Mobile Media Services and Mobile Operator Business by Jan Markendahl, Konrad Tollmar and Laili Aidi

Transcription

1 Mobile Media Services and Mobile Operator Business by Jan Markendahl, Konrad Tollmar and Laili Aidi Mercury Magazine , Autumn/Winter (Special Issue on the New Media Landscape), Issue 5-6, pp.. Mercury Magazine issue No. 5/6, [Autumn/Winter] 2013/2014. Copyright 2013, The Department of Business Studies, Uppsala University. All rights reserved. Reproduction of the printed magazine in whole or in part without written permission is strictly prohibited. Mercury Magazine ISSN is published by the Department of Business Studies, Uppsala University, Box 513, SE Uppsala, Sweden. This reprint is available for free at Annual printed subscription rates for non-alumni and non-students at the Department are 399 SEK, Euro 50, $60, 35. To subscribe please your order to Mercury Magazine is the official magazine of the Department of Business Studies at Uppsala University

2 CONTENTS/ AUTUMN/WINTER 016 Merger Mistakes Owners of all kinds need to be more careful in approving international acquisitions, argues Lars Engwall. 018 PROFILE: the whiz kid Jukka Hohenthal has met the new CEO of ICA Gruppen and Uppsala alumnus Per Strömberg. 021 IDEAS: DREAM CATCHING Tore Strandvik and Anu Helkkula put forward a new idea of how to discover innovations that customers will buy. 022 value creation Achieve your commercial goals by creating value for all stakeholders, argues founding partner of Prime Carl Fredrik Sammeli. 025 book review: big data LSE researcher Niccolo Tempini reviews the work of Viktor Mayer-Schönberger and Kenneth Cukier. 028 the future of direct selling Magnus Brännström, CEO of Oriflame and Chairman of SELDIA - the European Direct Selling Association, provides his view on the future of direct selling. 030 LEGITIMACY FOR SALE? Anna Tyllström walks us through the world of PR consultants, politics and the struggle for visibility. 038 effective and happier Carin Eriksson Lindvall explores the sense of meaning in our work. 040 deceptions of consistency Public sector organizations cannot uphold consistency and coherency in what is to be communicated argues, argues Josef Pallas. 046 learning from disasters Enikö Kaptalan-Nagy explores one of the biggest crises in the European Union: The Mad Cow disease. 052 THE ENTREPRENEUR AS COMMUNICATOR As an entrepreneur you need to develop your storytelling skills, argues Ivo Zander. 054 THE SELLING OUT OF ART Anders Björnsson comments on an indecent activity among Swedish corporations. 058 what does it take to get your attention? Poja Shams examines how purchasing decisions are made in grocery stores using eye-tracking technology. 064 why not get a contractor in? When specialist knowledge is lacking in-house companies are forced to move outside their boundaries. 068 DON T CRY WOLF! Managing your intellectual property requires among other things collaborating with enforcement agencies. 070 MOBILE SERVICES AND OPERATOR BUSINESS Spotify and Telia cooperate in Sweden but can this type of partnership be a role model in other areas of the world? 074 WHAT IS SERVICE? Services are the backbone of our economy but we seldom think about them, argues Bo Edvardsson

3 scientification Throughout society the scientific method have gained momentum in managing and communicating work flows and organizational processes, argue Leon Michael Caesarius and Jukka Hohenthal. 076 GETTING CLOSER TO CUSTOMERS On the emotions your organization needs in order to be truly customer-centric. 080 REAL HUMAN BEINGS ARE A MEDIUM TOO Magnus Söderlund focuses on a very traditional yet powerful medium we tend to forget the face-to-face encounter. 082 judging the manager in media Shallowness, superficiality, smartness, focus on looks and appearances - is that what we get from mediatization, asks Magnus Frostenson. 084 tripple bottom line? Culture quadruples the challenges, argue Lena Zander and Ciara Sutton. 088 HOW CAN ACADEMIA SUPPORT BUSINESSES? Academia has a lot to offer businesses, argues Staffan Movin. 090 WHEN SCIENCE MEETS FINANCE Different accounting calculations influence product innovation, argue Henning Christner and Torkel Strömsten. 097 operating margin Magnus Bild discusses what probably is the most common financial indicator in business and uveils its delicate qualities. 102 WHAT DO AUDITORS DO? Pernilla Broberg has observed autitors at work in Big 4 audit firms bringing forth an updated view of auditing and the role of auditors. 108 swedish controllers - shaped by a book? Nils-Göran Olve tells a story about a book and its impact on a role. 112 LEAN MANAGEMENT Göran Nilsson provides 14 principles for a nuanced view on the subject that provokes more feelings than any other management concept around. 118 LET S DECIDE! The process of decision making confuses Henrik Bäckström. 120 MANAGERIAL DEVELOPMENT Is it a necessary investment or mere rain dance, asks Martin Rogberg. 122 NEED FOR SPEED? Agile management is the key according to Tomas Gustavsson

