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Mobile to Adult ~
Personal Services
Third Edition

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White Paper – Mobile to Adult – Personal Services ~ Third Edition

Mobile to Adult ~
Personal Services ~
Third Edition

Introduction
Erotic adult entertainment is big business. What’s more the underlying drivers mean that the
demand is pretty constant. There will always be elements of the population requiring adult
entertainment, and this does not vary much by season, or external event – for example in the
way that mobile sports gambling is stimulated by large sporting events.

In its broadest sense erotic adult entertainment covers everything from erotic magazines,
DVDs and movies, telephone sex lines, and Internet sites to lap dancing clubs. The delivery
media and channels for adult entertainment have progressed in much the same way as for
other forms of entertainment, as product creation and delivery technology has advanced. Now
we have a new delivery channel for entertainment services – the mobile phone, and the adult
entertainment industry is beginning to embrace this medium in the same way as the electronic
games industry and the music industry.

What has particularly differentiated the erotic adult entertainment industry from other forms
of entertainment is that it is a regulation constrained industry. In this respect it is very similar
to the gambling industry. Whilst people may object to particular genres of music, or dramatic
art, exposure to “unpleasant” music is not protected by government legislation, unless of
course a particular performance falls under local obscenity or public nuisance laws. Adult
entertainment on the other hand is heavily regulated in most markets largely to protect
children from seeing unsuitable adult material. Working within these regulations and general
public sensibilities places an operational overhead on the industry, particularly for international
operations. The mobile channel adds an interesting new dimension to adult entertainment,
with its “anytime/anywhere” availability. This has provided opportunities and challenges for
market players and regulators the world over.

Types of Adult Content for Mobiles

Much of the mobile content that is currently offered to subscribers can be modified in order
to make it adult in nature. This has led to the emergence of a variety of forms of adult content

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that include SMS-based services such as jokes, dating and chatting, video streaming services,
video chatting, video clips, pictures, moantones and games.

Text-based Adult Services

SMS chatting is a prominent adult service available across the world and two-way chatting has
added to its lure. In SMS chatting, subscribers can chat with models and celebrities by sending
a premium rate SMS to them. This is the least technically demanding of adult applications and
can be accessed from most 2G phones.

Images

Adult content packages offered by mobile operators generally includes animated or plain
images of porn stars and celebrities. These images are offered on themes such as tropical,
retro, sports, lesbians, gays, costumes and fetish. Gay and lesbian themes have experienced a
rise in demand over the past two years. The images can be billed on a download or
subscription basis depending on the business model adopted by the network operator or the
content provider. Images can also be part of other services such as MMS chat.

Moantones

Moantones are the erotic manifestations of ringtones involving screams, moans and groans of
models. Whilst the number of service providers offering this type of ringtone are increasing, it
is small business and Juniper Research considers that this is very much a niche market, and will
remain so.

Erotic Games

The games offered for adult services are generally derived from the already popular
conventional games. For example, Private has modified the prominent mobile game Snake to
an adult game – Sexy Snake, where the graphics incorporate erotic content. Among various
adult games, puzzle games have gained prominence due to the ease of developing these games.
These erotic games sometimes involve a lot of interactive material. Strip poker has remained
an all time favourite of online adult game makers and its mobile versions are also likely to be
popular.

Video-Based Services

Videos are increasing their share in the mobile adult services portfolio. The various video-
based services offered on mobiles include streaming videos, video/movie clips, video chatting.
Also included in this category are mobile TV services.

Video based services have been given a tremendous boost by the launch of 3G services. In he
UK 3G operator “3” offers a variety of video based services through its “Top Shelf” section on
its Planet Three multimedia portal.

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Industry Development
The adult entertainment industry as a whole is highly fragmented, and this has become more
so since the Internet revolution. Participants range from well established global adult
entertainment brands to “one man and a webcam” operations. As the newest delivery channel
for adult entertainment, the mobile sector is in the early stages of market development.

As with most developing markets for mobile content, pioneers in the mobile adult content
industry tended to be small companies specializing in the technology and/or delivery medium
and with a relatively complex delivery chain, many alliances have been formed to deliver end
product to the customer. However, the big global adult content brands are now actively
exploiting the mobile channel and many of the pioneering companies of a few years ago, are
now sizeable and successful businesses in their own right. Some are attracting venture capital
interest, a sure sign that it is not just the early enthusiasts that see a market opportunity. With
large brand and investor interest in the industry, further consolidation is inevitable as industry
participants seek to secure better access to content, distribution channels, technology and
industry “know how”.

