premium rate services' annual market review 2014, market outlook 2015
TRANSCRIPT
By Nick Lane, chief insight analyst @mobilesquared
PRS Annual Market Review 2014, Market Outlook 2015
About mobilesquared
mobilesquared.co.uk @mobilesquared
We provide intelligence and insight on the telco and media sectors. The real value we deliver lies in how we transform our research into high-performing content and strategy that puts our clients ahead of their competition. Our work has a clear impact on our clients' business results, because we design each brief around their business objectives. We've been analysing the telco space for two decades, so our experience has been earned, not learned. Our instinctive ability to ask the right questions uncovers invaluable nuggets of insight, which we interpret to help shape truly-effective strategy for our clients.
Who we work with
@mobilesquared www.mobilesquared.co.uk
Market in decline (all figs excl. VAT)
mobilesquared.co.uk @mobilesquared
£686.6 mil. Revenues down 3.2% on 2013
Fourth successive year PRS market revenues have dropped
PRS market contracted by 16% since 2010
£571.6 mil. (excl. charitable donations)
Mobile + Operator billing revenues 2014
£411.89 mil. (excl VAT)
Voice-based revenues 2014
£274.72 mil. (excl VAT)
including red button
“Mobile” + “Operator billing” accounted for
60% of total revenue in 2014
Revenues by service type
mobilesquared.co.uk @mobilesquared
Directory enquiries still on top
Consumers drawn to simplicity of charitable donations
Revenue change by payment platform
mobilesquared.co.uk @mobilesquared
DQ, 087, voice PRS/09* hardest hit by decline in market revenues.
*incl. Red button
£m excl VAT 2013 2014
Directory enquiries (DQ) 140.93 116.93
Mobile (including voice shortcodes) 328.35 343.45
Operator billing (incl PayforIt) 36.82 68.44
Voice PRS/09 & red button 119.2 88.65
Voice 087 83.63 69.14
Total 708.9 686.60
Forecast 2015e (all figs excl. VAT)
mobilesquared.co.uk @mobilesquared
£637.5 mil. Revenues down 7.2% on 2014
£513.5 mil. (excl charitable donations)
900
800
700
600
500
400
300
200
100
0
“Mobile” + “Operator billing” projected to account for 66% of total revenue in 2015
Mobile + Operator billing revenues 2015
£419.3 mil.
Voice-based* revenues 2015
£218.2 mil. *including red button
Market estimation for PRS in 2015 reveals that the market will have
contracted by 22% since 2010
PRS market declining at an average of 4.8% year-on-year
mobilesquared.co.uk @mobilesquared
The new 3 Gs Giving, Gaming, Gambling Only 3 services to experience growth
2014-to-2015
2015e forecasts by service type
2014-15e revenue % change
mobilesquared.co.uk @mobilesquared
Revenue decline accelerating for DQ &
voice PRS/O9 services
Mobile + Operator billing revenues
forecast to grow 2%
Voice-based services forecast
to fall 21%
2015e
2015e
mobilesquared.co.uk @mobilesquared
% change
PRS users
mobilesquared.co.uk @mobilesquared
PRS users, as of Jan 2014 19.3 mil.
Average PRS users per service, Jan 2014 3.1 mil.
30% of UK
population use PRS
PRS ARPU (annualised)
mobilesquared.co.uk @mobilesquared
£35.60 (Incl. charitable donations, excl VAT)
£38.64 (Incl. charitable donations, excl VAT)
PRS market losing low-paying users
2014
2015e
mobilesquared.co.uk @mobilesquared
State of play 2014-15e
Users 2014-15e
mobilesquared.co.uk @mobilesquared
Consumer reasons for stopping PRS usage during 2014, include:
Stopped trusting PRS / Problems with a service / Free content elsewhere / Using other paid services / No longer see value in PRS / Services not as good as they were / Not interested in the service any more / I pay for the services using credit/debit card
PRS industry lost 233,000 users per month in 2014
Non-compliance activity accounted for 46% of these users per month
54% stopped using PRS because of cost, service relevance and alternative content-related issues
The consumers say
mobilesquared.co.uk @mobilesquared
7.9 million happy PRS users
6.3 million use PRS less
2.8 million no longer use PRS
2.1 million don’t know
The consumers say
mobilesquared.co.uk @mobilesquared
Q. What reason/reasons can you attribute for using these services less of stopping using them altogether?
Smartphone impact
mobilesquared.co.uk @mobilesquared
UK smartphone penetration 68%
Smartphone penetration among PRS users 72%
Why have you reduced or stopped using PRS in 2014?