4 TECHNOLOGY Can streaming music services in the mobile phone compensate mobile operators for declining voice revenues? Spotify and Telia cooperate in Sweden but can this type of partnership be a role model in other areas of the world? Jan Markendahl, Konrad Tollmar and Laili Aidi have investigated the matter. WRITTEN BY Jan Markendahl Konrad Tollmar and Laili Aidi ireless Internet access to an increasing number of new and existing services has become a major trend in just a few years. Smartphones are becoming more and more important in daily life, providing not only voice and messaging services. Internet connectivity enables phones to be an important tool for almost all everyday activities. In Sweden, 2013 is the year when the mobile phone is the most common way to access an Internet bank. For public transport and parking, mobile phones are used for payment and ticketing. Contacts with friends, work, and the schools of children are managed by use of the phone. For entertainment, YouTube clips and music are downloaded and radio and TV are accessed from the phone. Mobile operators provide the connectivity and invest and build the mobile networks that enable this large increase of data traffic. In countries with mobile broadband, data traffic is dominating over voice traffic. The majority of the traffic comes from data services, but the corresponding revenues are too small compared to the voice revenues. Mobile broadband traffic will continue to increase requiring heavy investments in network capacity. At the same time Google, Facebook and other actors offer services making use of the connectivity and network capacity. Some operators claim that these Internet companies offering services over the top (OTT) should pay for using the connectivity. For the operators this is challenging in another way since they also want to find new sources of revenue. The large revenues from the traditional voice services have been decreasing for many years and the increasing revenues from data services do no fully fill the revenue gap. Hence, new types of services and revenues are of vital importance for operators, this can be in areas like mobile payments, services enabled by Internet of Things (IoT) or from mobile media services. In this article we will look more into if and how mobile operators can enter the mobile media and music business. This is a complex issue since the music industry has been transforming dramatically during the last couple of years. The content is distributed using digital channels and actors like Apple, Google and Spotify enter the market and offer music services over the top (OTT). Based on cases from Sweden, China, Indonesia and India we investigate how mobile operators and OTT players cooperate and not. We will also discuss the transformation of the music industry, how mobile music services are provided in different settings, the multitude of solutions and actors, and the implications for the mobile operator business. Some years ago operators presented pictures of the traffic and revenue mixes. Typically data services represented 75% of the traffic but just 25% of the revenues

