An old telecom industry joke goes like this: A Japanese VAS company goes to an Indian telecom carrier for a content deal. They’re thrilled when the carrier suggests an 80:20 revenue share deal, and then they realize that the carrier will keep the 80%. The crux of the joke is that in Japan, which is a data heavy market, the leading carrier NTT Docomo keeps 20% of revenue share. The catch: Docomo keeps the money it makes from data.
But Japan is a market with evolved payment mechanisms, comfortable with online and mobile payments. In India, the propensity to purchase content online and mobile is rather limited: when a customer sees a price tag before her, the chances that she will not buy the content. Apart from that, the cost of content on operator decks has been prohibitively high, though it has come down significantly in the recent past: whether a Rs. 99-150 game, Rs. 10 wallpaper, Rs. 15 animation or a Rs. 15 ringtone.
On the other hand, data costs, though disclosed, are not as explicit. When a consumer get the opportunity to view a video or just download the same content for free on the mobile, there is only a charge for downloading that content. Data consumption, except in case of unlimited plans like the Rs. 95 one from Aircel, offer the opportunity of monetizing heavy data consumption, particularly from providing data-heavy content free for viewing on the mobile, whether it is YouTube video, videos via VuClip, or even comics like those launched on Tata Docomo and Airtel. A 1 minute clip is around 1.4 MB in size, and would thus cost around Rs. 8 for download. In comparison with paid content, there would be no payouts to content owners.
What started this chain of thought is the recently announced partnership between BCCL owned Times Audience Network (TAN) and VuClip, a video search engine with a proprietary technology for repurposing content on the fly for mobile optimization. VuClip will make video content from the Times Group available on mobile. Over the past six months, we have often heard from industry sources that VuClip has been receiving a revenue share of data charges from telecom operators. However, each of the 5-6 times we’ve asked for a confirmation, Salman Hussein, VP (Business Development) for VuClip has denied it. Neither Hussein nor TANs Sameer Pitalwalla were willing to comment on how the content will be monetized and whether there is an advertising or data revenue share involved.
Frankly, it looks like it will remain a VC-funding dependent life for data heavy free businesses, unless they begin looking at ‘freemium’ options by retailing content. My sense is that nascent mobile advertising business, notwithstanding the number of ads that AdMob and InMobi claim they serve in India, is unlikely to help them sustain. At the same time, for operators, putting a price tag on content doesn’t appear to be scalable, and un-approved billing is being clamped down upon. India isn’t Japan, and perhaps, to build a supportive mobile content ecosystem, telcos should put into place a data revenue share. And I don’t mean a 80:20 deal.