PSA Annual Market Review 2016/17

Here’s a snapshot of the findings:

Market outperforms expectation again
First and foremost, market revenues are up 4.5%, bucking recent declines and beating last year’s prediction of a 1.2% fall in revenues. Operator billing, again, drove market growth, jumping 31%, with mobile (Voice Short Codes and PSMS) up 11% as well. Unsurprisingly, mobile-based services dominate, generating an estimated 75% of market revenues.

Charity text donations continue to be the largest market sector by some distance, followed by non-broadcast competitions, games on social networks, directory enquiries and betting. Consumer satisfaction across the board is up, by 6%. Charity, music and video content and broadcast-related services continue to stand out in terms of good consumer experiences.

So far, so good…
However, it seems this jump in consumer spend in FY16-17 is unlikely to be matched in FY17-18. To a large extent, recent growth reflects online competition revenue, which grew substantially, albeit with low levels of consumer satisfaction and trust. Changes to PayforIt rules and the introduction of our special conditions on online adult and online competition services have already had an impact on conversions and are expected to further improve consumer understanding.

Voice-based services continue to decline. Directory enquiry revenues dropped a further 21% in FY16-17 as consumers continue to use free alternatives. Other voice services declined by 10 to 13%, with declines expected again this year.

Unlike consumer satisfaction, trust is an issue that may be worsening. 32% of users (up from 29% last year) claimed that their trust had been compromised when using a service. This is a critical issue for industry. Many consumers who feel they have been treated unfairly, simply stop using phone-paid services altogether, which is not good for the market as a whole.

FY17-18 and beyond
Mobilesquared is expecting the market to contract by 6.1% in FY17-18 as the growth built on online competition revenues subsides. Looking ahead, PSD2 comes into effect in January 2018 and has the potential to open up the market to a variety of new services. It seems consumers are keen to take advantage.

Among existing users of phone-paid services, Mobilesquared estimate that roughly half might pay for things like tickets or stamps via their phone bill – that’s approaching 12 million UK consumers. And that’s before you consider current non-users of services. There appears to be a great chance here for industry to work together in realising this opportunity. 

As a regulator, we’ll be working with industry to ensure these services are launched in a safe and sustainable manner.

Thanks again to Mobilesquared for conducting the research – another excellent report. We look forward to working with stakeholders to respond to the findings and further the interests of consumers through encouraging competition, innovation and growth in the market.

Read the full Annual Market Review 2016/17.