Mobile was a happy addition to content providers to sell their content. But, over the years the content providers realized that the equation between them and the mobile operators is extremely lopsided. Parag Kamani gives a rundown on this not-so-great brush with technology for content.

My first introduction to the mobile industry occurred in 1997 when I bought myself a wireless connection and, with it, what became my first cell phone. The archaic model is now popularly referred to as “the cricket bat”, but it was the only model easily accessible and that too, if I reminisce correctly, purchased at a princely sum then of Rs.17,000.

However, it was in October 2006 that I was offered an opportunity of working with the mobile industry as the Head of Wireless for one of the largest media and entertainment groups in the country. In interacting with various mobile operators, I became aware that, of all the monies earned from the usage of content on/through handsets, the bulk of it was being retained by the operators, and barely 30 per cent or less was being offered as revenues to the content owner or, as the case was, the content provider/aggregator. This travesty became a lot more paradoxical when I studied the model that was working in “Westernised” countries where the revenue share ratio was in inverse; the operators retained 30% of the income generated from users or less, with the balance being provided to the content owners/providers.

Traditionally, the mobile value chain in India commenced with revenues generated from voice. Mobile operators were focused then on building and operating their networks and owning their customer base. But with the exponential growth due to cheaper handset pricing, economical packages, a drop in rates, and with abundant wireless data technologies, the mobile phone suddenly transformed from a voice tool to a device that now also provided value added services [VAS].

As a result of this transformation, mobile operators [or “telcos”] began to realize they cannot single-handedly cater to customer needs. Emerging alliances and partnerships created a rather complex value chain that changed the operational dynamics for the mobile operator. Relationships with content and application providers were formed and new challenges had to be addressed.

Recovery of revenues is the key challenge that content providers have been facing. With increased complexity of partnerships with operators in the value chain, the flow of money for content owners has yet to be corrected to enable them to receive [more than just] their dues. While each content provider wants to know how to create the highest return on the content being provided, mobile operators want to retain their supremacy as the main revenue earner with these entities [content owners, content providers, application providers, and content aggregators]. From a content provider perspective, issues hindering the mobile data initiatives include the absence of industry standards for governing revenue sharing, authentication of services, payment handling, and security and fraud management.

Value added services have matured globally and, today, form a considerable portion of the total telecom revenue. The focus is now on mobile entertainment and commerce, location-based services, and new and enhanced services in the next generation network (NGN) environment, such as 3G in India. Though it is growing at an exciting pace all over the world, and India is among the top 3 countries for the mobile and for the VAS industries, the challenge for telcos is to retain customers, develop alternate revenue streams, and create a basis for differentiation in a high churn market.

Well, iPhone 4S doesn’t stop with just Siri and AirPlay alone. There’s Genius to give them company. When you’re listening to a song you really love, tap Genius. The Genius feature finds other songs that go great with it and creates a playlist you’ll love even more. You can play it, save it, or give it another go. Genius playlists are, well, actually genius. Say, for example, when you’re having a party, hanging out, or hitting the road, with Genius you’ll hear song mixes you wouldn’t have thought of yourself. This would not only lend the songs kept in the corner an ear, but you’d end up re-appreciating the songs you forgot you had.

The biggest anomaly in the ecosystem is that while the number of companies and the demand for such services is increasing, the revenue model shared between VAS companies and operators leaves a lot to be desired. VAS providers are suffering because the revenue share is heavily skewed in favour of telcos, which is not the case in other geographies. The innovation in mobile VAS can only be supported once content providers start getting their fair share of revenue, like in Japan and in England.

As things stand, mobile VAS or MVAS has emerged as a great opportunity to rescue the industry from declining average revenue per user [ARPU]. While service providers are focusing on expansion of their subscriber base through value added services, the potential for growth remains robust.

Still in its infancy [in comparison to the anticipated potential based on the ongoing growth in subscribers], the VAS industry in India lacks proper processes, common benchmarks, and a code of practices. Operators, VAS providers, and users, being the three main stakeholders of this business, need to cooperate and coordinate to help the industry flourish. However, though lack of transparency still remains a hurdle, nothing changes the fact that there is no regulation towards the revenue shares that are being retained by operators.

