master thesis presentation: business models for mobile broadband media services - case study...
DESCRIPTION
The increase mobile data traffic from the emerging Internet services, especially multimedia, has posed considerable challenges for the telecom industry. Their initial mobile data services business models are generally not compatible with these emerging Internet services. Thus, there is a substantial need to investigate the suitable options to make media as a profitable telecom business sector. However, there are different challenges and opportunity factors in developing sustainable mobile media business in each market, due to the unique circumstances applied as the result of customer characteristics, mobile market situation and regulatory/law enforcement. The first purpose of this thesis is to explore the business model options to deliver media services on top of mobile broadband. Although, we limit our focus to Indonesia, we first analyzed the worldwide patterns toward the media services in order to get a broader view of the current trend. We mapped multitudes of actor involved in digital online / on the top (OTT) media service, which together they form different types of constellation in the value network, as well as service, delivery and revenue model. We also put our focus to get the lessons learned from Spotify’s business model, by framing it using Chesbrough and Rosenbloom’s model. The second purpose is to understand the Indonesian mobile user's characteristic toward the mobile media services. We conducted survey to 119 Indonesians, analyzed the result with one sample T-tests and validated it with the correlation tests (Cronbach Alpha and Pearson correlation), within the Unified theory of acceptance and use of technology (UTAUT) framework. Our findings confirm the low willingness to pay, but an open attitude for the services. The mobile device and network quality are not the barriers for them to adopt the services, and there is a tight connection between the decisions to adopt the services with the perception that the service is popular. Through those findings, we assessed the feasibility of the identified options and formulated the recommendations. We used our understanding about Indonesian market structure (telecom and media), regulation, and mobile user, as well as the lesson that we got from media services provisioning in Sweden and worldwide trend. We found that the pricing tiers, adjustable pricing, and differentiated features are some of the key success factors. Meanwhile, being part in the point-to-multipoint partnership with the well-known OTT player is the potential position that the Mobile network operators (MNOs) in Indonesia should take in provisioning OTT media services, rather than deliver the services by their own.TRANSCRIPT
Business Models forMobile Broadband Media Services –
Case Study Indonesia Telecom Market
Laili Aidi
Greger Blennerud(Supervisor, Ericsson)
Konrad Tolmar(Examiner, KTH)
Jan Markendahl(Supervisor, KTH)
2
Question
How to make media services
delivered on top of mobile broadband
as a profitable business
in Indonesia?
Outline
Background
Literatures Study
Methodology
Digital Music and Broadcasting
The Missing BRIC in the Wall
Looking Forward
BackgroundBackground
Introduction
Global
Indonesia
Shift in usage and expectation
Sustainable business challenges
Potentials in multimedia services
Mobile broadband as preferred access
4
BackgroundBackground
Problem Definition
Who are the players ? How do they play ?
MNOs’ strategic options ?
Potentials and challenges for MNOs ?
5
Mobile user characteristics ?
BackgroundBackground
Objectives
Demand Side
Supply Side
Recommendations
Existing business models,Indonesian Ecosystem (Regulation, Telecom, Media)
Consumption pattern, Indonesian users’ characteristic
Feasibility of solutions, Highlight suitable options
6
Background
Literatures Review
Methodology
The Missing BRIC in the Wall
Looking Forward
Outline
Digital Music and Broadcasting
L1 - Concept point of view
Definition and meta-models that should be found in a business model
* J.H. Chesbrough and R.S. Rosenbloom, “The role of business model in capturing value from innovations: Evidence from Xerox Corporation’s technology spin-off companies”
