An East African Mobile Entertainment Overview: Music Discovery, Nano-economics and Mobile Money

Recently, All Amber invited Afrinnovator down to cover and participate in Mobile Entertainment Africa. Below is a summary of that first talk, which painted a snapshot of some trends and key learnings from the East African mobile entertainment scene.

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Silicon Savannah: the new catchphrase describing the East African and Kenyan region, the innovation and dynamism taking root there and the temperature for creating disruptive companies and sparking growth in the region. Home to the iHub, iceAddis, Hive CoLab, the IDEOS phone and the epicenter of the global Mobile Money revolution. This is East Africa.

If we take a snapshot of each of the main countries there and their respective mobile populations:

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Kenya_Uganda_Tanzania_Rwanda_Mobile_Subscriptions.

Kenya has 26 Million Mobile Subscribers with 63% Mobile Penetration in the country. The corresponding mobile internet users for the East African region are spelt out in Erik Hersman’s slide above. According to the Communications Commission of Kenya (CCK) when they published the last quarter’s rise of 12% to 25M was the highest seen all year. This can be attributed to a number of factors including a hypercompetitive spell between market leader Safaricom and newcomer Bharti airtel. Within the handset manufacturers side, competitively priced handsets from manufacturers and subsidies/partnerships from Mobile Network Operators helped drive volumes.

Which brings us to the posterchild for the revolution so far, at least in Kenya. The ~$100 smartphone (now approx $70)

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The Huawei IDEOS phone. Since the beginning of the year there are estimated +400,000 IDEOS in the market. Thanks to this, Android Marketplace and consumer education around apps and the app economy has grown.

Google Africa responded to this by including Kenya as one of localization nations for the Marketplace with local currency billing albeit no mobile money solution present yet.

The drive for local apps also led them to invest through Google’s Android Developer Challenge (ADC) where semi-finalists all get presence on the Android Marketplace and winners take home $25,000 for their local apps. Winners and more on that here.

“Kenya is an economic powerhouse in East Africa and its mobile telephone market is ranked as one of the most competitive in Africa.”

Eeva Nuutinen, FinPro Project Manager

But more importantly, let’s see how the countries weigh up in the East African community. For most, Kenya remains the epicenter of those looking to penetrate the African market. A great market to observe to put your finger on the pulse of what’s going on in East Africa.

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Hard to look at this region without a reintroduction to mobile money. M-Pesa (M for Mobile and Pesa – “money” in Swahili) is the most popular mobile money transfer platform. According to Central Bank of Kenya it transferred $850M in 2010 with total volume of transactions processed exceeded $9 Billion and recently lauded for soaring past Western Union’s frequency of transactions.

As far as their partnerships with banks, one special mention is M-Kesho a partnership with Equity Bank where together they’ve pioneered the agency banking model with over 30,000 Registered Agents pioneering a new low-cost model of retail banking. One which CEO Dr. James Mwangi describes as “…banking through your shopkeeper.”

All this context is well and good, but in the scheme of how it applies to entertainment, more importantly value added services and the industry we needed to establish that context to dive in.

The Ecosystem.

Ideally what any mobile entertainment owner/operator aims to do is connect two things: Sources of money to uses of money.

Sources:

•Airtime

•MNO Wallets

•Banks

 

Uses:

•Information Services

•Media

A highly cited statistic by JBB Research in one of their Africa reports projected the Kenyan mobile entertainment market to be worth $165M by 2013. The Value Added Services estimates for the year from several industry voices remain slightly skeptical:

Current estimates of Digital Music in Kenya stand at $12M while for the Value added services (VAS) industry is closer to $40M.

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Per capita income aside, if we look at mobile penetration and the masses behind M-Pesa, in this case the bottom of the pyramid, or the next billions (references to this and this) we find that one Kenyan nuance plays a role in the success of the mobile industry in Kenya.

