Broadband, Media and Advertising
The Future is Mobile
Among the strategies carried out by mobile players to face the declining voice ARPU, mobile broadband is now taking off in some countries, and is starting to realise its potential. In the next few years, a significant share of the revenue potential from mobile Internet services will be from handsets, rather than other devices. Improved handset functionality will contribute to the growth of both mobile Internet and infotainment services.
The mobile broadband modem market, including PC Cards, ExpressCards, USB devices and internal cellular modems, reached around 4.3 million units in Western Europe in 2007. With these figures, also mobile internet consumption is growing: we expect that at the end of 2008, nearly 24 million people will access the internet via a mobile phone, generating 5 billion revenue from mobile access, and they will be more than 51 million in four years time. The revenue from mobile broadband access is to reach 13 billion at the end of 2012. Thus, in four year times, access revenue will represent 12%of total mobile operators revenue.
As smartphones and similar devices become more common, it is reasonable to expect that content consumption on mobile networks will increase significantly. Video streaming to the handsets is also likely to become prevalent.
While smart-phone owners comprise a small percentage of the overall population of mobile phone users, they are heavy users of internet connections and mobile services. We estimate that by the end of 2008, 62 million Western Europeans, that is 22%, will use a smartphone. This rate will reach 33%, or 94 million users by the end of 2012, an increase by 53% in a few years.
Mobile TV and mobile video services consumption offered over broadcast, multicast and unicast distribution are projected to grow by 70% from an estimated user base of 25 million at the end of 2008 to 43 million users in 2012. ITMedia Consulting expects mobile entertainment will account for around 5% of mobile revenue at the end of 2008, just as revenue from internet access. However, the weight of these services is set to grow: mobile entertainment will nearly double its share, and access revenues will do even better, passing from 5% to 12% of total mobile revenue by 2012. Voice revenues will be the big loser, going from 75% of total revenue to 64%.
Among all media entertainment services, however, TV and video content account only for 15% of total revenue in 2008: music is the biggest source of entertainment revenue, with a 40% share, followed by games, with 17%, and other images, 16%. As a whole, mobile entertainment services will pass from €4.7 billion revenue at the end of 2008 to €9.6 billion in 2012.
As for video content, we expect that mobile TV and unicast video content – both VOD and TV – revenue will reach €2 billion by the end of 2008 in Western Europe. This figure includes both pay revenue and advertising revenue. More in detail, pay revenue from content service will amount to €672. By 2012 total revenue from TV and video content services will nearly double to €3.7 billion, whose €1.4 billion will be from pay services.
The development of the mobile entertainment market makes it interesting for all players involved, and specially for advertisers. advertising on mobile phones has huge potential to connect brands with consumers at any time of the day and within a specific location but it must be creative, relevant and non intrusive.
Despite early promising indications, the current financial crisis will slow the development of the mobile advertising market. Advertising buyers will reduce their budgets, and their attitudes towards experimenting with mobile advertising are likely to be conservative. ITMedia Consulting expects the European market for mobile entertainment – mobile and TV content - advertising will amount to €1.3 billion by the end of 2008, and it will reach €2.4 billion by the end of 2012, growing by 76% in four years, or at a 15% CAGR.
The mobile industry appears now the edge of a new phase of development: new proposition will offer consumers a good browsing experience on a new generation of smartphones, together with a true broadband experience as offered by HSPDA. As internet search functionality on the handset screen improves, the user experience will reach a level that could lead to a substitution in usage away from the PC.
Index of content, tables and figures