Wireless data revenues are surging for U.S. carriers, but whether network operators can cash in on mobile entertainment is far from certain.
It’s no secret that network operators are wagering vast sums on wireless data to offset ever-slimming margins from voice, and those bets are beginning to pay off. Revenues from wireless data have increased 78 percent in the last year, according to figures from Telephia Inc., and Verizon Wireless recently became the first U.S. operator to hit the billion-dollar mark in quarterly data revenues.
Entertainment content and applications represent the slimmest fraction of such activity, though. Messaging continues to dominate the space: M:Metrics data indicates more than 73 million users send at least one text message a month, and 28 million reported sending photos or videos over their cell phones. And “personalization” content-ringtones, wallpapers and other goodies used to express individuality-remains a cash cow, with more than 10 percent of all wireless users buying at least one ringtone in the last month.
It remains very early days for mobile games, video and music, however. Game revenues continue to increase, but many believe the market has stalled following quick uptake by early adopters. Indeed, revenues from wireless games increased only about 5 percent from the first quarter to the second quarter of 2006, according to Telephia. It appears the industry has done a credible job of developing simple, casual games, but has yet to overcome significant challenges including confusing deck menus and sometimes exorbitant pricing.
Video questions
Wireless video is likely the sexiest mobile application on the market, but it remains the biggest question mark. Companies such as Crown Castle International Corp., Qualcomm Inc. and Aloha Partners are sinking hundreds of millions of dollars into dedicated networks for mobile multimedia broadcasts, but crucial issues remain: What do wireless users want to watch on their phones? How much will they pay?or how much advertising will they accept? And, perhaps most importantly, can carriers, content providers and multimedia network operators find a way to share revenues in a way that benefits all the players in the value chain?
Music potential
Music may be the most promising segment of the mobile entertainment space, at least for the next few years. Full-track downloads and streaming broadcasts don’t crowd networks the way video does, and many wireless users are already accustomed to listening to music on-the-go with iPods or other digital music players. While Sprint Nextel Corp. and Verizon Wireless decline to disclose figures for their full-track services, both report solid uptake despite analysts’ claims that pricing for over-the-air downloads remains prohibitive.
Connections
The driving force behind mobile entertainment revenues in the future may not be the singular categories of video, music or games, however. Many believe content providers of all stripes should learn to exploit the “connected” capabilities of mobile phones, adding social networking and user-generated content components to their wares. Mobile communities may be the glue that holds all types of wireless entertainment offerings together, allowing users to create their own content as they help sell branded wares via recommendations and other viral marketing techniques.
And there’s no greater evidence for the power of user-generated content than the messaging applications that currently dominate wireless data, said Rob Tercek, cofounder of MultiMedia Networks.
“User-generated content has always been the highest segment of content in mobile,” Tercek said last month at CTIA Wireless I.T. and Entertainment 2006, referring to text and photo messaging. “Publishers would be wise to open up their applications to users for more interaction.”
