Phone Plus Prepaid: Web Warehouse

Posted: 6/2003

Web Warehouse
Retailers Now Stock Digital Goods Using Prepaid PoSA

By Khali Henderson

The premiere cards in the new AT&T PrePaid WebCents program'

Consumer spending for online content in the United States last year increased 95 percent over 2001 to reach $1.3 billion, according to a report released in March by the Online Publishers Association.

"The year 2002 will go down as the year in which the conventional wisdom about paid online content changed," says Michael Zimbalist, OPA executive director in announcing the results. "Whether or not consumers will pay for content is no longer a matter for debate. Clearly, they will."

According to the report prepared by comScore Networks, the number of consumers paying for online content grew from 10 million in fourth quarter 2001 to 14.3 million in fourth quarter 2002.

Capitalizing on this groundswell, AT&T Corp. launched in April a new prepayment service to help online digital content providers reach out to consumers in traditional retail stores. The AT&T PrePaid Web Cents Service enables consumers to purchase a specialty card from a retailer, which is activated at the point of sale. To use the card, the consumer logs on to the content provider's Web site directly or through the AT&T PrePaid Web Cents site (www.webcents.att.com). The consumer is prompted to enter the serial number and PIN printed on the back of the card to begin purchasing digital content. AT&T processes the payment.

The specialty cards can be used to purchase a variety of online content such as interactive games, ring tones, graphics, maps, guidebooks, digital music, streaming audio and video, software, research services and more. The content provider issues each card exclusively to allow use of its content.

The service is touted as an alternative to credit card payments for the youth market, people who don't use bank accounts and those who are reluctant to use credit cards over the Internet for security reasons or for cost control.

A May poll by Payment One in cooperation with Javelin Strategy & Research and eContent Magazine, showed consumers continue to perceive serious shortcomings with today's online payment options, particularly with respect to security. In fact, when consumers who have not made online purchases were asked what would persuade them to buy online content, 53 percent cited more secure payment options. Payment security was chosen over price or product-related responses by more than a 2-1 margin. Sixty one percent of all respondents said they would be more likely to make online content purchases if there were an easy and secure alternative to the credit card.

"Online content and service providers clearly need to do more to satisfy the concerns of consumers about online payment if they hope to continue to grow their revenues and customer bases," said Joe Lynam, president and CEO of PaymentOne. "The implementation of new consumer-friendly payment options may well be the single most important step providers can take to better monetize their products and services." On the flip side, it's great that prepaid providers are expanding their offering to include digital content," says prepaid market analyst, Imke Louis-Mensah, vice president for Atlantic-ACM. "Prepaid wireless providers have been slow to embrace this, but providers are realizing that their customers are willing and able to pay for content."

Louis-Mensah notes that European wireless carriers such as Orange, Vodafone Group plc, Virgin Mobile Telecoms Ltd. have been offering digital content to prepaid wireless users for a while now and it is a hit. Virgin Mobile is bringing the strategy to the states through its MVNO deal with Sprint PCS. It offers VirginXtras, which includes ringtones, music and entertainment, to its base of prepaid customers, which are primarily the youth market.

While VirginXtras are accessible to subscribers for free, other prepaid digital content offers are cropping up that are not only provider by device agnostic.

Debisys Inc., a provider of prepaid transaction processing solutions, recently inked an agreement with PlayPhone Inc. to deliver licensed games and ring tones to Debisys' retail network. PlayPhone packs are being shipped to about 4,000 stores nationwide; at least 10,000 stores are to be stocked by the second quarter of 2003.

Mark Flanagan, CEO of Debisys, told PHONE+ prepayment generally is viewed as a way to get to the lucrative youth market by overcoming issues such as lack of credit, inability to enter a contract and runaway spending.

The PlayPhone deal is the first in which Debisys will distribute content to its retailer network. Debisys' system automates payment processing for prepaid wireless, long distance and local services using its point-of-sale terminal software.

Flanagan is optimistic that the content will take off, driven in large measure by the availability of web-enabled wireless devices.

A May report from IDC indicates the market for converged handheld devices, or "smartphones," is just beginning to accelerate. In the first quarter of 2003, the worldwide converged handheld device market grew 423.0 percent year-over-year and 33.7 percent sequentially to 1.71 million units.

Web Cents also represents PRE Solutions Inc.'s first foray into digital content. The company's retail network tied into its prepaid transaction network is one of the participating retail entities in the AT&T program. "It's a new revenue opportunity from our standpoint and our merchants' standpoint," says Tom Konz, senior vice president of marketing and operations. "Up until this point, everything [prepaid] has been subscription replenishment. With content, you can sell to anyone [not just an existing prepaid customer]."

The Web Cents service brings together participating retailers, such as the PRE Solutions Retail Partner Network, Speedway SuperAmerica LLC and Uni-Marts Inc., with content providers like Cellus USA, Disney Online, Shockwave.com GameBlast and Vindigo. By the end of April, cards were to be available in some 4,000 retail stores across the country with more stores to be added in the coming months.