Sometime in 2007 there will be more than 20 million mobile phones in Australia.

In our firm we have been involved in the ever-growing mobile market for some time (see Content Licensing for Mobile Phones). Our focus in this post is on commercial and legal needs for revenue generation by content owners and licensees.

But we aren't alone or unique in our interest in the market for digital content over your mobile. There are numerous examples which track this back to 2000. Some are sober, like the UK based http://www.the-phone-book.ltd.uk/. At the opposite extreme there is the "mobile souffle" of Riot Entertainment Ltd of Finland. It set out to become a leading publisher of mobile games and entertainment in February 2000. It was backed by EUR21.5 million of venture capital from Nokia Ventures and Softbank UK Ventures. It grew to almost 100 employees, set up a chain of offices world-wide and had an average monthly burn rate of EUR 1 million. SBS Television in Australia recently screened Riot On, the awarding winning documentary on Riot Entertainment's rise and fall when investors turned the tap off in March 2002.

Mobile phone related revenues

Since that time, and with the mobile firmly locked in as a very personal assistant, whole businesses have grown around the personalisation of mobiles including ring tones, wallpapers and clip-on fascias. They have earned from the penchant for reckless spending by 12 to 25 year olds.

Revenues from mobile data services are rising about 11% per year. In Australia ranked in order of mobile content popularity are first ring tones, followed by general information services, logos, adult content, chat services and Java games. Australian users on average have paid A$3 for monophonic and $5 for polyphonic ring tones, A$4 for colour logos, A$2 for black and white logos, A$3 for chat services, and A$5 for Java games.

It all adds up to a market (lately tagged as "m-commerce") with growing revenues. And these figures are the tip of an iceberg of legal and commercial relationships which result in revenues shared between numerous players.

Market typology

The players in this market are:

• network operators, [in Australia they include Telstra, Vodafone (whose network AAPT uses), Optus (owned by SingTel), and Hutchison (Orange)]; and
• platform providers eg handset manufacturers such as Nokia, Ericsson, Motorola and now Apple with its iPhone;
• content and application developers (preparing mobile content including news streams, ring tones, logos, Java games, videos, Java applications etc);
• content aggregators and publishers; and
• marketing and media agencies marshalling commercial customers seeking marketing opportunities, be it advertising, sponsorship, product placement or something else.

The groups of players in this typology recognise they are in a market driven by adding value to their offerings and here content is prominent. We have noted this in client deal flow for m-commerce which has involved us in copyright licensing and other legal work for:

• television programming specifically for delivery via the Web and mobiles,
• a cartoon character developed in Australia for markets in Asia,
• licensing client content (text and graphics) to a mobile phone network operator, and
• television program concepts involving SMS voting being pitched to television networks.

M-commerce applications

For them collectively the big future money from mobile and wireless applications includes - mobile gaming, web surfing involving data transfer fees, pay per view content, alert subscriptions, payment facilitation (eg for parking meters, concert tickets, vending machines), mobile coupon redemption and loyalty cards.

These uses grouped under the latest buzz word, "m-commerce" (mobile commerce), can involve a range of mobile and wireless devices. For New York thieves, mobile phone stealing teenagers and content licensors alike - it is critical to know your technology. Mobile devices can be currently and roughly grouped into five categories:

• mobile phones (AKA cell phones): typically have fixed buttons for fixed functions;
• smartphones: typically voice-centric devices with PDA functions;
  
• personal digital assistants (PDAs) eg Palm Pilot and Blackberry: typically containing an input device such as a stylus, touch screen, mini-keyboard or navigation pad;
• media players (eg iPod and iPhone): using a compression system for content and playback controls (eg play/pause, next, previous, volume up, and volume down); and
• laptops and computers supported for example by Wi-Fi or WiMAX wireless internet connection.
  

The pattern of development is uneven globally. Russia, Japan, China and different European countries all have varying use patterns for phones. Similarly there is variation in these countries as regards the use of credit cards. In Scandinavia mobile phone ownership is very high but credit card use is low; while in the US mobile phone ownership at about 85% is relatively low, but credit card use very high. For those who want to exploit markets globally complications are added by the fact that phone billing also varies, for example in England you pay per minute even for local calls.

In Japan the preference is for i-mode, and it remains the global pinnacle for m-commerce financial success. i-mode is NTT DoCoMo's mobile Internet access system. NTT DoCoMo is the world's second largest mobile phone operator, and a subsidiary of telecoms giant NTT. Approximately 30% of Japan's population uses i-mode about 10 times or more a day, including to access more than 7,000 Internet sites via mobile phones. There are over 42 million i-mode subscribers in Japan out of a total market of 70 million mobile phone or device users a few years ago. The pattern in other countries has involved a "walled garden" of content controlled by the carriers or major players, hence resulting in less content and application variety. In Japan the growth of content is in part attributable to the fact that NTT DoCoMo permits developers to retain 90% of content revenues. Walter Adamson of Digital Investor, a collaborator with our firm and some clients, is the Vice-President, Asia-Pacific for the i-mode Content Forum. He writes in his blog posts late in 2006 that Telstra (the i-mode licensee for Australia) has all but buried i-mode and smothered it with its BigPond brand and its Next G and 3G messages.

Developments in advertising have increased the opportunity for niche developers of content and Web and mobile phone applications. Advertisers are now regularly including the Web and mobile phones in their marketing mix. Creative destruction caused by online advertising is turning those advertisers into free radicals - hunting any communications medium that offers better reach (ie bigger audiences) at a lower cost and with greater effectiveness (eg brand-building kudos, viral buzz and audience recall). These developments spiked in the second half of calendar 2006 and included numerous media mergers and acquisitions in Australia. Developments in 2007 could shape things for years to come.  

Update 19 July 2007:

• As predicted by Walter Adamson in his comment on this post, and as reported by Chris Jenkins in his story headline for The Australian on 18 July 2007: Telstra kills off mobile i-mode. i-mode R.I.P. 7 December 2007.
• Also, at the Future of Media summit held in Sydney and San Francisco on 18 July 2007, two members of the online panel predicted that the walled garden of telco content would fall due to consumer pressure, with consumers used to the extraordinary level of access to content on the Internet.
  

Reference: Mobile Marketing: Achieving Competitive Advantage through Wireless Technology by Alex Michael and Ben Salter (Butterworth-Heinemann, Oxford, 2006). The authors are respectively the Managing Director and Mobile Content Manager for Sprite Interactive in Surrey, England.

For statistics and analysis also see BuddeComm.

For a list of US mobile phone content start-ups and backers, see Mobile Remote Control, a Fast Company story.