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    Games and entertainment drive record DCB growth in UK PRS market as charity donations fall away

    UK consumers spent £593.7m on phone-paid services in 2022-2023, up a mere 0.9% on the previous year, but driven by a move away from charity donations towards a surge in spending on DCB for games, the latest data on the UK PRS market shows.

    According to the study by Analysis Mason for the Phone-Paid Services Authority (PSA) – the industry’s regulator in the UK – Revenue generated from operator billing increased significantly to £294.3 million (+12.8% year-on-year), outweighing declines in revenue across all other channels including premium SMS, voice 087, voice 09, voice 118 and voice short codes. Charity donations also fell by £14.1 million (–28.1% year-on-year) to £35.9 million in 2022–2023.

    According to the report, the growth in spending on operator billing was driven by higher spending on games downloaded from app stores and, more broadly, by the increased popularity of operator billing as a payment mechanism for games and entertainment services.

    The addressable market for app stores through operator billing grew inorganically as a result of an agreement between Vodafone and Apple (completed in November 2022) and also organically as a result of increasing consumer awareness in 2022–2023 about the partnership between Three and Apple (established in 2021–2022).

    The average spending on app stores also increased after Vodafone lifted spending limits on Google Play purchases. There were also new partnerships between operators and video streaming providers.

    Spending via premium SMS declined because of lower consumer participation in TV and radio broadcast competitions using premium SMS as a payment mechanism. Other service categories, including legacy and subscription-based services, continued to decline. Spending via premium SMS also declined following a 2- week pause in broadcast competitions following the death of the Queen. In 2022–2023, premium SMS services also faced greater competition from online platforms hosted by existing industry players (which have started to migrate users to their own online platforms because consumers are more likely to use alternative digital payment methods) and from new entrants in the competitions market (which operate exclusively online and do not offer phone-paid payment mechanisms at all).

    Spending on voice-based services using the 09, 087 and 118 numbering range and voice short codes declined as consumers continued to migrate to free or online alternatives. Spending on information, connection and/or signposting services (ICSS) services over the voice 09 number range generated more revenue than expected during 2021–2022, and has declined only marginally this year, which has led to a slower decline in spending on voice 09 services overall. Voice short code services are being phased out by some industry players.

    Charity donations declined as a result of cost-of-living pressures and decreasing viewership of telethon events. These two factors explain why spending on telethons run during 2022–2023 was lower than in previous years. For example, Red Nose Day 2023 raised £31.9 million across all payment mechanisms (including both phone-paid methods and other channels) compared to £42.8 million in 2022. In addition, Stand Up to Cancer did not run in 2022–2023 because it returned to its bi-annual format. Non-telethon charity donations also fell, largely due to cost-of-living pressures.

    What are consumers spending on?

    Consumer spending on games increased by £24.7 million year-on-year. This significant increase is attributed to higher app store payments which were made possible following partnerships between Apple and mobile network operators (Apple’s partnership with Vodafone was forged this year and Apple previously established a partnership with Three, but take-up of its offering increased significantly in 2022– 2023). Vodafone also removed its spending limitations on Google Play, which increased average spend per user. Finally, growth has also been driven by higher numbers of purchases for physical gaming consoles, such as on the Microsoft Xbox and Sony PlayStation stores.

    Spending on entertainment increased by £5.0 million and lifestyle services payments increased by £3.0 million. These increases are due to higher spending via operator billing, boosted by the agreements between Apple and operators, but also because the quality of content and the number of subscriptions increased. In particular, new entertainment service providers (for example, Paramount+) in the phone-paid service market as well as the improved quality of merchants’ lifestyle content subscriptions are key drivers of the success of these respective services.

    Spending on TV and radio engagement fell by £2.7 million year-on-year, mostly due to consumers reducing their spend on TV and radio broadcast competitions via phone-paid services. There was a two- week break in broadcast competitions for the period of national mourning follow the death of the Queen, and consumers have also begun favouring online-based competitions that offer bigger prizes (for example, the opportunity to win a house via Omaze), which do not use phone-paid service payment channels. Broadcasters have also encouraged audiences to migrate to their own online platforms, where audiences are less likely to pay via phone-paid services. Other reasons for this decline, after years of strong growth, involve a general reduction in TV viewership as consumer habits increasingly shift towards the use of online streaming platforms via smartphones and other portable devices.

    User spending on most other services, including assistance services, charity donations and personal and relationship services, declined. The main reasons for this include the increasing prevalence and use of online platforms, the growing popularity of digital payment mechanisms and the declining use of legacy services. Betting, gambling and lotteries was the only other service category in which spending did not decline, remaining flat (+£0.1 million), with a stable user base but there is limited appetite within the industry to promote or grow these services.

    Commenting on the findings, Joanna Cox, general manager at industry body aimm, says: “The Association for Interactive Media and Micropayments welcomes the news of a year-on-year increase in direct carrier billing. This is a testament to members in the value chain who have worked tirelessly to ensure operational excellence which has translated into increasing consumer trust and growing engagement.

    “The cost of living crisis has created a very challenging commercial environment, but years of robust, best practice with the consumer at the heart of every purchasing journey means that this industry remains well placed to be able to offer high quality services using simple and secure methods of payment.”

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