Premium Decline
January 24, 2009
I remember a late night, drunken conversation with the CEO of an Irish mobile technologies firm, the day we had all been allotted our initial premium rate SMS shortcodes. He was saying how it was the future; micropayments and all that. The truth is that the mobile technologies industry needed this; WAP had pretty much flopped and we knew it, so we desperately needed a viable revinue stream.
A few weeks later the operators began to reveal their T&C's - and rates. We had to sign NDA's for this - in retrospect possibly because they were too embarrassed to let the wider public know they were gouging everyone - charging crazy set-up and recurring fees, imposing unrealistic conditions and, most importantly, keeping the lion's share of revenue.
The problem with this is that as a result it killed the micropayment idea outright (and with it the product my company had been developing) and the only way anyone could make money from PSMS as a result was with worthless junk, porn and scams.
And that's where the PSMS industry ended up; in a cat-and-mouse game with regulators, skirting an increasingly narrow grey zone and a decreasingly trustful consumer base. Meanwhile the operators, creaming the profits of often unethical subscriptions, were throwing up their hands and claiming - it had nothing to do with them; "we're the good guys". Yeah, right.
It's an industry in serious decline at this stage. The content hasn't really changed all that much and the only attempts to change have been a largely (unsuccessfully) move to put together some form of 'social networking' offering to replace the ringtones and wallpapers that are not really doing it any more. Games are still doing well, but the problem is that the margins are simply not the same. When your net revenue is perhaps half of what the customer is paying out, and you want to remain competitive while still paying for your content, it makes things very tight.
Where does this leave premium SMS? In a shrinking market that will only be able to support a handful of players is my bet. The only hope for it is that a new direction is taken with content, but, from experience, this is an industry that rarely innovates, although it is very good at replication. Even with the aforementioned attempts at some form of 'social networking' offering, it's obvious that no one really knows what exactly this offering is supposed to look like, and so isn't really taking off.
Alternatively, a return to the micropayments dream could save things. Unfortunately, the operators are unlikely to decrease their share and so content will remain over priced or only viable if the marginal cost is very, very low.
Either way, a consolidation, or culling, is probably in order, before someone finally innovates and all the others rush to copy them.
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