2.8 million PRS users claim
they get free content elsewhere
2.6 million people claim to
not afford PRS any more
Consumers talk less
mobilesquared.co.uk @mobilesquared
Voice minutes usage dropped 14% between 2008-2014e
Fixed-line usage hardest hit, falling 28%
141 128 123 111 103 92 83
85 90 98
103 105 110 116
33 36 33 29 27 24 23
0
50
100
150
200
250
300
2008 2009 2010 2011 2012 2013 2014e
Outgoing fixed and mobile voice minutes (billions)
Pre-pay mobile
Post-pay mobile
Fixed
Almost 50% still use fixed-line because
it is free
73% spend less than 10 minutes per
day using their fixed-line
80% use fixed-line less because of
mobile
Opportunities
mobilesquared.co.uk @mobilesquared
The 3 Gs 2014: £229.9 mil (excl VAT) / 33% of total revenues
2015: £250.4 mil (excl VAT) / 39% of total revenues
Apps
Mobile payments Physical & quasi-physical goods
Estimated daily mobile usage, PRS users, 2013-2014
Opportunities - giving
mobilesquared.co.uk @mobilesquared
Payment opportunity
mobilesquared.co.uk @mobilesquared
•Smartphones creating new mobile payment opportunity – PRS expansion into quasi-physical and physical goods. •Operator billing only PRS area experiencing growth; projected to slow down in 2015. •Industry waiting for release of the update to Payment Service Directive (PSDII) in July 2015 before deciding mobile payment strategy;
•Major Level 1 providers expected to reduce role in PRS sector in pursuit of mobile payment strategy.
•Operator billing to be viewed as separate platform from traditional PRS services in order to attract corporations and major retailers (brand identity);
•Brand reputation an important consideration •PayforIt potentially becoming “brand” for operator billing restricted to PRS sector. •Credit/debit cards have the march on operator billing;
•Industry out-payment timelines (30+ days) a potential hurdle. •Operator billing requires significant promotion from a united industry.
10.8 million PRS users would be interested in using their mobile phone
to pay for “other” transactions that appear on their monthly mobile phone bill, or uses available credit from
their pay-as-you-go account
Preferred consumer payment channels
Payment opportunity
mobilesquared.co.uk @mobilesquared
What is appealing about using your mobile phone to pay for transactions?
Collaboration
mobilesquared.co.uk @mobilesquared
Increased openness and closer working relationship between industry and
regulator developed in 2013 and continues throughout 2014 and into 2015.
• Industry and PhonepayPlus worked successfully together to counter threat
from non-compliant affiliate marketing (initiative commenced mid-2013)
•Introduction of “SKIP” to regular text payments in charity sector
• Formation of Rapid Response Unit viewed as significant step forward
• Supported industry on Payment Services Directive (PSDII)
• Tackling the issue of re-direct.
Consumer perception of PRS
mobilesquared.co.uk @mobilesquared
Consumers believe PRS costs between
£0.25 - £10
25% of consumers claimed to know
how much PRS costs
41% said they did not know
Despite the clarity required when promoting PRS as mandated by regulation,
consumer perception of PRS pricing is inaccurate.
On average, consumers believe PRS costs an average of:
• £1.63 to vote on X Factor
• £1.08 per minute to call DQ
• £2.77 per minute to call a chat line
Cost-related issues are the principal reasons for PRS users to reduce their usage of PRS or stop using the services altogether.
Q. What reason/reasons can you attribute for using these services less of stopping using them altogether?
PRS pricing not reflective of changing market dynamics (internet, device evolution, behavioural changes)
Key findings
[email protected] @mobilesquared
1. PRS market decline continues: Down 3.2% 2013-2014, projected to fall 7.2% 2014-2015.
2. Operator billing only payment mechanism within PRS experiencing revenue growth; promise of quasi-physical and
physical goods revenues prompting major Level 1 providers to develop divergent strategy.
3. Service growth from the 3 G’s of Giving, Gaming, and Gambling.
4. PRS users dropped from 19.3 million (Jan 2014) to 16.5 million (Jan 2015); ARPU increasing.
5. Non-compliance accounts for the loss of 46% of users per month; cost, service relevant and alternative content-
related issues affect the remaining 54%.
6. Compliance hit 80% in 2014, industry targeting 85-90% in 2015.
7. PRS pricing requires realignment based on changing market dynamics, technology, and consumer behaviour.
8. An app strategy presents longevity
*Revenues include charitable donations
Over to you: Any questions?
@mobilesquared www.mobilesquared.co.uk
[email protected] www.mobilesquared.co.uk Tel: +44 (0) 7909 445 848
Thank You