Operators are preoccupied with subscriber acquisition, creating a better infrastructure to support growth and, most importantly, looking at models for a quick recovery of investments towards 3G. In fact, due to 3G, the focus may move away from VAS eventually, although it remains a massive revenue generator today.

Telcos' near term outlook seems to be more on acquiring new customers and less on service awareness. The revenue share ratio between telcos and VAS providers in India is 70:30, substantially skewed in favour of telcos than in other countries.

This will apparently remain so as the revenue share pattern in India remains extremely poor as far as VAS is concerned vis-a-vis rest of the world. Even in a country like Sri Lanka, on an average, content providers of VAS obtain 30-55% revenue share from operators. In fact, in countries like China and Thailand, more than 80% of the revenue generated is shared in favour of VAS providers. But the current level of revenue share restricts the visibility, penetration, and innovations on mobile space in India.  

We need to understand what the real VAS numbers are. Most reports say that it is 10% of operators' revenue. But at the same time, it includes P2P SMS revenue, which is not shared by operators with VAS providers. It also includes some other services, like Blackberry, which is not considered as VAS.

Indeed, revenue sharing with operators depends on the type of VAS offered and there are a few VAS players who opine that revenue should be market driven, where each player in the value chain gets their share of the pie, based on what [type of] content is being brought onto the table.

Nevertheless, nothing changes the fact that mobile operators, along with subscribers, remain the heart of the mobile ecosystem but, even here, the paradox remains: Mobile operators determine revenue share.

While the TRAI is correctly monitoring the growth of value added services and regulatory issues, the key issue remains the necessity to bring uniformity or clarity in the licensing conditions of mobile telecom operators with regard to provision of value added services, as well as monitoring the revenue share model in the mobile value added services value chain, and its transparency.

While it is appreciated that, in India, operators have spent crores of rupees in obtaining bandwidth – especially towards 3G – and have, since, also set up infrastructures to support it, it does not change the argument that revenue shares in India are comprehensively skewed towards mobile operators, which needs to undergo a change; nay, a radical change.

That “change” appears to be a possibility where some mobile operators are willing to part with upto 50% revenues towards certain delivery platforms but, alas, continue to retain the bulk revenue share towards their main platforms of income, such as VAS. However, instead of being overly critical of the existing situation, I can only urge the powers that be that the revenue shares in favour of content owners/providers/aggregators be changed to their advantage and, that too quickly, for the sake of retaining/creating content and, with it, providing users/consumers better choices…

Note: This article is entirely based on a personal opinion and does not reflect on the policies/models of the organisation for which this writer works.

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The nominations for the prestigious 27th Annual TEC Awards for Outstanding Technical Achievement was recently announced. The TEC Foundation for Excellence in Audio is a public benefit corporation, dedicated to recognizing and furthering excellence in audio, video, music and other communications media arts. The Foundation’s signature program is the Technical Excellence & Creativity (TEC) Awards, honoring outstanding achievement in audio technology and production.

TEC has recognized Harman for its breakthrough quality in Audio products over the last many years. Not only were JBL and Lexicon by Harman winners at the 26th Annual TEC Awards, but the founder of Studer by Harman, late Dr. Willi Studer is an inductee into the TEC Awards Hall of Fame. 

This year Harman Professional products have been nominated in five different categories, including two separate nominations in the all new ‘Amplification Hardware/Studio & Sound Reinforcement’ category. Below are the details of category Harman has been nominated by TEC Awards.

Amplification Hardware/Studio & Sound Reinforcement - Crown ComTech Drive Core Series/ JBL MSC1 monitor controller with RMC (Mac version)

Sound Reinforcement Loudspeaker Technology - JBL EON 515XT

Wireless Technology - AKG DMS 700 V2

Sound Reinforcement Console Technology - Soundcraft Vi1 with VM2

Small Format Console Technology - Soundcraft Si Compact-16

Large Format Console Technology - Studer Vista 5 M2

The TEC Awards nominations are made by a panel of industry professionals and voted upon by members of various professional organizations and audio industry websites. Online voting began on November 1st, 2011 among members of various professional organizations, including the Producers and Engineers Wing of the Recording Academy, Society of Professional Audio Recording Services, Motion Picture Sound Editors, Music Producers Guild, NAMM, Game Audio Network Guild and qualified professionals subscribing to various audio industry trade publications. The winners will be announced at the much awaited NAMM Show 2012.