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Vietnam: Digital content firms leave market after drop in profit-sharing with mobile networks
The average profit ratio that digital content firms can expect from mobile network operators is 30 percent compared with the average 70 percent rate in the rest of the world.
The average profit ratio that digital content firms can expect from mobile network operators is 30 percent compared with the average 70 percent rate in the rest of the world.
A manager of a content firm said that of the VND136 billion worth of revenue from VAS (value added services), VND100 billion goes to the mobile network operator, while the firm receives VND36 billion. But the real amount the firm can earn is only VND12 billion after paying VND24 billion to partners for content production, media campaigns, technical infrastructure and network maintenance.
“Prior to 2008, we received 50-60 percent of revenue. In 2015, we got 45 percent, and the figure has gradually decreased to 25 percent,” he said.
“We don’t have money for re-investment and development because of this unreasonable profit-sharing scheme,” he added.
Another content producer (CP) said that relations between operators and content producers seem equal, but the latter is always at a disadvantage.
Meanwhile, content can be plagiarized by operators which set the profit-sharing scheme. and CPs have no other choice than to accept the low profit rates.
The leader of a firm which was once a CP and has shifted to providing ICT solutions said the firm once had high expectations about the market and good cooperation with network operators. However, the firm decided to stop relations as the profit was too low.
For many years, CPs have lodged complaints to network operators and the watchdog agency about the profit-sharing scheme. The Authority of Telecommunications under MIC said the scheme is unreasonable and doesn’t encourage CPs to make investments to create high-quality content that satisfies the requirements of millions of clients.
Leaving ‘fertile land’
A report shows that the global mobile VAS market was worth $539.5 billion in 2020 and expected to be $723.4 billion in 2022. With a compound growth rate of 13.3 percent, the market value will reach $1.1 trillion by 2026.
No official prediction about the Vietnamese content service market exists, but experts say this is a ‘fertile land’.
Like other countries, revenue from traditional services and SMS has been decreasing, so telecommunication providers have to develop other services to maintain business prospects, and digital services have become the target of telecom carriers. However, this is at a time when content firms are leaving the market.
Nguyen Duy Tuan, chair of VAS Business Club, said that before the mushrooming of digital services, profits were very good and these were the golden days for both network operators and CPs. Later, network operators have had lower profits shared with CPs. As a result, many CPs cannot survive and many of them have shifted to other businesses.
Meanwhile, the CPs which are still in the market are not in good shape. They have had to cut their workforce and operation costs because of modest profits. Some bring foreign content to Vietnam and cooperate with network operators to distribute the content.
With modest profits of 30 percent, no CP can exist and create high-quality content.
Content development firms previously could spend their own money to attract clients. But since 2018, network operators have stopped communications via WAP channel, so it is difficult for CPs to run media campaigns to attract clients. As a result, VAS has shrunk with revenue decreasing by 80-90 percent.
“Some content firms have seen revenue drop from VND70-80 billion a month five years ago to VND1.5-2 billion now. The number of CPs that exist is very modest,” he said.
Nguyen Manh Ha, former CEO of VMG Media and Chair of CP Club, said there were up to 150 CPs in the club in the past, but many of them have shifted to other businesses, including his own.
“Though the market potential is great, we decided to leave because we cannot see opportunities for CPs. It is the model of cooperation between CP and network operators which led to the decision,” he said
CPs mostly offers services that bring profit within six months. If the time is longer and the services cannot provide profit, they will not be able to continue.
Some CPs have shifted to develop apps in Google and Apple stores, while others have succeeded in providing online games on the apps.
A CP pointed out that the unreasonable profit-sharing scheme offers little profit to all parties. Because of the modest profit, CPs cannot make significant investments to make high-quality content, while mobile network operators lack content to provide to customers, especially when they deploy 4G/5G services.
Thai Khang
Source: https://vietnamnet.vn/en/digital-content-firms-leave%C2%A0-market-after-drop-in-profit-sharing-with-mobile-networks-2005949.html