±±¾©Èü³µpk10

THE BACKGROUND

When Jamster's Crazy Frog outsold Coldplay to reach number one in the UK singles charts in May, ding-dinging over a polyphonic reworking of Beverly Hills Cop theme Axel F, the annoying ringtone became the first of its kind to make it into the charts. While it had broken records with the frequency of its TV ads, which aired 83 times an hour at the campaign's height, it also marked the coming of age of downloadable mobile content in the UK. Be it ringtones, music and video clips, logos or games, consumers are using mobiles to access entertainment content at a phenomenal rate.

The proliferation of mobile ownership (80% of all UK adults now have one) and technological developments have spawned a mobile content industry that Mintel estimates will be worth £740m by the end of 2005 - 18 times its value of £40m in 2002.

The International Federation of the Phonographic Industry (IFPI) recently reported that the number of digital music downloads tripled in the first half of the year. While sales of music in hard-copy formats at $12.4bn (£7.1bn) still outweighed download sales of $790m (£451m) in the period, more tracks are now downloaded than are sold as hard-copy singles - and as many are downloaded by mobile phones as via the internet, according to IFPI.

The increased penetration of mobile phones is certainly aiding the download market, and the frequency of phone purchasing also helps. This year almost 20m mobile phones will be bought, according to Mintel. The majority will be upgrades to 3G handsets with multimedia facilities, giving more consumers the ability to download.

The download industry is very much the domain of the young. Research suggests that people in their late teens and early-20s are most reliant on mobiles, and it is this age group that much of the download industry targets. However, the UK's aging population means there are twice as many over-65s as 15- to 24-year-olds, so an untapped market exists for innovative download providers.

Market make-up

The market is dominated by ringtones, which account for about a third of traffic. Games are becoming more popular, though, and are expected to take a 20% market share by the end of this year. Music downloads and gambling, meanwhile, are both emerging areas, likely to grow in the coming years.

Most downloads are bought by the consumer requesting them via a text message or email, although some operators also offer services via top-up cards and ATM-style purchasing centres. With the latter systems, consumers can buy credits that they use to get more downloads.

The low outlay for downloads - the average price is £1 - means that they have become something of an impulse purchase, and advertising is stimulating much of the buying.

Problems have occurred when children who have seen the ads have signed up to expensive subscriptions that parents then struggle to terminate.

However, the industry is becoming more closely regulated, with a code of practice introduced to protect consumers, and top-up cards are another way in which the industry is trying to address concerns about hidden charges.

Not all mobile downloads have to be bought; some ringtones and icons are free, with companies using the media to raise awareness. In terms of volume they would double the size of the market.

There are two groups of operators: portal (mobile phone networks) and third-party providers (companies established primarily to provide downloads).

Third parties tend to build business through subscriptions and repeat purchases. Four leading companies have emerged in this group: Jamster and its sister brand Ringtoneking, MonsterMob, iTouch and Zed.

Subscription focus

Jamster, which is owned by US company VeriSign, made revenues of $181m (£103m) in 2004. It has a presence throughout Europe, but is particularly strong in Germany, Switzerland and the Netherlands. Its positioning is to provide consumers with all the services they need to customise their handsets, covering games, music and communications.

MonsterMob's core business is in mobile entertainment services. Recently rebranded as The Mob, it has about 6m customers worldwide and 450,000 subscribers. It offers competitively priced subscriptions such as £1.50 a week for unlimited polyphonic ringtones, Java games and wallpapers.

iTouch is the company behind the technology used by TV shows such as Big Brother for viewer voting. As well as its entertainment offering of ringtones, logos and games, it provides customer information and messaging services.

Multi-function capability

Jamster marketing director Robert Swift believes the market will develop rapidly as 3G phones gain greater penetration. 'Mobile phones will have (much) more functionality - people will be able to check their bank statements, trade shares and gamble,' he says.

'The market is still in its infancy. In the past ringtones and games were only for 16- to 24-year-olds, but now it is expanding,' he adds. 'However, older users get more attached to their handsets, so there will be a lag. In the next two to three years mobile downloading will become an evolved market.'

Mintel predicts that ringback services - where the person calling hears the tune rather than it playing as the purchaser's ringtone - and real music downloads will start to replace ringtones. Gaming will remain popular and gambling and adult entertainment will also boost the uptake and value of the sector.

Mintel forecasts that the rapid growth of the mobile content sector will continue. It predicts that the market will more than double in both value and volume, reaching 1.98bn downloads by 2010 - a 161% increase on 2005 - and a value of £1.93bn.

MOBILE DOWNLOADS VOLUME AND VALUE SALES BY TYPE 2005(est) 2004 04-05 m pounds m m pounds m % chng 1 Ringtones 250 250 100 120 108 2 Games 200 150 55 60 150 3 Music 60 100 20 35 186 4 Wallpaper/screensaver 100 70 90 60 17 5 Gambling 70 50 15 20 150 6 Other 80 120 20 25 380 Total 760 740 300 320 131 Source: Mintel TOP 10 RINGTONES BY SALES, 2004 Track Artist 1 Babycakes 3 of a Kind 2 Yeah Usher (feat Lil John & Ludacris) 3 I Don't Want You Back Eamon 4 Call On Me Eric Prydz 5 Lola's Theme Shapeshifters 6 Hey Ya OutKast 7 My Band D12 8 Cha Cha Slide DJ Casper 9 Burn Usher 10 Come With Me Special D Source: The Times UK RETAIL SALES OF MOBILE PHONE HANDSETS BY VOLUME AND VALUE 000 units pounds m 2000 17,500 945 2001 14,875 788 2002 14,280 700 2003 15,998 864 2004 18,077 995 2005 (est) 19,886 1105 Source: Mintel

ANALYST COMMENT - THOMAS HUSSON, MOBILE ANALYST, JUPITER RESEARCH

The mobile content sector, which is dominated by ringtones, accounted for £300m in revenues in the UK last year. Although still far behind SMS revenues, Crazy Frog proves that heavily advertised mobile content can succeed.

But Crazy Frog has generated a lot of bad press for Jamster, the firm behind it. Critics argue that it misled consumers by failing to make it clear that they had to sign up to a monthly subscription, and in doing so damaged the whole industry.

The code of conduct has to be implemented more strictly.

On average, two-thirds of ringtones are sold by independent content providers promoting their products in press ads or on TV. Personalisation services remain an impulse purchase, however.

Other content categories are emerging, such as mobile games and, to a lesser extent, music video clips (pioneered by 3 in the UK), short video downloads and streaming of full-track music downloads. Mobile live TV is a nascent market.

Mobile content is only just beginning to be a source of differentiation for mobile operators, as demonstrated by the recent exclusive-content deals between Orange and Jamiroquai and T-Mobile and Robbie Williams. Such a trend will continue, with many internet players and media companies trying to leverage their brands in the mobile arena.

Once music- or video-enabled phones reach critical mass, mobile entertainment will grow if mobile operators concentrate on educating the public on how to access content. Ease of use and simplicity are key drivers that need to be standardised through handset manufacturers and software vendors.