value proposition
market segment
value chain structure
revenue generation and margins
value network
competitive strategy
Functions of Business models*
Literatures Review Literatures Review
Business Models
Definition
Business model type X Business model type Y
Business model company A
Concepts categories and hierarchy
Business model case X
8
* C. Zott, R. Amit, L. Massa. “The Business Model: Theoretical Roots, Recent Developments, and Future Research”
*
L2 - Taxonomy point of view
Common characteristics do not necessarily apply to businesses in general but to specific industries
* Rappa, "Managing the digital enterprise - Business models on the Web”
Brokerage
Advertising
Infomediary
Merchant
Manufacturer
Affiliate
Revenue streams in Online business*
Community
Subscription
Literatures Review Literatures Review
Business Models
Definition
Business model type X Business model type Y
Business model company A
Concepts categories and hierarchy
Business model case X
9
* C. Zott, R. Amit, L. Massa. “The Business Model: Theoretical Roots, Recent Developments, and Future Research”
*
L3 - Instant point of view
Real world case or firms’ business model• Xerox’s business model• HSPA roll out investment evaluation with cost elements, forecasted traffic & ARPU, profitability calculation*
* N.K. Elnegaard, K. Stordahl, J. Lydersen, T. Gunnar, “Mobile broadband Evolution and the Possibilities”
Literatures Review Literatures Review
Business Models
Definition
Business model type X Business model type Y
Business model company A
Concepts categories and hierarchy
Business model case X
10
* C. Zott, R. Amit, L. Massa. “The Business Model: Theoretical Roots, Recent Developments, and Future Research”
*
Literatures ReviewLiteratures Review
Network Centric Approach
11
* H. Håkansson and I. Snehota. “No business is an island, the network concept of business strategy”
..linking of activities and resources within a network as a primary task .. enterprise should be conceived as a transaction function rather than a production function *
Actor, Relation, Activity (ARA) Modeling*
Actor AActor A Actor BActor B
Actor CActor C
Network of Actors D,E,FNetwork of
Actors D,E,F
Relation type X
Activities B1, B2, B3
** J. Markendahl, “Mobile Network Operators and Cooperation - A Tele-economic study of infrastructure sharing and mobile payments services”
Line of reasoning to collaborate***
Co-specialization
Co-option
Learning and Internationalization
*** Y.L. Doz and G. Hamel, “Alliance advantage: The art of creating value through partnering”
Literatures ReviewLiteratures Review
Technology Acceptance
Technology Acceptance Model (TAM)*
* F.D. Davis, “A technology acceptance model for empirically testing new end-user information systems: theory and results”
12
“The diffusion of a new technology is a result of decision series and comparison factors
from user’s perception about benefits and costs of adoption”
Explaining 70% of observed variances Intention to use Usage Behavior Demographic factors
Unified theory of acceptance and use of
technology (UTAUT)*
** V. Venkatesh, M.G. Morris, G.B. Davis, F.D. Davis. “User acceptance of information technology: toward a unified view”
But.. Inadequate to explain variances Cite success 17-53% Tested later, not during decision-making
Background
Literatures Study
Methodology
The Missing BRIC in the Wall
Looking Forward
Outline
Digital Music and Broadcasting
MethodologyMethodology
Methodology
Mixed Research approach
14
Literature study
Business model concepts and frameworks
Technology Acceptance theories
Media Service related studies
Data collection
119 Indonesians• Pearson correlation tests• Cronbach Alpha tests
Secondary sources(unobtrusive technique)
Qualitative interviews (expert sampling)
Online survey (simple random sampling)
• Market reports• Scholarly journals• Business articles• Technology reviews
• MNOs - TeliaSonera (SWE) - Telkomsel (IND) - Axis (IND)• Telecom regulator BRTI (IND)• OTT music provider Spotify (SWE)• TV broadcaster TV4 (SWE)• Mobile content provider NST (IND)
MethodologyMethodology
Methodology
Data analysis
Network centric approachActors identification and constellation (ARA modeling)
