The Brazilian market is unique in its taxation schemes, content consumption, and especially in licensing songs for the mobile market. For historical reasons all major publishers are represented by two main entities that regulate the market, dictating fixing fees per song, minimum values per download as well as the percentage of revenue they get per download.
Nothing unique about that, except for the fact that these values are disproportionate to the local purchasing power, values practiced in the rest of the world as well as the revenue share structure that operators offer to content aggregators and integrators.
Firstly, the fixing fees for songs in general run around USD 10, while in Brazil that value is around USD 178 making it prohibitive to acquire extensive music catalogues.
Secondly, the percentage charged per download (10%) is on top of the sales price to the user, not considering the taxes that are retained by the operator. This tax is on average 30% depending on the region the product is sold and is a telecom tax, not a service tax, which many debate would be the correct tax to apply (14%). If these changes came into effect, profit margins would be considerably higher.
Finally, content integrators are only now initiating conversations about creating their own organization to deal with the issues mentioned above. Without this unified force, the profit margins will be squeezed more each year since the licensing organizations raise their fixing fees and minimum value per download annually. Last year (2004) the fixing fee charged was USD 158 and the minimum value per download was USD 0,10. This year both these prices went up by 12,5%, in line with local inflation. The problem is that the price for the end user stayed the same without any forecast to rise.
On the other hand, Brazil is unique in the sense that it consumes more local content than foreign content. This means that the market has an enormous content production machine in all areas – music, print, radio, and television – with large media groups dominating the market.
Operators are building their own integrator/aggregator subsidiaries to provide the service to these media groups to convert the content into the appropriate mobile formats. This movement is a logical step forward in the VAS market since it eliminates a middle man in the content acquisition process and is only possible because the mobile content formats are moving more towards open and Internet standards that do not require extensive know-how or complex tools to be prepared.
With this centralization of the content market, we can conclude that ‘content’ is king since it is what the end user wants. The format, delivery mechanism, technology used or content provider brand becomes irrelevant to the end user. They want to be able to get the content they want at any time, anywhere, and at a reasonable price.
In the Brazilian market this movement has already started.