Premium content drives Asia's mobile

But growth could be hindered if operators in some markets continue to demand a larger slice of revenues from mobile content providers.
Written by Aaron Tan, Contributor

As the growth number of cellular subscribers starts to flatten across the Asia-Pacific region, the mobile communications industry will in future be driven largely by data services, an analyst says.

Frost & Sullivan said in a statement Tuesday that while messaging continues to contribute the bulk of revenues in emerging mobile data markets, much of the growth potential lies in premium content.

In the Asia-Pacific region, messaging accounted for about 39.6 percent of total data revenues last year, excluding revenues shared with third-party content providers. Overall, the mobile data market is expected to grow at a compound annual growth rate of 17.9 percent between 2005 and 2011, the analyst said.

Janice Chong, industry manager at Frost & Sullivan, noted: "Subscribers in most Asia-Pacific countries have strong preference for local content, which creates the impetus for the fast-growing mobile content market."

The demand for premium content will also be boosted by an expanding regional subscriber base and better 3G (Third Generation) network coverage, according to Frost & Sullivan. Cheaper advanced multimedia handsets, and the race by mobile providers to secure a continuous stream of content through partnerships will also drive growth of mobile data revenues, the analyst added.

According to Frost & Sullivan, the Asia-Pacific premium content market--spanning 13 countries in the region--raked in revenues worth US$9.4 billion last year. This market is expected to reach US$32.9 billion by the end of 2011.

The research company also noted that in some Asia-Pacific markets, the revenue share ratio skewed in favor of mobile operators, rather than content providers which are also required to pay hefty royalties for applications to music label companies and associations. This has held back the growth of the premium content industry in some countries.

Chong explained: "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."

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She added that content providers in these countries believe they deserve a larger revenue share because they bear the entire cost of content development.

This trend is particularly inherent in markets outside Japan and South Korea, Chong said, mostly due to the popularity of SMS (short messaging service) based applications that contribute to low data traffic usage. As such, operators will tend to seek a higher revenue share from content downloads to compensate for the low data traffic revenue, the analyst said.

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