{"id":549595,"date":"2006-07-21T07:17:58","date_gmt":"2006-07-21T07:17:58","guid":{"rendered":"http:\/\/localhost:8888\/wordpress\/technology\/549595-on-the-move.html"},"modified":"2006-07-21T07:17:58","modified_gmt":"2006-07-21T07:17:58","slug":"on-the-move","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/technology\/549595-on-the-move.html","title":{"rendered":"ON THE MOVE"},"content":{"rendered":"

Instead of going to a retail store to purchase the latest Madonna CD, imagine simply clicking a few buttons on your 3G cellphone and downloading it over the air. Plug in headphones and you\u2019ll be tapping your foot to Hung Up or Sorry in no time. <\/font><\/p>\n

Mobile content is already big business. It\u2019s estimated that premium-rated content \u2014 ringtones, picture messages, and the like \u2014 generates sales of more than R1bn\/year. Developments in cellular handset technology, especially the introduction of miniature hard drives into cellphones, will lead to further strong growth as consumers begin using their phones as music players and for playing interactive video games. <\/font><\/p>\n

The market, though, is already highly competitive, and some industry players expect consolidation. There\u2019s already evidence of this. Listed media group Primedia is said to be in talks, believed to be at an advanced stage, to acquire eXactmobile, SA\u2019s largest mobile content company. The deal, if it goes ahead, would be worth more than R200m. <\/font><\/p>\n

Primedia CEO William Kirsh says he won\u2019t comment on market speculation. What he will say is that mobile content is a \u201cstrategic play\u201d for Primedia. The mobile phone, Kirsh says, is becoming much more than just a device for making phone calls. Increasingly, it is a medium for delivering information and entertainment. \u201cIt is a growing space in the media industry and we have a big reservoir of content that we can leverage,\u201d he says. <\/font><\/p>\n

Mobile content is particularly important in SA, Kirsh says, given that the penetration of broadband Internet is so low. High prices have kept broadband growth in check. Mobile penetration, on the other hand, is higher than 60% and still growing. Primedia will put more resources into mobile content. \u201cIt\u2019s in the area of convergence that content has its greatest application,\u201d Kirsh says. <\/font><\/p>\n

eXactmobile, which sells music, ringtones, pictures, animations and games on the Vodacom and Cell C networks, was one of the first SA companies to offer content on cellphones. It began life in the RF Group, the company that first introduced Nokia handsets in SA. (Two of eXactmobile\u2019s biggest shareholders are RF Group founder Wilf Mole and his son Davin.) <\/font><\/p>\n

Like Kirsh, eXactmobile director Gavin Penkin declines to comment on speculation about a deal with Primedia. But he concedes that the market is becoming much more competitive. Big international players have entered SA recently, including Spain\u2019s LaNetro Zed and Germany\u2019s Jamster (also known in some markets as Jamba). The latter, which is best known for its Crazy Frog character, was acquired by VeriSign in 2004 for \u00e0 223m. <\/font><\/p>\n

The industry\u2019s growth phase may be only just beginning. Thanks to games and downloadable music, content providers predict boom times ahead. Helping drive this are rapid technological advances in handsets. Cellphones are becoming more like miniature PCs than telephones. <\/font><\/p>\n

The latest 3G handsets have tiny hard drives built in. Nokia, for instance, sells 3G phones with 4GB of storage capacity. That\u2019s enough to store about 1000 songs. Within a few years, phones will be able to store in excess of 100GB. <\/font><\/p>\n

eXactmobile already offers 50000 music tracks for download. Licensing music is expensive, though, and Penkin says only large content providers will be able to afford to offer this content. <\/font><\/p>\n

The impact, though, will be immense. Over time, Penkin expects separate MP3 players, such as Apple\u2019s industry-leading iPod, to disappear, as people begin using their cellphones to store their music. There\u2019s no point, he contends, in carrying two separate devices. <\/font><\/p>\n

Once digital rights management schemes are in place to prevent the kind of widespread piracy that occurred on the Internet with peer-to-peer file-sharing networks, Penkin expects mobile music to become a huge industry. \u201cThe music industry sees mobile as its future but it doesn\u2019t want another Napster,\u201d he says, in reference to the once-notorious file-sharing network. Mobile networks are by their nature more controllable than the Internet, hence the record companies\u2019 interest in using them as a way of distributing their product. <\/font><\/p>\n

Penkin is less convinced than some of his peers that international content providers threaten to undermine smaller local players just as the industry is on the cusp of strong growth. In fact, Penkin says offshore players that have set up here are finding the going tough. Prices in SA are low compared with Europe, he says, and consumers here are becoming more savvy. They are much more willing to complain about unethical practices, he says. <\/font><\/p>\n

But Sean Cond\u00e9, CEO of Mira Networks, which provides services to content providers, thinks international players pose a big threat. \u201cThey have far more money than anyone in the market,\u201d Cond\u00e9 says. \u201cThere are Malaysian companies, Dutch companies, and they are all coming into the market.\u201d <\/font><\/p>\n

Cond\u00e9 expects some degree of consolidation will follow. Smaller players could be forced out of business, he says. Acquisitions are possible, too. <\/font><\/p>\n

Another threat to content providers is the cellular operators. They have identified content as a key growth area as they try to build new revenue streams in an effort to offset an expected fall in the tariffs they charge for voice telephony. Voice is likely to become a \u201ccommodity\u201d and operators are \u201caggressively pursuing anything that is non-voice revenue\u201d, says Lana Strydom, senior manager for portals and interactive services at MTN \u201cContent plays a big role in generating non-SMS data revenue.\u201d <\/font><\/p>\n

Strydom expects content will contribute about 50% of MTN\u2019s non-SMS data revenue within the next five years. At the same time, data revenues, which contribute just 5% to group revenues now, will make up a much bigger slice of MTN\u2019s revenues. <\/font><\/p>\n

Operators such as MTN and Vodacom have one big advantage over third-party content providers. Because they control the distribution of handsets, they are able to determine what is delivered to the home pages on users\u2019 phones. \u201cIt is our strategy to own the entry point in the same way that Google owns the entry point to the Internet,\u201d Strydom says. \u201cFrom there, consumers can make their own decisions about what they want to do and where they want to go, but at least that brand presence and that top-of-mind presence is always there.\u201d <\/font><\/p>\n

Cond\u00e9 says the network operators are trying to own the desktop on the phone. \u201cIf you own the desktop, you have the consumer\u2019s eye. You can sell them anything from there, anything you want.\u201d <\/font><\/p>\n

Strydom admits that tension between the operators and third-party content providers is inevitable. She says MTN doesn\u2019t have a choice but to play in the content space. The relationship with external content providers is managed by a separate division in MTN, she says. <\/font><\/p>\n

For now, content is not a big money spinner for the group. But it\u2019s already proving valuable , Strydom says, in building relationships with customers. If MTN can use content to build an affinity for its brand among consumers, they will be less likely to move to other operators.<\/font> <\/p>\n

Inet-Bridge ||\u00a0 <\/font>Discuss this article<\/font><\/a> <\/font><\/p>\n

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