In a tough move, that could easily set an example for the rest of the world, Australian regulators are now requiring mobile content providers to be upfront about the true cost of their services.  I have been a strong critic of the subscription model for a long time, and have kept claiming it is a way to screw consumers and cover for an industry business model for mobile content that does not work.  The numbers from Australia proves just that: An astonishing 90% said they did not realize they signed up for a subscription when they bought content in response to an ad.  Moreover, 55% did not know how to get out of the subsription – this despite the market here have had the option of sending “stop” in an SMS as a required standard for quite some time.

This is really just the case of the regulators beating the consumers to the punch. You can only fool some of the people some of the time.  The business of providing mobile content simply does not have the economics to support a pay-per-download model because the cost of advertising and cost of billing is too high.  The general rule of thumb is that you spend about $15-20 to acquire a subscriber, who then stays subscribed for about 12 weeks.  If you then charge say $5/week, and the mobile operator takes their usual 50% cut for doing the billing, you are left with 5*12*0.50 = $30 in revenue and net about 15 per customer – this is of course before paying content providers.  If you happen to sell games for top publishers like EA, and the user downloads their industry average of 3 games/month, you are likely only left with a margin of a few cents.  Of course, that is why the content providers try to push lame services like love calculators or “magic x-ray” and similar, as they can make these themselves quite cheaply (and people do seem to love them).

I do support the regulatory move made by the government.  However, the mobile operators need to wake up!  The business models for mobile content haven been killing the industry since its inception – while the solution has been obvious for years.  Luckily Vodafone has realized this, and pehaps will send a signal to the rest of the industry.  But when something I wrote about in 2003 is still an issue, then you really have to wonder if we will not see a severe down turn in premium mobile content before we see it going back on its feet again once it is supported with sustainable business models.

Lastly, the regulations will hopefully also weed out the sharks in the industry.  There are too many shady providers who know exactly what they are doing to the consumers, but are there to rip them off as long as they can. The “good guys” stand to benefit from this – and can possibly best be evidenced by the recent jump in share price of the largest incumbent in Australia, Mobile Active.