Broadband, Smart Phones Drive Torrid Growth for Content

While banks, card networks, and wireless carriers jockey for position in the nascent market for mobile payments at the point of sale, the digital-content business is quickly establishing itself as a fast-growing mobile-payments market. That’s thanks to the rapid spread of mobile broadband networks and smart phones, a new report says.

U.S. sales of games, music, and videos via handsets will reach $1.54 billion this year, up 34% from $1.15 billion in 2009, according to the report, released on Tuesday by eMarketer Inc., New York. That torrid growth rate should continue for some time. Overall, the research firm expects U.S. mobile-content sales to rise at an average annual rate of almost 20%, to $3.53 billion in 2014.

The biggest market is that for games, which accounted for $627.7 million in revenue last year. These sales will reach $849 million in 2010, up 35%, and will grow another 21% in 2011, to $1.03 billion. Digital-games sales through mobile phones will surpass $1.5 billion in 2014, eMarketer predicts. Videos, which generated $436 million in sales last year, will total $548.3 million in 2010, for a 26% jump. They will reach $719.2 million next year, up 31%, and $1.34 billion in 2014.

Music is the smallest but fastest-growing of the three categories measured by eMarketer. The firm sees the growth as fueled by a movement by users away from ring tones and toward a willingness to pay for full-length songs, which in turn are made possible by the spread of mobile broadband. Mobile-music listeners totaled 16.2 million in 2009, a number that will climb to 21.7 million this year and 52.2 million, or nearly one-fifth of all handset users, by 2014. Music sales on mobile devices will come to $143.2 million this year, up fully 75% from 2009’s $82 million, and will reach $676.5 million four years from now.

Aside from the wider availability of mobile broadband networks, eMarketer attributes the growth of digital content sales on handsets to the rising popularity of smart phones and tablet-type devices like Apple Inc.’s iPad. The combination of broadband and more powerful devices with better and bigger screens makes the consumption of digital content more satisfying for users, the firm says.

The eMarketer report echoes previous predictions for mobile commerce in digital products. In March, for example, Issaquah, Wash.-based Chetan Sharma Consulting forecast that mobile-application downloads worldwide would reach almost 50 billion in 2012, up seven-fold from 7 billion last year.

The mobile-commerce market for digital goods stands in stark contrast to that for sales in physical stores, where efforts to bring contactless payments on handsets to the point of sale remain in the pilot stage virtually worldwide. Recently, news reports indicated AT&T Inc. and Verizon Wireless are leading a carrier-based venture that will pilot near-field communication payments next year (Digital Transactions News, Aug. 3). And last week, Bank of America Corp. said it will launch in September a pilot for NFC in New York City (Digital Transactions News, Aug. 23).