In analysing the market for adult erotic entertainment services Juniper Research adopts a
definition of adult erotic entertainment that includes any content that is for sexual fun and
titilation. This includes softer, “glamour” content, that would not have restricted access in
many countries, as well as hard core adult material that is offered behind an 18 (21 in some
countries) barrier. Taking this wide definition of the mobile adult content market, Juniper
Research estimates that the global market will reach $3.3 billion by 2011.

Market Drivers and Constraints

There are many drivers to the development of the mobile adult content market, not the least
the basic human desire for erotic services and the anywhere/anytime availability of the mobile
phone. However there are also considerable hurdles to be overcome if the market is to
develop to its full potential. The principal drivers and inhibitors of the mobile adult content
market are summarised in Figure 1.

Figure 1 – Mobile Adult & Drivers and Constraints

Drivers Constraints
• Human nature • Public resistance
• Return on • Operator reluctance
investment • Lack of age
• Anywhere, anytime verification
entertainment Mobile • Regulation
• Privacy Adult • Localisation and
• High device optimisation
penetration Content
Market • Networks
• 3G technology • Handsets
• Target market • Marketing
match
• Spam
• Age verification
• Quality of product
• Trusted Brands
• D2C distribution
Source: Juniper Research

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Mobile Adult Content Market Drivers

Many of the market drivers that have favoured the growth of adult content over the fixed
Internet also apply to accessing adult content over the mobile channel. In addition, the mobile
platform has some inherent advantages, such as anytime/anywhere availability and a larger
potential market as compared to the fixed Internet in most countries. The principle drivers for
the development of the mobile adult content market are discussed below.

Human Nature

Sex and titillation sells – particularly to young men. This is not a new phenomenon and has
driven the sale of adult and glamour content through all its media channels through the ages.
Nor is it a phenomenon that is likely to change, barring some state imposed dampening of
libidos, or an environmental catastrophe having the same effect. Opinions differ on whether
the same drivers exist for adult and “hunk” content aimed at female users. Certainly there is
an increasing demand for adult content aimed at female users in some cultures and an
increasing amount of content aimed at female users is being offered.

Return on Investment

Not only does sex sell, but there is a lot of money to be made from it. Experience in the
market to date has shown that consumers will pay premium prices for high quality adult
content. From Juniper’s market forecasts it is also clear that even with relatively conservative
estimates of market penetration, substantial market revenues can be generated. Even at the
high quality end of the market, high prices relative to other mobile entertainment content and
substantial demand will mean good returns on investment for all players in the delivery chain,
including network operators.

Convenience

The most convincing and inherent advantage of the mobile platform is in the fact that it allows
access to value added data services anywhere and anytime. A mobile user has immediate
access to his/her mobile for most part of the day. This opens up a new access channel for
entertainment services, adult services included.

As with many forms of mobile entertainment, there is an emerging “casual” user base. This
sector is looking for “dead time fillers” ie easily accessible entertainment to wind down
wherever you are, or to fill time while waiting for something else to happen – at an airport, on
a train etc. The mobile phone is the ideal medium to deliver this type of entertainment.
Juniper Research anticipates that this will be exactly the same in the adult sector, and
particularly with soft video and erotic games products – pay $5 for a bit of fun whilst waiting
for your luggage to arrive at Terminal 3 (second thoughts better make that $20).

Privacy

Because of its anywhere/anytime availability the mobile phone affords the user of mobile adult
services the opportunity for privacy, which many users may find attractive. As with the fixed
Internet, the mobile Internet allows users to purchase product without having to take the
product from the top shelf of a public retail outlet, or enter an establishment that they may
not wish to be seen entering. This is particularly true for many users trying services for the
first time.

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High Device Penetration and Target Market Match

The sheer volume of mobile users remains a market driver. Mobile penetration in most
countries is now greater than fixed line access and the same for mobile Internet and fixed
Internet access. The challenge is to convert those overall penetration levels into active users
of mobile data services and mobile entertainment services in particular. High quality video and
TV services will require 3G networks, but a large range of text, MMS and graphics adult
services are available to 2G and 2.5G users.

3G Technology

There is little doubt that the user experience of mobile adult entertainment is enhanced by the
high quality video capability embodied in 3G technology. This has advantages on two fronts:
first the quality of moving image reproduction for video and mobile TV material, and secondly
the speed of download for video content. 3G network coverage is becoming widespread in
Europe, North America and some Asia countries, but still has a long way to go in global terms.
This can therefore be seen as both a driver and constraint, depending on the market that you
are in. Overall, Juniper Research sees the roll out of 3G technology as a major boost to mobile
adult content and to video based services in particular.

