The PRS industry is facing a challenging time as the business undergoes perhaps its most radical evolution in its history with old services collapsing and new ones proving harder that expected to exploit, according to the 2015 PRS Annual Market Report from Phonepay Plus.
According to the study commissioned by the regulator and carried out by Mobile Squared, the PRS market has declined by 3.2% in 2014 to be worth just £686.6million annually. But while the many of the mainstays of the sector are plateauing – at best – some parts of the industry are growing.
Mobile represented the two payment mechanics that experienced growth in 2014, with operator billing (including PayforIt) up 86% on 2013 revenues, and mobile (including voice short codes) increasing 5%. Operator billing (including PayforIt) has shown meaningful growth as a nascent platform, yet still only accounted for 10% of total PRS revenues generated in 2014. Mobile, consisting of PSMS, charitable donations and voice short codes, accounted for 50% of PRS revenues in 2014.
Add operator billing to the mobile category and it reveals that mobile has become the dominant payment channel for PRS, accounting for 60% of total PRS revenues in 2014, or £411.9 million (excluding VAT).
Voice-based PRS have been hit hardest with the 2013-2014 revenue decline, with voice PRS/09 (including red button) falling 26%, directory enquiries and Voice 087, both dropped 17%. Collectively, voice-based services experienced the greatest decline in revenues between 2013 and 2014, down 20% from £344.6 million to £274.7 million (both excluding VAT).
Mobile’s dominance as a payment type for premium rate services – including PSMS, charitable donations, voice short codes, and operator billing – will increase from 2014 to 2015 and account for 66% of total PRS revenues. In 2015, mobile categorised services are expected to generate revenues of £419.3 million (excluding VAT).
Overall, mobile-based payments (including operator billing) are projected to increase 2% between 2014 and 2015, while voice-based payments are expected to fall 21%.
Broken down by payment channel, voice PRS/09 will experience the largest decline in revenues (30%), while directory enquiries is projected to drop 19%.
If the PRS industry is to stage any kind of recovery in the coming years, it will do so on its triumvirate of growing services of charitable donations, games and gambling, otherwise known as the new “3Gs” of “giving, gaming and gambling”, stresses the report.
Charitable donations represented the standout success story of 2014 for PRS, contributing £115 million to the total market, with the total value of donations doubling over a two-year period. Giving, gambling and gaming (including games or apps charged to bill, and social gaming) combined, accounted for 40% of the total PRS market in the UK in 2014.
Across the service taxonomy, 14 of the 18 services are expected to experience a decline in revenues in 2015. Voice-based information services is projected to experience the biggest year-on-year decline, 32%, followed by tarot and astrology (22%) and low-cost international or reverse-charge calling (20%).
Only the “3 Gs” of giving, gaming and gambling are expected to experience an increase in revenues in 2015, and they will account for 49% of the PRS market. Revenues for charitable donations and for gambling are predicted to each increase 8%, with gaming (including games or apps charged to bill and social gaming) revenues set to jump 11%.
While the 3 Gs represent the greatest service-type opportunity within the PRS industry, operator billing presents a nation-wide opportunity for companies (Level 1s) operating in the sector capable of processing payments. There are 10.8 million PRS users (56%) that would be interested in using their mobile device to pay for “other transactions” based on operator billing.
For operator billing to succeed, a standardised mobile operator approach is imperative, but aligned with this is the need for a united industry promoting the simplicity and consumer demand for operator billing. The industry believes the £500 million revenues generated via operator billing in 2019 is more than achievable.
OTHER KEY HIGHLIGHTS INCLUDE:
• The UK was estimated to have had 19.3 million PRS users as of the start of 20142, which accounted for 35% of the total population3 aged 11 and over.
• It is estimated that 087 customer services remained the most popular service among PRS users (with 8.8 million people using the service at least once in 2014), followed by broadcaster interaction (6.6 million people), charity donations (5.8 million people) and games or apps (4.8 million people). The average PRS category at the start of 2015 had 3.1 million users.
• ARPU for PRS was £35.60 (excl VAT) in 2014. This reveals that the average monthly spend by a PRS user was £2.97 (excl VAT).
• By the start of January 2015, there were an estimated 2.8 million people fewer using premium-rate services than January 2014, with an average departure rate of 233,000 per month.
• Estimates of the number of PRS users exiting the industry per month indicate that 108,000 (46%) of those users will leave as a direct consequence of perceived non-compliant activity, while approximately 125,000 (54%) will leave because of a cost, service relevance and alternative content-related issue.
CHECK OUT THE FULL REPORT HERE