Keeping billing processes in tune

According to a recent report by UK research firm Understanding and Solutions, music-based mobile services account for around 14 percent of the global music retail trade and will rise to an estimated 30 percent by 2011.


Today, both the telecom industry and the music industry recognize the huge potential of mobile distribution of music. Record companies, whose revenues have been falling for the past five years due to piracy and illegal file-sharing, are keen to promote legitimate digital music services and partner with mobile network operators. Their huge subscriber bases and ability to market directly to consumers makes mobile carriers highly important distribution partners for music labels and music content aggregators.


At the same time, as voice services are rapidly becoming commoditized, mobile operators want to acquire compelling content to offer the value-added services, that, as little as two years ago, were viewed merely as marketing or customer retention tools. Now, they are considered by many operators as critical revenue generators.


It appears that for the foreseeable future, both industries shall remain strategic partners. But for communication providers, music-based content services still present some significant challenges, particularly for the revenue management and billing processes.


Acquiring music content is not necessarily a simple linear transaction. Music content distributed over mobile networks requires the licensing of multiple rights, including the right to copy and transmit both the musical composition and the sound recording. Depending on the country, an operator may have to work with multiple partners to acquire music content, each requiring reporting settlements and payment.


In many countries, especially in Europe, acquiring music content requires a license from a collection society. In the UK, this is MCPS/PRS, which represents the vast majority of music publishers and composers worldwide and issues licenses when their music is recorded or publicly performed. Collections societies in other countries include GEMA in Germany and SACEM/SDRM in France.


In the UK, MCPS/PRS offers a standard licensing scheme to communication providers that they must acquire and comply with should they wish to distribute music content over their networks.


Regarding the recording of the music download, a standard license is based on a revenue-share arrangement, but also subject to a minimum royalty per download. A share of any sponsorship revenue related to the music service is also payable.


A percentage of service revenues is likewise payable in respect of the performance - or transmission across the networks - of the music content. These licenses are required in addition to any payments to a record company or music provider.


The communication provider's revenue management systems and processes must, therefore, have the adaptability to support these potentially complex non-negotiable partner license agreements, whether they are based on revenue share, rate per use or combinations of these payment models and associated reporting requirements.


Mobile operators may also want to package music content with telecom services, such as voice or SMS bundles or with other music-related digital content, to address target-specific customer segments. Revenue management systems must support such bundling while complying with the business terms of the operator's partner agreements.


Music is an example of the many new services being introduced that involves multiple parties in the value chain. To promote mobile music services, real-time charging and balance management becomes increasingly important to the revenue management process.


With the diversification of services, many subscribers are still unfamiliar with new content-based services and require reassurance over costs. Revenue management systems should support real-time charging and balance management to enable real-time advice-of-charge messages, ensuring that subscribers are comfortable in using the service.


At the same time, they must allow the communications provider to ensure the credit-worthiness of the subscriber with real-time balance authorization and reservation capabilities. Bad debt resulting from high levels of content consumption, including music, carries the added exposure to third-party content license costs, in addition to lost service revenue.


Other challenges include the complex usage reporting requirements by collection societies and record companies and the increasing DRM and piracy issues. The steps required to meet these challenges are part of the more general, but necessary, process to ensure that revenue management systems become more flexible and responsive to tomorrow's dynamic markets.