Age Verification

There is much concern globally about children gaining access to pornographic material over
their mobiles handsets. The introduction of age verification procedures and systems could be
seen by many as a restriction on market development. However, many in the industry, see it
as a very positive move and Juniper Research agrees with this view. Robust age verification
procedures enable the legitimate mobile adult content industry to develop within a framework
of trust, from consumer, through to operator and content supplier. However, the absence of
content filtering and age verification solutions in operator networks is a definite constraint.

Branding

Mainstream adult service users are more likely to trust adult services offered from a
recognised brand. The adult content industry has a number of well known and respected
global brands, such as Playboy, Private, Penthouse and Hustler, as well as some up and coming
local brands, which help to establish credibility and user confidence in product quality. This is
important in an industry where there are also some less reputable product providers. These
reputable brands are now adding credibility to the mobile channel.

Developing D2C Models

Most mobile adult content is delivered off-portal (off-deck), certainly content restricted to
over 18. Initially this was a constraint to market development, but off-portal and direct to
consumer delivery models are now becoming much better established. Off portal delivery
channels have been well established in Europe for some years, and are now becoming better
established in other regions, particularly North and South America. Key to this has been the
growth of strong independent product aggregators and independent billing services, such as
Bango.

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Mobile Adult Content Market Constraints

The evolution of the mobile adult content market is marked by a number of hurdles, such as
public reservation towards adult content, technological shortcomings and marketing
constraints.

Public Reservation to Adult Content Usage

Historically, access to adult content through various media has been a controversial issue for
the public and subject to much debate. Since adult content has become available on mobile
phones, which are used extensively by teenagers and even younger children, the sensitivity of
this issue has assumed greater significance. There will always be elements of society which see
adult entertainment as something which should be hidden away, whatever the delivery channel.
This is evident in all societies, but more prevalent in some. The necessity to work around the
various opinions on adult content within any society will inevitably remain a constraint on
market development.

Operator Reluctance & Lack of Age Verification

Mobile network operators the world over are major brands and brand image is important to
their business development and competitive positioning. Most operators are reluctant to
overtly offer, or promote, mobile adult content for fear of it tainting their brand, or running
foul of the law. The adoption of age verification procedures and screening technology has
eased the situation in some markets, but old habits die hard. The lack of age verification
procedures and technology in other markets is a definite constraint on market development.

Regulation

Principle among the hurdles to free market development is the fact that mobile adult content
services together with mobile gambling services are regulation constrained. These regulations
vary by individual country market and adherence to them places a tremendous overhead on
players in the market, particularly those that address multiple national markets. It makes the
role of local aggregators and distributors vital in the delivery chain and puts increased emphasis
on content localisation.

Localisation and Optimisation

As mentioned above, localisation is an important consideration. This is not just to adhere to

local market regulations, but also to cater for local market preferences. What works in one
market does not necessarily work in another.

In a similar light the issue of handset compatibility, common for many forms of mobile
entertainment content, is present in the adult content market, particularly with respect to
media rich graphic and video content. If the image is not optimised to the handset in use, the
end user experience will be less than required.

Network and Handset Constraints

The roll out of 3G networks has been mentioned as a market driver for mobile adult content,
notably because of the improved graphics and video handling capability. However as pointed

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out this can also act as a market constraint in markets where 3G licenses have yet to be
issued, or operational networks have yet to be rolled out.

Device limitations include memory constraints, insufficient screen size, poor display quality and
limitations on device operation. The major hindrance for any mobile entertainment service
stems from the small size of handset screens as they offer a constrained view of content.
Content has to be rendered for optimal presentation by handset (or handset type) it also has
to be developed with the mobile channel and they way it is used, in mind.

Marketing and Constraints

Marketing of adult content is prone to public opposition, scarce availability of marketing

channels, excessive spam (see below), and regulatory constraints prevailing in the market. In
many countries marketing of these services is difficult due to legal, social and cultural
prohibitions.

To avoid unnecessary legal hassles, marketers restrict themselves to the use of those
advertising channels which already promote adult content. These promotional channels include
adult magazines, porn web and WAP sites, Adult Pay TV etc. However, the drawback of these
channels for marketing is their limited access to the non-users or passive users of such
content.

The reaction of some less professional adult content suppliers to restricted legitimate
marketing channels. Is to send out spam i.e., clips or small archives of adult content sent to
mobile users randomly. This has a negative effect on the public perception of mobile adult
services.

Quality of Product

Product from the trusted brands is of high quality, but at the bottom end of the market,
content can be extremely variable. If a consumer’s only experience of mobile adult content is
of poor quality, or poorly delivered material, it may be a long time before they use the channel
again. All industries struggle with rogue traders and variable product quality, but it is a
particular issue in the adult content industry, which is still highly fragmented. This will improve
as the industry consolidates and trusted providers take an even stronger grip on the market.