Moving through peri-urban areas of Nairobi or most towns you will find even the smallest SKUs of fast moving consumer goods typically get divided and subdivided at a retail level for consumers who can afford a scoop of cooking fat or half a packet of milk (served and sold in a plastic bag) as opposed to the smaller unit found in a supermarket or main shop. This “nano-economy” of goods and services purchased and exchanged piecemeal speaks to a larger trend. In a country where Note: the highest denomination of mobile phone airtime in the country (on the Safaricom network at least) is Ksh. 10 ( $ 0.10)

Within the entertainment industry in Kenya, you have several products that have tapped into this phenomenon and achieved tremendous success as a result of creative micro-billing.

Malipo Pole Pole – Swahili for “Paying slowly” pioneered by Cellulant to allow people to make micro-payments for music downloads via their airtime. This

Okoa Jahazi – Swahili for “Save my ship” or “Save me” this is an airtime advance of between Ksh. 20, 50 or 100 where Safaricom, the mobile service provider takes 10% of the amount you ask for. The services’ success has seen it piloted in other emerging territories within the Vodafone footprint including South Africa.

Skiza Microbilling Options. Safaricom’s ringback tune service Skiza at their initial launch, charged Ksh. 20 a month for the service of having people who call you hear your favourite song. There wasn’t as much traction as anticipated. Upon changing this to a micro-billing model of Ksh. 5 a week traction was achieved and success followed.

Point: Microbilling for entertainment breaks it down to smaller manageable payments that appeal to the lower levels of the market who still want to consume content just need a more flexible structure to pay for it.

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This is David Mathenge, known to many as Nameless.

As a successful Kenyan Afro-pop performing artist, he derives his value from strong hit singles and follow up appearances, endorsements and his own business ventures funded by his brand. He doesn’t need to release an album because the mechanics of the market don’t support artists through album sales. He released his debut album in 2004 and has survived with this smart tactic since, having delved into film production, music production and diversifying investments within the entertainment industry around his brand.

One commonly quoted statistics that surfaced speaking in online piracy and later piracy in general is that piracy accounts for 95% of music sales. The best an artist is going to do is 5%. The best.

Locally, there’s typically a 2 week window for pirates. This is because once a song’s discovered to be a “hit” it works its way through the system including a trip across the border where it is mass produced and copied to return and flood the grey and black music market across Kenya.

The Music Value Chain is messed up.

The Music Copyright Society of Kenya has lost the trust of the artists and the mandate to prosecute and act on their behalf thanks to wrangles and mismanagement. This leaves Premium Rate Service Providers (PRSPs) to connect directly to artists and/or record labels and make arrangements directly.

You can innovate around this dilemma or you can innovate to solve it.

To solve the dilemma one needs to look at the challenge for artists. The challenge for the artist is the capital to fund the hit single.

One company innovating the landscape of the industry is Cellulant. With their “Studio to Deck” program they’ve used their connections and partnership with financial institutions to connect artists to finance and capital to produce singles with a revenue split and digital music rights to Cellulant to deliver the content through their system.

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Mobile Lotteries: Now you see them, now you don’t.

One of the popular stories of the past year involved a company known as Flint East Africa. They held two lotteries, the first began as “SMS 6868” charged at Ksh. 50 per SMS and later changed with no notice (but substantial branding) to “SMS 6969 charged at Ksh. 69 per SMS.

Their “reward” was over $12M in 3 Months after which the lottery was renewed and they generated large revenues once again in the second “reloaded” round.

Thanks to a lack of firm regulation and a gap in enforcement between the Betting Control and Licensing Board (BCLB) and the Communications Commission of Kenya, Flint East Africa changed the game mechanics from a simple single SMS entry mechanic to a questionnaire format (multiple SMS) that charged for each SMS answer into the game, multiplying revenues at the expense of the end user.

Sources and estimates have ranged from conservative to speculative ranging between Ksh. 30 000,000 to Ksh. 120,000,000 a day for Flint.

