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Mobile MediaMobile MediaMaking the app market payRonan de RenesseSenior Analyst IHS Screen DigestSenior Analyst, IHS Screen Digest

June, 2011

Application store/smartphone combination revolutionised mobile media

• Smartphones offer better tech for rich media consumption on mobile (WiFi, ed a co su pt o o ob e ( ,memory, processing, power, screen size)

Applications stores have broken• Applications stores have broken operators’ walled-gardens and fuelled innovation

• Improved browsing experience has brought online and mobile together

Remaining issues:Android Market

• Remaining issues:• Addressable market still small• Monetisation can be difficult• Over crowded market place

Copyright © 2011 IHS Inc. All Rights Reserved.

Over crowded market place• Device fragmentation

2

UK leads European smartphone market

iOS installed base by country (m)EU5: Smartphone installed base (m)

14

16

18

20

140

160

180

8

10

12

14

80

100

120

0

2

4

6

40

60

80

0

2011 2014

0

20

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

France Germany Italy Spain UK


2011 2014

3

France Germany Italy Spain UK

Smartphone market was a three-horse race

Europe: 2010 smartphone installed base market share by OS (%)

Europe: 2015 smartphone installed base market share by OS (%)

22.9%

4.0% 3.7%

base market share by OS (%)

0.3%7.9%

5.1%

base market share by OS (%)

32.7%6.0%

20.2%

38.3%

11.0%

iPhone Android BlackBerrySymbian Windows Others

47.9%

iPhone Android BlackBerrySymbian Windows Others


Symbian Windows Others

4

Symbian Windows Others

Apple dominates 2010 app revenues

2010: leading application stores' share of revenues (%) total €1 6bn • Apple’s App Store took 82.5% of

5 0%

4.9%

7.6%

of revenues (%) - total €1.6bn pp pprevenues from the four leading stores in 2010 with revenues of €1.3bn. Apple will maintain its lead with around 60% market share among 5.0% gleading stores to 2014.

• In January 2011, Apple passed 10bn total downloads By May 2011

82.5%

total downloads. By May 2011, Google had served 4.5bn – with Nokia and RIM some distance behind.

Apple: App StoreGoogle: Android MarketNokia: Ovi Store

• Despite growth in downloads, Google has so far struggled to monetise many Android Market users. But

Copyright © 2011 IHS Inc. All Rights Reserved. 5

Nokia: Ovi StoreRIM: BlackBerry App World

yimprovements are on the way.

…but Android Market will catch-up fairly quicklyq y

Application stores revenue forecast (€bn)

6

7

4

5

Blackberry App WorldNokia Ovi Store

2

3Nokia Ovi StoreGoogle Android MarketApple App Store

0

1

2008 2009 2010 2011 2012 2013 2014


2008 2009 2010 2011 2012 2013 2014

6

What about others?


Games is the leading app category

10

World App Store downloads (bn)Q1 2011: major publishers’ iOS

releases

8

9

Capcom

EA Mobile

releases

5

6

7

Gameloft

Glu Mobile

2

3

4

Hands-On Mobile

Namco

Digital Chocolate

0

1

2

2008 2009 2010 2011 2012 2013 2014THQ Wireless

Disney Mobile


Games Others0 2 4 6 8 10

The application market goes beyond distributing repurposed content to mobile g p p

• For TV companies, mobile applications offer the t it t

Number of apps by TV network (total = 78)

opportunity to:• increase the length of the relationship with

consumers by making content accessible anywhere at anytime

NBCMTV

• create a more intimate contact with the audience with interactive features evolving around key TV programmes

• improve brand image by creating ‘cool’ apps

Disney

CBS

Fox

Number of apps by genrep g y g pp• increase viewership and address an audience

unreachable on any other platforms• generate additional revenues through paid

downloads/subscriptions and/or advertising GamesNews

SportsTravel

pp y g

downloads/subscriptions and/or advertising• Popular applications tend to be more innovative

by taking advantage of the mobile experience to bring another dimension to existing services.

Entertainment

Finance

Lifestyle


Others

Online freemium music providers see mobile as a way to improve their business casecase

• Spotify, Deezer both launched mobile applications on Androidmobile applications on Android and iPhone/iPod Touch in 2009

• Spotify: 1m paying subs from 6.7m active users in a region

i t t t i f ig

resistant to paying for music

• Deezer: 800,000 paying subscribers

• Mobile operators embrace the unlimited music on-demand craze

• 3UK bundled a Spotify premium subscription with its latest Androidsubscription with its latest Android handset

• Orange made a strategic investment in Deezer in 2010 and also bundles it with some of its services


But, rich media is still only a small subset of mobile content and data revenues

14%

Rich media as % of data & content revenues

12%

14%

8%

10%

4%

6%

0%

2%


0%2006 2007 2008 2009 2010 2011 2012 2013 2014

Music Games TV & Video Application stores

Mobile won’t offset decline in traditional media revenue streams unless bundled

PiracyTop-tier customer migration

Core media services Blended

Over-the-top

Increased competition

Increased ARPU

Customer ownership

Core media services

Core mediaservices

ARPU ARPUp

Tougher regulation

Reduced churn

Added value

ARPUmedia servicesARPU

Mobile ARPUDifferentiation

Mobile ARPU

Mobile ARPU


The mobile data crunch. Who will pay for data?

• Smartphones, mobile broadband and M2M are set to drive exponential

UK mobile data marketM2M are set to drive exponential mobile data traffic growth

• Increasing competition and heavy subsidies on data/smartphone 10

12

14

700

800

900

subsidies on data/smartphonebundles will endanger mobile data monetisation

• There are three options for operators: 6

8

10

400

500

600

ue p

er G

B (£

)

affic

(PB

)

• There are three options for operators:• Add extra capacity on the network and

increase prices• Content delivery optimisation (IMB,

throttling, QoS, WiFi)Ch id ( bil d 2

4

6

200

300

400

Rev

enu

Tra

• Charge content providers (mobile data termination fees)

• Video is set to contribute to more than half of mobile data traffic by

0

2

0

100

2010 2011 2012 2013 2014

Smart phones Mobile Broadband Revenue per GB


than half of mobile data traffic by 2015

13

Smart phones Mobile Broadband Revenue per GB

Tablets: similar apps but better monetisation - US case study y

1% 2% 1%1% 1% 2%

US: top grossing iPad apps US: average price per paid game ($)1%

4%

3%

0.3% 3%4%

0.3% 3%1%

4%

2%

3.5

4

63%

2%1%

1%4%

2.5

3

63%

Books Business Education

1.5

2

Entertainment Games Healthcare & FitnessLifestyle Medical MusicNavigation News PhotographyProductivity Reference Social NetworkingS t T l Utiliti 0

0.5

1


Sports Travel UtilitiesWeather

0iPhone iPad

Thanks

[email protected] l 44 207 424 2865Tel: +44 207 424 2865Twitter: @Ronan_SD