“Taxonomy point of view” approachService, Distribution, Revenue models
“Instance point of view” approachSpotify business model (Chesbrough and Rosenbloom)
Pre - Study
Regulatory scoutingPolicy and Law enforcement
Market scoutingMedia and Telecom
Mobile media user characteristicsMean measurement, Cronbach Alpha, Pearson correlation, UTAUT
Post - Study
15
Mixed Research approach
Findings FormulationActors’ roles, Value networks, Service models, Distribution models, Revenue models
Recommendation
Final Conclusions
Background
Literatures Study
Methodology
The Missing BRIC in the Wall
Looking Forward
Outline
Digital Music and Broadcasting
MUSIC AND BROADCASTINGMUSIC AND BROADCASTING
Digital Music
17
Typical Direct-To-Fan model
Universal via getmusic.com.au (Label), U2 via U2.com (Artist)
Core music actors network box
Core music actors network box
Customer
Customer
Brand PartnerBrand Partner
Core Actors and Networks
> Singer, composer, songwriter> Recording contract, publishing contract, > Blanket license, Individual license, > 360-degree agreement
PublisherPublisher
ArtistArtist
Indies Record LabelIndies Record LabelMajor Record LabelMajor Record Label
Revenue stream / sharing line
Core music actors network box
Other Actor(s) Other Actor(s)
Collecting SocietyCollecting SocietyContent AggregatorContent Aggregator
MUSIC AND BROADCASTINGMUSIC AND BROADCASTING
Digital TV/Video
18
Typical Direct-To-Fan model
BBC (Youview, iPlayer), Discovery Channel,
TV4 (TV4 Play)
Brand PartnerBrand Partner
CE ProviderCE ProviderMobile Device OEM & OS Provider
Mobile Device OEM & OS Provider
Core broadcasting actors network box
Core broadcasting actors network box
Customer
Customer
Core Actor and Value Networks
Other Actor(s) Other Actor(s)
Revenue stream / sharing line
Core broadcasting actors network box
Content Aggregator / Distributor
Content Aggregator / Distributor
StudioStudio
TV BroadcasterTV Broadcaster
MUSIC AND BROADCASTINGMUSIC AND BROADCASTING 19
Service Model Delivery Model Revenue Model
Personalization Ring tone, RBT Retail, Subscription
Ownership DRM/Free-DRM à-la-carte download
Retail, Subscription, Subsided
AccessOn-demand / Internet radio
streamingSubscription, Subsided
Integrated
Service, Distribution, Revenue models (Music)
Stickiness
RecurUp-selling
Cross-promotional
Telco’s Point of View
“Media IAS Online Music Forecast, 2011-2015: Social Media, Subscriptions and the Cloud” - Gartner
MUSIC AND BROADCASTINGMUSIC AND BROADCASTING 20
Service Model Delivery Model Revenue Model
Ownership EST (Retail)
AccessOn-demand / Live / Catch TV
streamingPPV (Rental), Subscription,
Subsided
Integrated
DRM/Free-DRM à-la-carte download, physical delivery
Service, Distribution, Revenue models (Video)
““Over the Top (OTT) and Through the Middle (TTM) Video - Advertising, Subscription, Rental, and Sale Markets”, ABI Research
The local advertising is very very profitable for TV4, and it's (a) growing business. The only
competitors.. today are only local newspaper, local direct mailings, and so on..
Märta Rydbeck, InterviewedEx-Director of Distribution and Affiliate sales at TV4
How do you manage that on the mobile device distribution? .. It’s not done yet. All channels
(around the world) that have regional versions, they are facing the same problem (measure system).
MUSIC AND BROADCASTINGMUSIC AND BROADCASTING 21
CE ProviderCE ProviderCSPCSP Mobile Device OEM & OS Provider
Mobile Device OEM & OS Provider
Core Music/Broadcasting actors network box
Core Music/Broadcasting actors network box
OTT Retailer and Service ProviderOTT Retailer and Service Provider
Customer
Customer
Typical Point-to-Point Partnership Napster, iTunes, 7Digital, Hulu,
Neflix, Voodler, Microsoft (MSN)… TDC (YouSee Play), SK Telecom
(MelOn), Telefonica (Sonora), Orange (Orange Music), AAPT (AAPT Music), Virgin Media (Virgin Digital), BSkyB (Sky Songs), TeliaSonera (Musikbutiken), …
Sony (Sony music unlimited, PS), Microsoft (Xbox), Nintendo (Wii), Apple (Apple TV), Google (Google TV), …
Nokia (Ovi music store), Samsung (Music Hub), Blackberry (BBM music service), HTC (Mog), …
Platform development and maintenance
Sustainable and updated contents
Marketing and branding
Effort vs.
Impact
Telco vs.