With over Ksh. 1.2Bn in 3 months the Kenya Anti Corruption Commission stepped in and began investigations that remain inconclusive into the ownership, structure, charity payment (every lottery must pay 25% of profits be donated to charity, of which this was never fulfilled)

One interesting end result of this was that everyone within Flint’s supply chain began some sort of play into the lottery space. The television station partners began their own SMS lottery games using their media coverage and audiences, notably KTN, NTV and currently Citizen Television.

Mobile network operators who had revenue share agreements with every mobile lottery also launched their own with very similar game mechanics, banking on the trust they have with their audiences. They’ve used similar entry mechanics albeit simpler on the “the more you SMS, the higher your chances of winning” and as to the ethics of this approach, given the circumstances the jury is still out.

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And yet when it comes to the opportunities that mobile entertainment offers, where are the local innovators and those making the most of these gaps in the market? Further up, another bottleneck is lack of capital which we’ve looked at in a number of posts and articles before.

Nokia have really made headway recently with +30 apps have been reportedly been created by Kenyan developers, some exclusively for Nokia’s Ovi Store. Most are locally-focused, though some are promoted across the Ovi Store globally, hence bringing in revenue from markets with operator-billing in place (still no confirmed date for this in Kenya). Nokia is actively promoting these apps throughout traditional media including billboards, radio and below-the-line on behalf of the developers in an attempt to capture the market.

Conferences investing in this gap of success stories of apps and startups over the past few months have included:

Pivot25 Conference: $75,000

IPO48: €40,000

With IPO48’s investments all being in the media and entertainment space, the Estonian/Danish investors recognise the opportunity and are pushing these developers and startups to produce content and working with mobile operators to begin to deliver it to the Kenyan market.

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One of the greatest challenges to mobile entertainment however, is delivery. At a MNO (Mobile Network Operator) level Safaricom is trying to address this. Last year they launched a partnership with Opera Mini, the popular mobile browser. Earlier in 2011 they piloted a white-labelled option of the popular browser “powered by Safaricom Live.” seen above.

This beta version pointed to Safaricom’s existing portfolio of value added services but a source at Safaricom pointed out that this could change to become more of a mix of Safaricom’s portfolio and what’s already popular on the Opera Mini service since this was a pilot phase.

According to Opera Mini’s State of the Mobile Web and their recent survey on Social Networks use on the Opera Mini platform, Facebook accounts for 67% of all pageviews in social media (and since Facebook is the #1 accessed site in Kenya it therefore accounts for 67% of all pageviews on the mobile web)


Opera Mini Social Media Mobile Web Page Views
However, “social” is yet to be integrated as part of the fold in spreading and delivering mobile entertainment content especially popular content such as music.

Which leads to the big opportunity…

 

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Delving into Music Discovery and giving better access to news and information services that can link up social and music discovery could prove to be “right on the money” for the future of content across the continent.

Thank you. Thoughts welcome below in the comments.

Thanks to those at the conference as well for the great feedback and rating on my talk and delivery.

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  • http://nanjira.com Nanjira Sambuli

    Really hoping that PewaHewa,that’s got a headstart on digital music distribution via mobile money rises to the opportunity that lies in mobile entertainment. It’s a great concept, but that alone won’t make it the behemoth of mobile entertainment solution that it could be.

    Insightful read. Good one, Mark.

    • http://www.mark.co.ke/ Mark Kaigwa

      Thanks Nanjira, 

      I agree about PewaHewa. Big opportunity for them in the Kenyan market. They would be the model to emulate and as a venture, there’s all sorts of possible “exits” depending on how you look at it, the most likely one being acquisition. It’s a smart space to make headway in as the likes of Spinlet begin to try make their mark.

      • http://nanjira.com Nanjira Sambuli

        I checked out Spinlet. Good stuff,seems they are taking a Pan-African approach. And whilst that is all good, I most certainly hope that we’ll find a home grown solution to local music distribution first,before embracing what’s out there,simply because the Kenyan music industry situation is so sensitive,so unique! It would be unfortunate for us to not tap into the revenue that can be generated from this industry if we find viabke digital distribution solutions. Can go on and on,anyway,some other time.