The Market for Mobile Adult Content

Juniper Research estimates that the total global market for all forms of mobile adult content,
including glamour content will be $1.4 billion for the current year, 2006. This is forecast to rise
to just over $3.3 billion by 2011. This is a cumulative average annual growth rate of 19% per
annum. Although this growth rate is less than that anticipated for core mobile entertainment
markets such as mobile games and mobile music, it is still substantial growth in a regulation
constrained market.

Over this period of time the structure of the market, in terms of product delivered, will have
changed significantly, with a continued migration from text and still graphics-based services to
video-based services. Figure 2 shows how the balance between the different product
categories is anticipated to change between the start of the forecast period in 2006 and the
final year, 2011.

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Figure 2: Total Revenues from Mobile Adult Content (Text, Graphics & Tones,
Video & Games). Product Split (%) 2006 and 2011.

2006 ($1.4 billion) 2011 ($3.3 billion)

7%
20%

Text 21%

50% Graphics &

Tones

Video &
30%
Games 72%

Source: Juniper Research

In 2006 50% of the market is already estimated to be taken by video based content and erotic
games, 30% by still graphic content and moantones and 20% by text based services. By 2011 it
is forecast that 72% of the market will be for video based adult content and games, with 21%
taken by still graphic content and moantones and only 7% by text based services, mainly in still
developing markets.

There are significant differences in the regional markets for adult mobile content and very
often also between the individual markets within those regions. Reasons for these differences
include:

• Regulatory environment • Cultural preferences

• Network infrastucture • Mobile data usage
• Disposable incomes & price levels • Adult content availablity and
accessibility
Europe and Asia are the most developed mobile adult content markets, while the US market
lags considerably, in terms of its potential. Latin America is a good potential market for mobile
adult services and is a market where conventional adult services continue to flourish. Individual
markets within the Rest of the World region also show good potential eg South Africa and
Russia, but the region as a whole is not well developed for mobile adult content.

Figure 3 show Juniper’s estimates of the regional breakdown of the global cumulative revenue
stream for the period 2006 to 2011. Of the $14.55 cumulative revenue stream it is estimated
that Europe will account for 39%, Asia Pacific 33%, North America 17% with South America
contributing 7% and the Rest of the World region contributing 4%.

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Figure 3: Total Cumulative Revenues from Mobile Adult Content (Text, Graphics
& Tones, Video & Games) 2006 to 2011. Regional Split (%)

4% 17%
North America
33% 7%
South America
Europe
Asia Pacific
Rest of World
39%

Source: Juniper Research

Mobile Adult Content: Text,

Graphics, Tones, Video & Games
2006-2011
This white paper is taken from the authoritative study Mobile Adult Content: Text,
Images & Video 2006-2011 which provides a detailed analysis of the evolving market
opportunity for mobile adult content. With over 176 pages this report considers the next five
years and is packed with market opportunities, forecasts and technology comparisons. With
extensive research supporting in-depth quantitative forecasts, this report covers market
drivers and constraints, including technology advances increasing mobile penetration, changing
demographics, untapped markets, and global distribution, pricing, customisation & usage levels.

For more details on this report visit the website www.juniperresearch.com or phone +44
(0)1256 830002.

Juniper Research Limited

Juniper Research specialises in providing high quality analytical research reports and
consultancy services to the telecoms industry. We have particular expertise in the mobile,
wireless, broadband and IP-convergence sectors. Juniper is independent, unbiased, and able to
draw from experienced senior managers with proven track records.

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About the Author

Bruce Gibson is Research Director of Juniper Research Ltd.

Bruce has worked in the IT and telecom industries for over 20 years, providing consultancy
services and information products to telecom service operators, application developers/service
providers and to industry investors. Prior to joining Juniper Research, Bruce was Managing
Director of Zetetic Consulting, where he provided consultancy services to telecom operator
and solution supplier clients in Europe, the Middle East and Africa on IT-lead business process
improvement and market strategy. Before this he joined Cerillion from Chorleywood
Consulting where he was Managing Director from 1997 to 2001 and actively participated in
major telecom industry projects as both Project Director and Managing Consultant.

Bruce is a frequent conference speaker and chairman at telecom industry events. He is also an
experienced workshop leader and trainer.

Publication Details

Publication date: September 2006

For more information, please contact:

Michele Ince, General Manager
michele.ince@juniperresearch.com
Juniper Research Limited, Century House, Priestley Road, Basingstoke, Hampshire RG24 9RA
Tel: +44 (0)1256 830002 / 476200
Fax: +44 (0) 8707 622 426

Further whitepapers can be downloaded at http://www.juniperresearch.com.

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