Content providers around the world scrambled last week as China Mobile Communications Corp. disclosed plans to strengthen policies for third-party content subscriptions.
The nation’s largest operator unveiled a series of changes including offering one-month free trials, increasing the number of text-message reminders to users and automatically canceling subscriptions of users who fail to respond to confirmation requests. Billing on a per-message basis will be forbidden.
The new policies are expected to be implemented later this month, and fellow carriers China Unicom and China Telecom are expected to follow suit.
The news shook investors, who fear the changes will cripple content providers that have invested heavily in the vast market. Nasdaq-listed firms such as Tom Online, Sina Corp., Linktone Ltd. and Sohu.com Inc. were buffeted by the news, as each company’s stock lost substantial ground following the announcement.
All four firms issued warnings about the changes, with Sina saying the new policies will “have a significant, negative impact on its MVAS (mobile value-added service) revenues going forward.” About half of Sina’s first-quarter revenues were from its MVAS business, the company said, and 73 percent of that sum was generated by China Mobile users.
Monstermob Group plc, which has invested heavily in the Chinese mobile content market in the last year, was among the hardest hit by the news. Shares of the global content provider plunged nearly two-thirds as Monstermob’s value crumbled from more than $150 million to just over $58 million.
The development was the latest in a series of setbacks for Monstermob, a London-based company that is suffering through a nightmarish summer. Chief Executive Officer Martin Higginson was ousted last month after the company lowered forecasts for its U.K. business by $2.8 million, and investors fled as shares fell more than 21 percent on the revised outlook.
The tremors surrounding China Mobile’s move underscore both the vastness and the danger surrounding the country’s wireless content market. Nearly 440 million of China’s 1.3 billion people are mobile users, according to recent figures from market research firm eMarketer, and the country will claim 635 million wireless consumers by 2010. About one-fourth of Chinese mobile users are 20 to 24 years old-the sweet spot for wireless service providers, content companies and handset manufacturers.
For all its promise, though, China is rife with peril for outsiders looking to break in. Content companies must navigate a bureaucratic labyrinth just to come to market and then must serve at the whim of the country’s three government-owned operators.
“It’s important to realize that most or all of the content providers (in China) use the super-aggregator model,” said Dov Cohn, vice president of product marketing for Motricity Inc. “Many of those super-aggregators are in and of themselves partially government owned; they’re part of that government-owned infrastructure. But you have to have a relationship with one of those super-aggregators.”
Motricity dipped its toe into the Chinese market late in 2003, partnering with PalmGear Inc. to market mobile software and content to consumers and business users.
“It is in our strategic plan to get into the Chinese market, but we need to be a little more deliberate in how we go about doing that,” Cohn said. “There are significant cultural differences that require significant investment.”
