to
emerge.
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Additional
reporting by Aditya Khanna
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