Blog Post

@ 3GSM Operators & Content Owners Clash On Discovery, Disparate Business Models

User-gen content may be billed as the next “Big Thing” in mobile, but a panel of senior execs from mobile operators and content companies, including Verisign, EMI, Disney, SK Telecom and Telus, told the audience at 3GSM that mainstream content will remain the mainstay of their business. YouTube on mobile may be the one to watch, “but it’s still the content owned by traditional content and entertainment companies” that delivers the scale and grabs the eyeballs on and off-portal, said Verisign chairman and CEO Stratton Sclavos. In his view, mobile communities do serve a purpose, but it’s not around content creation. Their role is to recommend content to their peers. He envisions a scenario where a chat between friends via mobile about a concert would trigger a content sale. (And he could be on to something. A recent Hitwise study revealed the impact that social sites have had in driving traffic to other destinations on the Web. Shopping and classified sites, for instance, received 2.4 percent of their visits directly from MySpace in September 2006 –an 83 percent increase since March.)

Against this backdrop, mobile social networking could be the deciding factor in content sales. “The whole notion of MySpace and the presence services operators are rolling out is another accelerator of mobile commerce and mobile content [consumption],” Scalvos said. “Community interaction makes it safe to go off on the Web [and check out content] even with fairly poor discovery on mobile as it is today.”

Sunil Gunderia, VP & head of mobile for Disney EMEA, complained discovery is inadequate and blamed it for “poor consumer content experiences” and the industry-wide disappointment with mobile data take-up. “The discovery mechanism for mobile is just not great and going to a portal is not the best experience for a consumer, and that has certainly detracted from them engaging with mobile entertainment,” he said. Disney is looking at ways to solve this issue, but operators have added to the problem rather than contribute to a solution. Gunderia: “We [Disney] can promote discovery if we can engage with the consumer directly.” But the frustration of data pricing and lack of transparent tariffs continues to hold this process up.

Barney Wragg, head of digital at EMI Music Worldwide, agreed that discovery is the obstacle the industry has to overcome if it wants to sell more content. In his view, if users prefer entertainment snacks and mobisodes to full-length content, then the industry can’t assume users will embrace browsing as a means to access the content they like. Will uses want to endure long browsing sessions to look for content? Wragg doubts it: “Sales is going to be around the relevancy of our services and the personalization of our services.”. Entering a music store via mobile that has the capability to “present you within the first two minutes with the most relevant repertoire of the content you’re most likely to buy will be absolutely key.”

Another way around the discovery dilemma might involve tighter integration with the handset, according to Steven Nuttall, BSkyB’s director of business development. In fact, handsets can be both the problem and the solution when it comes to content discovery and sales. In the case of BSkyB, the company’s recent deal with Motorola to preload BSkyB’s content app on devices is “a good strategy because it solves the formatting problem and discovery in one step,” he said. “Rather than be an app buried in the phone, it’s right at the top of the menu.”

The rest of the session focused on the level of tension in the business relationship between operators and content owners. The consensus: it’s a little better than last year, but it has a way to go. Predictably, the fighting continues around rev share agreements, partly because neither side is realistic about the sales they can achieve. EMI’s Wragg: “People tend to forget that the entertainment business is a business of scale and a mass market business that doesn’t work well in a small market environment.” He called for better marketing and more pragmatism on the part of operators and content providers. “Saying you’re developing a business around selling 50,000 downloads is not [something] the entertainment market finds interesting