International OTT
We've taken the difficult decision to close Sky Songs. Although we are extremely proud of the service we built and the experience it offers, we just didn't see the consumer demand we'd hoped for.BSkyB’s Spokeman, 2010*
* The Telegraph, “BSkyB to close iTunes rival Sky Songs due to weak demand”
Telecom Actor’s Potential Positions (1)
We reversed the business models.. They (MNOs) were very upset with Euro Sport at that time.. but
the thing was people like the channel.. so the operators came back and said 'how much do you
want’?Märta Rydbeck, InterviewedEx-Director of Distribution and Affiliate sales at TV4
MUSIC AND BROADCASTINGMUSIC AND BROADCASTING 22
Telecom Actor’s Potential Positions (2)
CE ProviderCE Provider
OTT Retailer and Service ProviderOTT Retailer and Service Provider
CSPCSPVehicle ProviderVehicle ProviderMobile Device OEM &
OS Provider Mobile Device OEM &
OS Provider
Customer
Customer
Typical Point-to-Multipoint Partnerships
Spotify (TeliaSonera, Virgin Media, 3UK, KPN, MTV Mobile Europe), Deezer (Orange, Belgacom, Everything Everywhere, T-Mobile), Rhapsody (MetroPCS, Comcast), Wimp (Telenor, Canal Digital, Portugal Telecom), …
Sonos (Rhapsody, Spotify, Deezer, iheartradio, Last.fm, Napster), Sony (Netflix), Samsung (Amazon LoveFilm), Dell (Rhapsody, Napster),
HTC (Mog), … Pandora (Ford, BMW), ..
Core Music/Broadcasting actors network box
Core Music/Broadcasting actors network box
Churn rate
ARPU
Market share
We actually started with our own service, much more like Spotify…But it was not great.. we need to spend all our
communication explaining ‘what the service was’, ‘how it works’, and ‘why you should get it’. (At the end) the perception and value we gained was very low…
Lars Roth, Interviewed Vice President Consumer at TeliaSonera
They (OTT) focus on the quality, and we also (have) tried to build (it through) our brand… but Spotify is extremely
oriented building the brand through the product.. We can't really do that, because our competitor are following us
quite fast.
MUSIC AND BROADCASTINGMUSIC AND BROADCASTING
Spotify
23
The retail model
The Freemium model (paid + subsided subscription )
Revenue generation
Streaming subscriptions
Free-DRM Download purchase
Advertisement
The Recipe
Price tiers & Demand-based pricing
Geographic segmentation
Feature differentiation
Multiple data sources
Dual request mechanism
Peer discovery strategy
Multi-device integration
The IngredientThe idea is not very exclusive.. it's like 20 percent of the idea, 80 percent of the execution. And they’re excellent at the execution…
Lars Roth, Interviewed Vice President Consumer at TeliaSonera
MUSIC AND BROADCASTINGMUSIC AND BROADCASTING
TeliaSonera - Spotify
24
Specialization
Co-opetition
Soft cap with Throttling
post-paid (Triple-Play) and pre-paid
Discount arrangement
Alliance Model
Short -term agreement
“Spotify monthly revenue by service type in Europe, Sept. 2008 – March 2011 ”, Analysis Mason
Values Exchanged
Resource acquisition
Background
Literatures Study
Methodology
The Missing BRIC in the Wall
Looking Forward
Outline
Digital Music and Broadcasting
THE INDONESIAN MARKETTHE INDONESIAN MARKET 26
In the Spotlight
* “Smarter MBB Offering The Consumer View”, Ericsson Consumer Lab, March 2012
Regulatory and Policy
No Entry barrier for cloud services
No QoS policy for broadband
Low TRE Score for mobile and broadband QoS
Customers’ quotes, 2012**
Internet lemot(slow internet connection).
