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Home GENERAL English

Operators Need to Overhaul Pricing Strategies

globaltelconews-admin by globaltelconews-admin
17 December, 2004
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The mobile content market in Western Europe has taken off more slowly than expected, generating revenues of just EUR2.3 billion in 2003. While it currently lags behind markets such as Japan and North Korea, there is plenty of scope for it to catch up, provided that operators and other industry players urgently address the barriers presented by current pricing structures and billing capabilities.

“A key short-term priority is addressing the inadequacy of pricing structures,” insists Alex Zadvorny, report author. “The prevailing approaches to pricing are far too complex and difficult for the customer to understand. In some cases a subscriber incurs three types of charge in order to access one piece of mobile content. Western European operators
should either follow the Japanese operators’ approach or strive to develop affordable flat-rate content packages similar to those in the satellite TV industry.”

The choice of pricing philosophy will also depend on the relative strength that an individual operator has in the overall content value chain. As large content owners increasingly realise the potential for distributing content via mobile networks and try to play a greater role in this market, operators will face the choice of either becoming integrated content ‘broadcasters’ or focusing primarily on the provision of network capacity. Moreover, this decision is increasingly interrelated with factors such as pricing, billing and customer segmentation.

New services such as mobile music and video have recently captured the imagination of mobile operators, according to Analysys: “South Korean operators have provided evidence of the growth potential in mobile TV and video – by offering video on demand based on an easy-to-understand flat rate they have managed to achieve nearly three times the 3G penetration of Japanese operators,” says Zadvorny.

“At the same time, the success of fixed-line music download services such as iTunes has prompted mobile operators to launch their own music download offerings. The operators’ approaches have differed – from selling full tracks to providing access to song fragments. However, we expect that such offerings will face a number of challenges and will struggle to reach the mass market, as fixed-line alternatives will continue to dominate,” cautions Zadvorny.

While music and video services clearly have potential, no single service is expected to become a ‘killer application’. According to the detailed revenue forecasts provided as part of the report, a number of different services will contribute to overall market growth in the next five years.

“Despite the recent focus on music and video, text-based information is expected to continue to be an important service category,” says Zadvorny. “What is likely to change is the method of its delivery – in addition to, and increasingly instead of, SMS and WAP we expect Java applications to take centre stage.”

If operators address these issues quickly, Analysys forecasts that Western European mobile content revenues could account for over 10% (EUR15.0 billion) of the total mobile services market by 2009.

Other key growth factors and challenges facing this industry, such as service discovery/ease of use, device features, standardisation, Digital Rights Management (DRM), and mark-up convergence are covered in the report, which also contains detailed forecasts of growth in Western Europe split by key markets (France, Germany, Italy, Spain, Sweden and the UK), including subscribers, service adoption, spend, ARPU and revenue.

About Analysys (www.analysys.com)

Analysys provides strategy and management consultancy, information services and start-up support throughout the telecommunications, IT and media sector. Its grasp of market dynamics, coupled with creativity, rigour and renowned objectivity, enables Analysys to consistently exceed the high levels of quality and innovation that its clients expect. The company has over 130 staff in offices in Cambridge, London, Glasgow, Madrid, Milan, Paris, San Francisco and Washington DC, and works with associates in Auckland, Melbourne and Vancouver.

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