5 The Telia-Spotify case in Sweden illustrates how mobile operators can enter the music market by collaboration with another actor. However, it turns out that this is not a general solution that can be applied everywhere in the world. Mobile operators are facing a number of challenges. Some of these are related to revenues and costs and some are related to new services and the market position of the operators. Mobile broadband services have increased but this type of data service requires heavy investments in network capacity. Some years ago operators presented pictures of the traffic and revenue mixes. Typically data services represented 75% of the traffic but just 25% of the revenues. The other main type of challenge for mobile operators is related to the market position of different actors. For the traditional connectivity services (voice, messages and data) the end-user has subscriptions with the mobile operator. This represents a typical business-to-consumer setting (B2C). For other mobile services like payments, ticketing, smart meters, connected cars, and health applications the situation is different. In these cases the service provided by the mobile operator is just one part of an overall service and some other actor has the main customer contact. The mobile operator contributes to the service of another actor in a business-to-business-to-consumer setting (B2B2C). We find an example of this in the cooperation between Telia and Spotify. Spotify has worked with multiple mobile operators in Europe, starting 2009 with Telia in Sweden, others are 3 in the UK and KPN in the Netherlands. In Sweden, a service bundle is formed by combining the Spotify Premium with TeliaSonera s subscription plans. In Sweden this made Telia the exclusive operator to use the Spotify brand within its products branding and marketing. Hence, it is a way for Telia to extend its service offering and also to provide a more attractive offer when competing with other operators. It may also be a way to increase revenues, increase customer loyalty and to reduce churn. Interviews made with Telia and Spotify in 2012 revealed some interesting facts about the collaboration. For Telia, the alliance with Spotify is attractive to young people, and the offer supports Telia s business strategies for first-time subscribers. Also cultural differences between telecom and the music industry was mentioned. Direct collaboration complicated and highlighted the need for a third party, i.e. Spotify, acting as a bridging actor. The Telia and Spotify case confirmed that there is no direct agreement between Telia and the content owners, but Telia is involved in the discussions. Through revenue sharing, Telia gets a small part of the music revenue but, the biggest part goes to Spotify and the content owners. Since many actors are involved in the music industry we will next illustrate the roles of different key market actors. In order to create and produce music content and product a number of actors are involved. Artists (composers, songwriters, singers, bands, orchestras) deal with the record label and publisher. These three actors are the content owners who usually hold the copyright. The collecting society or organization settles and collects royalties on a country basis, e.g. when a tune is played on the radio. The content aggregator acts as a point of contact for distribution to retailers, shops or service providers. The traditional way to distribute music is today complemented by a number of other solutions: selling physical CDs using on-line shops, downloading of tunes or albums (e.g. Apples I-Tunes), and use of streaming music services (Spotify). A key issue for OTT players offering music services is to have agreements with the music industry. Streaming music service can be used in computers, tablets and smartphones. Downloaded music can also be used in separate MP3s like an ipod. In Sweden Spotify initially offered both downloadable tunes and streaming music, but from 2013 only the streaming service is available. In 2012, 77% of Spotify s revenue came from paid subscriptions and 23% from advertisements. This makes Spotify the world s largest paid-based streaming music provider and Europe s second largest source of digital music revenue. The Telia-Spotify case in Sweden illustrates how mobile operators can enter the music market by collaboration with another actor. However, it turns out that this is not a general solution that can be applied everywhere in the world. This was clearly illustrated by interviews made in 2012 in China, India and Indonesia (by KTH students from these countries). In order to get the overall picture of each market, interviews were done with mobile operators, OTT media service providers and mobile content providers. All in all, it turned out that operators do not cooperate yet with any OTT music actors in these Asian countries. For different reasons operators and OTT actors had their own agreements with the content providers. In China there are low incentives to offer a paid music service. This can be explained by Chinese regulation; low law enforcement for copyright violations (music piracy) and also low willingness to pay, since most media revenues come from advertisements. The operators cooperate directly with the content owners and they have a strong bargaining position due to the weak copyright protection. In India the mobile media and music business is less developed than in China due to low penetration of advanced handsets, recently deployed 3G networks and very low Internet usage from mobile devices. The focus is on personalized services, typically ring tones and ring back tones (RBT). Another issue for India is that there are many local cultures and languages that makes it difficult to offer one national Spotify service like in the US or in Sweden. Also in India the operators cooperate directly with the content providers. One key asset and benefit for mobile operators is that they control the distribution channel (the network) and the payment channel (through the subscription). OTT actors do not have the same capabilities and in India most people do not have bank or credit card accounts. The situation in Indonesia is similar to India with focus on download of ring tones and RBT services. There are also online music offers from both operators and other actors. But these services have a hard time taking of although the smartphone penetration is much higher than India, due to bad network connectivity and low law enforcement and piracy issues, all leading to low willingness to pay. In Sweden cooperation between MNO and OTT actor like the Telia - Spotify case seems to work and result in benefits for both partners. Spotify (OTT) gets an increased customer base and frequent usage tend to drive users into higher value subscriptions. Telia (MNO) extend s the range of service offers that can increase customer loyalty and reduce churn. Sweden is a country with promising conditions for paid mobile music services. There are build-out high capacity mobile networks, a high penetration of smartphones and a high willingness to pay for music services. For less developed countries this does not seem to be the case. Poor network quality, low smartphone penetration, music piracy and a common opinion that music should be for free or very cheap, all contribute to a low willingness to pay for music services. However, the picture is more complex since at the same time there is also a growing market for paid services, and in absolute numbers this market share is significant. Finally, we can do some observations related to the position of mobile operators when entering the market of music services. If we compare with mobile payment and IoT we can note the following when operators offer other services: Mobile payment services support another service of another actor. IoT services are usually part of an overall service provided by another actor. Hence, the mobile operator cooperates with the actor owning and providing the content. For music services this is quite different, provisioning of streaming music services replaces traditional music service and to some extent means competition with the traditional music industry. The operator needs to cooperate with some actor that has agreements with the music industry (in this case Spotify) but Spotify does not need the mobile operator