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A 180-Day Mobile Outlook

A 180-Day Mobile Outlook

June 14, 2006
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" mobile distribution is tightly controlled by a handful of major carriers "

Wireless has become the latest buzz in networked entertainment as the adult industry anticipates the promising new revenue streams that mobile content and services offer. However, before mobile adult can fully mature in the North American market, certain legal and technical obstacles still need to be overcome.

Revenue from wireless adult services in the U.S. have been projected by research analyst Yankee Group to hit $200 million a year by 2009, but our short-term profitability depends on the delivery of products and services that are compelling from a consumer’s standpoint — within the constraints of common handsets and current wireless network capabilities.

To fully achieve our potential growth in 2006, we must address the regulatory and technical limitations inherent to wireless media in the U.S.

The apprehensive approach of the North American carriers to adult content on their networks creates logistical challenges. Until and unless U.S. carriers allow adult content on their own content portals — and approve carrier billing for adult content — there will be limited consumer accessibility to adult content and “friction” in consumer billing transactions. As of right now, adult mobile content and services companies are limited to credit card and subscription-based billing — both of which typically are cumbersome.

Furthermore, abuse of billing methods by companies providing mobile adult services, resulting in hefty chargebacks, already has led to some of these companies being frozen out by the carriers. Provisioning of billing by carriers for mobile text chat services has, for example, essentially ground to a halt. To foster goodwill with the carriers, self-policing is key. It is important for all mobile adult companies to enact defensible age-verification checks, bill customers responsibly, ensure full legal compliance and adhere to local and regional obscenity laws.

Because the capabilities of U.S. handsets and networks tend to lag behind those of Europe and Asia, early indications are that the American market is evolving differently than the overseas markets. Content downloads from carrier portals in Europe comprise a thriving industry, but until advanced handsets arrive en masse in North America that are capable of delivering high-quality rich media, revenue from mobile content will be restricted. The wide proliferation in the U.S. over the next two years of next-generation mobile phones with enhanced graphical and video capabilities will usher in a lucrative, European-style download business. But for the immediate future, iPods likely are the only small portable devices that offer much revenue potential for downloadable video content.

Products that tap into the experiential nature of wireless, however, are well positioned to immediately generate significant revenue from mobile phone users in the U.S. For example, operator-mediated products that engage callers with voice and text — but that are not dependent on graphical or video downloads — already are generating healthy revenue. These products include mobile text chat products, mobile conference calling products that function in the same way as online chatrooms, “Hot or Not?”-like photo rating products and live video chat sessions on cellphones.

Decade Mobile’s current sales data support this picture of the most lucrative products in adult mobile media in the U.S. being those that are not dependent on content downloads. Decade’s Text Chat, which is marketed as a white-label service for re-branding by other companies, rapidly became a profitable offering after its introduction. Text Chat customers pay about $1.99 every two minutes for an experiential service that engages and satisfies users.

Profits from these services are ongoing and cumulative, versus the one-time charge for a brief video or graphic download. In the near future, we anticipate the enhancement of our text chat services with graphics and video exchanges so that callers can get a visual of the person with whom they are chatting.

Since mobile distribution is tightly controlled by a handful of major carriers, the development of the adult mobile industry calls for a significant amount of experience, tact and ingenuity. As technologies and networks open up, standardized content ratings systems and age checks are enacted, and billing systems become more frictionless for consumers. In addition, downloadable rich mobile media will blossom in their appeal and profitability.


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