“Subscribers in most Asia-Pac countries have strong preference for local content, which creates the impetus for the fast-growing mobile content market,” says Frost & Sullivan industry manager Janice Chong. “The pace of 3G adoption, to a certain extent, influences the development of premium content applications by providing greater bandwidth and faster data transmission.”
The Asia Pacific mobile data market is forecasted to grow at a CAGR (compound annual growth rate) of 17.9 percent between 2005 and 2011. Messaging revenues still constitute the majority of operator-generated data revenues. In 2005, messaging accounted for approximately 39.6 percent of total operators’ data revenues (excluding revenue share of third-party content providers).
The total premium content market, which includes both operator and third-party content provider revenues, held 29.5 percent of total mobile data revenues in 2005, and is expected to register a CAGR of 23.2 percent from 2005 to 2011.
In certain Asia Pacific countries, the revenue share ratio skews in favour of mobile operators. As a result, content providers receive a small revenue split. Moreover, content providers are required to pay hefty royalties for applications to music label companies and associations. These factors have in some ways hindered the growth of the premium content industry in selected countries. While the revenue share model employed in Japan, South Korea and China may seem relatively favourable to content providers, similar business models may not apply to other countries across the region.
“In markets such as Indonesia and the Philippines, mobile operators typically retain 60 to 70 percent of the revenue from sale of content, while content providers receive the remaining smaller portion,” notes Chong. “Content providers in such countries believe that they deserve a larger revenue share considering that the cost of content development is entirely borne by them.”
This however is inherently characteristic in markets outside of Japan and South Korea, primarily due to the high use of SMS (short messaging services) based applications which contribute to low data traffic usage. The lack of a satisfactory level of revenue from data traffic usage would mean that operators will tend to seek a higher revenue share from content downloads to compensate for the low data traffic revenue.