M-Commerce Execs Further Dim Prospects for Premium SMS

In another indication that the days may be numbered for premium short-message service (SMS) as the dominant mobile-commerce payment channel, some 65% of executives in the entertainment, media, mobile, and broadband industries surveyed at a recent conference agreed that payments handled as direct charges by operators' billing systems will be the chief payment method in five years, with just 7% indicating premium SMS would hold that distinction in 2011. Twenty-one percent said credit cards would be the primary payment mode, while 6% indicated debit cards. Executives were canvassed by Valista Ltd., a provider of software for m-commerce payments, late in October at Digital Hollywood Fall, a trade show in Santa Monica, Calif. The survey results mirror a similar survey Valista conducted in July at another trade conference (Digital Transactions News, July 19). In this survey, only 6% said SMS short codes would support most payments in five years, while 44% said direct-to-bill would be the dominant method. Though a nascent payment technique in the U.S., premium SMS is widely used in Europe for payment of mobile-content downloads. Now, though, it is increasingly seen by some processors as inadequate to the growing needs of mobile commerce, chiefly because of its susceptibility to fraud. Cards and direct-to-bill methods, on the other hand, are seen by some observers as providing more robust authentication and authorization technology for a market that is carrying more sophisticated, and hence more expensive, digital content. Indeed, when asked what type of content will be most popular in three years, 49% of the Digital Hollywood attendees indicated TV clips and movies. Twenty-eight percent said music, with news, sports, traffic, and other information services being cited by 17%. Just under 1.5% indicated ring tones, now wildly popular, would be most in demand by 2009. But if direct charges to subscribers bills becomes the dominant payment method, operators may reap lower fees for providing payment and other services to content sellers. While 68% of the attendees said operators now receive from 40% to 50% of content sales, just under 16% indicated operators would get this much in three years. By contrast, three quarters of respondents said operator fees will fall into the 10%-to-30% range by 2009. With respect to how digital content will be bought via m-commerce, 37% said weekly or monthly subscriptions will be most likely in three to five years, followed closely by spontaneous purchases at 35%.