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Submitted by Mike Grenville on Mon, 05 Jan 2009 16:45 |
Lack of trust with consumers as well as the economic downturn have contracted the UK premium rate phone market in 2008 according to research for PhonepayPlus.
UK Premium rate phone regulator PhonepayPlus has published research from Analysys Mason that shows the result of the economic downturn on the UK phone-paid services market in 2008 and predicts further contraction of the market in 2009.
The second annual 'Phone-paid services: current conditions and future trends' report shows the market has declined in size due to a general lack of trust amongst consumers and fears of continued economic hardship. The report also identifies potential areas for growth in the market and calls for greater price transparency. The research polled 3000 consumers and carried out in-depth interviews with 25 companies from across the phone-paid industry. In addition to polling consumers in the 18+ age bracket the report, for the first time, assessed usage and views from users aged 11-17.
Despite prediction of a downturn, figures show public use of phone-paid services to be robust, with almost one in two (48 per cent) consumers having used a phone-paid service in the last six months.
![Proportion of respondents using each of the listed phone-paid services [Source: Analysys Mason 2008]](images/PPPusage2008.jpg)
Premium Rate Messages
Premium rate MMS for video clips and photos is being used by 5.5% of respondents overall. It is markedly more popular with younger people, with around 10% of those in the under-35 age group using the services, compared to 4% in the 35–54 age group and 1% in the 55+ age group.
A similar percentage of 5% of people have used premium rate news or text alert subscription services in the past six months. As with other premium rate SMS services, competition from free services available on the mobile Internet is beginning to intensify. As 3G handsets are becoming more user friendly, mobile broadband coverage is improving and mobile broadband price levels have fallen notably, consumers can readily access news (e.g., from the BBC or Reuters) or similar information at no charge instead of paying for a subscription service.
Voice Short Codes Boost
Common short codes for voice have been of limited use hitherto because O2 (with almost 25% of the market) had not implemented them. O2 finally implemented these at the end of September 2008. This may well hasten the shift of phone-paid voice traffic from fixed to mobile, because users will now be able, for example, to make a call to a 100ppm live voice service and be charged 100ppm, rather than 130ppm or 160ppm depending on their mobile service provider’s surcharge. Another key point is that common short codes can be used equally well for video as for voice, and this should act as a driver for the expansion of video-based phone-paid services, such as live video chat
Mobile Billing
SMS billing is also employed on the mobile Internet, both for WAP push messages and for WAP page views. Operators have different codes of practice for these services; for example, T-Mobile does not allow WAP push messages to be sent over its network. Vodafone, 3 and O2 have made Payforit compulsory for all mobile Internet purchases by their customers. Because of a number of consumer-harm issues related to WAP push and/or WAP page views, premium SMS may have a more limited role in phone-paid services in the future.
However, although the views of stakeholders are mixed, consumer survey data suggests billing-based payment mechanisms, such as Payforit, have yet to make a significant impact on the market.
In spite of this, because of the additional capabilities of SMS billing, the range of billing options is much greater than for fixed services and Premium SMS is expected to remain a very popular payment mechanism and to represent an even larger share of the premium rate market. One feature likely to be of increasing importance is the use of short codes, now that these have been extended from text SMS to include voice and video calls from all five UK mobile network operators.
![Phone-paid services market size, by service category [Source: Analysys Mason, 2008]](images/PPPsize2008.jpg)
Analysys Mason predicts a drop in the size of the premium rate market from GBP1.08 billion in 2007 to GBP920 million in 2008. This is a significant drop of 15% in the total market and is driven in part by the negative press generated by scandals in the participation TV market and regarding some mobile subscription services. The combined market for calls and SMS to competition/voting lines or TV quiz shows is estimated to be worth GBP95 million in 2008.
The Future
The report confirms the need to build trust amongst consumers in order to realise growth opportunities in the phone-paid services market, with accuracy of pricing information identified as the key factor that could help improve trust.
It suggests most premium rate services will experience declining revenues in the next twelve months and in general, the phone-paid services market is predicted to continue its decline in 2009. This is mainly due to a perceived lack of innovation in the marketplace, coupled with increased competition from alternate, and often free, services. For example, 50 per cent of consumers who plan to discontinue their use of directory enquiries services will do so because of the ease with which they can access similar services for free.
At the same time, the impact of the economic downturn is expected to become more severe as fears of a global recession grow and consumer spending contracts as a result. Some services are expected to be more vulnerable to lower disposable income than others. 35 per cent of respondents said they would be less likely to place calls to television voting or competition lines in the current economic climate compared to 20 per cent of those who use phone-paid services to access adult content, for example video or photos.
That said, the report highlights the impulsive nature of participation in phone-paid services such as television voting or competition entry. Therefore, it is difficult to predict consumer take-up of such services based on premeditated answers to questions.
The report also identifies a need for more effective and accurate marketing of phone-paid services to non-users as one in two claim to have seen advertising material and, of these, 15 per cent read advertising 'most of the time' or 'always'. 46 per cent of consumers found advertising about a given service to be misleading, poorly described or lacking in contact details.
Read the full report here: www.phonepayplus.org.uk/pdfs_research
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