Cuma ada tanda muter-muter aja tuh, proses connect, tapi ngga nyambung (only connecting process but not connected at all)
Demographic and Economics Aspects
GDP and domestic consumption
Middle-class income segment
Young population (57 %, ~27 years)
Bank account penetration (20 %)
THE INDONESIAN MARKETTHE INDONESIAN MARKET 27
Telecom Market
“Fixed broadband penetration in the BRICI countries”, Deloitte
Fixed network
Decreasing Fixed-line penetration
Perceived as expensive
Low Fixed-broadband penetration (1.2 %)
Complex geographical split and terrain
6.9 % PC ownership penetration
The lowest penetration among BRICI countries (per 100 pop)
THE INDONESIAN MARKETTHE INDONESIAN MARKET 28
Telecom Market
Multiple SIM ownership (starter pack, numbering cost, GSM vs. CDMA, number portability)
Third largest mobile phone penetration among BRICI countries (per 100 pop)
Mobile network
Mobile internet: a Leapfrog trend
98 % Pre-paid subscription
146 % High churn rate
“Mobile phone penetration in the BRICI countries ”, Deloitte
High mobile penetration (113 %)
Fast increase smart phone
ARPU
Decreasing trend in total ARPU (26000 IDR)
Increasing contribution trend from data ARPU
THE INDONESIAN MARKETTHE INDONESIAN MARKET 29
Mobile Media Market
Digital Piracy
Twice legal market value (88 %)
Low law enforcement
Personalization services (RBT)
Retail and Subscription revenue model
Point-to-point partnerships
Domination of MNO’s role and appearance
Digital Music
Monthly, weekly, ..
MNO, Mobile device OEM & OS provider, local OTT
Subsided-based revenue (Ads)
Digital TV/Video
Access-based services (Live streaming)
Direct-to-fan model
Local TV Broadcasters
* General Manager of Business development and support system at Axis Telekom IndonesiaYose T. Arizal, Interviewed*
Why RBT? Because it is the most easiest, the internet connection (for most cases) is not really good
…In Indonesia it's hard (to take off those digital services), it (piracy products) is really cheap here. Who will care about piracy acts?
50-50 sharing, cost excluded
THE INDONESIAN MARKETTHE INDONESIAN MARKET
The Indonesian mobile user
30
Low willingness to pay for all the services
Positive attitude to use the services (Video streaming, Music download)
Video and Music streaming turns as the most attractive service, if it is free
Behavioral Intention
WTU
WTP
Highest proportion of rejection to pay for Music streaming (~ 75 %),
followed by Video download (~ 67 %)
Compared with physical products..
Effort & Performance expectancy
“These services are more useful’
“Using these services saves more money”
“Using these services saves more time”
“These services are not complicated to use”
Mobile Network and billing
Mobile devices
“Mobile network is not a barrier to use these services”“I will not have to pay a lot for mobile account billing because of using these services”
“My mobile device supports these services”“I can afford to buy a mobile device that supports
these service”
Facilitating condition
Respondents think the services will be popular among Indonesians
Respondents don’t think they’ll get any positive attention from others because of using the services
The willingness to adopt the services correlates with a perception that the services would be popular among other Indonesians
Social Influence
Background
Literatures Study
Methodology
The Missing BRIC in the Wall
Looking Forward
Outline
Digital Music and Broadcasting
Looking forwardLooking forward 32
Findings Formulation
The players and the games
Actors
Pure players
Diversified players
Vertically-Integrated players
Network
Telco-centric, Device centric..Aggregator centric, Service provider centric .. Important Aspects
Missing prominent international OTT players
Piracy level and law enforcement
Dependency to mobile & MNO’s bargain
Bank account penetration
country’s economy & young population
In Indonesia, mostly the goal is not to decreasing the churn rate, but more into increasing ARPU. The (MNOs') network quality is almost same... we mainly play here with a tariff war…
* General Manager of Business development and support system at Axis Telekom IndonesiaYose T. Arizal, Interviewed*
Looking forwardLooking forward 33
Positioning Options
“Do nothing”
Too low impact
Immature market (WTP, WTU, Piracy)
“Do it alone”
Vertically integrated player
Point-to-point partnership
“Collaborating”
Aggregator centric / service provider centric
Non-equity model
Active role for a better bargain
Integrated billing, product bundling, data delivery optimization, customer data,…
Tack Så Mycket
USER SURVEY DATAUSER SURVEY DATA 35
Behavior Intention - WTU
Behavior Intention - WTP
User Survey
USER SURVEY DATAUSER SURVEY DATA 36
Facilitating Condition – Mobile network and billing
Facilitating Condition – Mobile device
User Survey
USER SURVEY DATAUSER SURVEY DATA 37
Effort and Performance Expectancy
Social Influence
User Survey