06 a n n u a l r e p o r t
C o n t e n t S 02 2006 in Brief
03 this is aspiro
04 an Interview with Johan lenander &
Gunnar Sellæg
07 Business Concept, Goals & Strategies
12 the Mobile Services Market
16 Know-how & Values
18 operations
20
Mobile Download Services26
Mobile tV30
Search Services34
Communities38
Mobile Marketing43 Stock & Stockholders
46 Corporate Governance
50 Board of Directors & auditors
51 Corporate Management
53 Directors’ report
56 risk & Sensitivity analysis
58 Five-year Summary
59 Definitions of Key Figures
60 Income Statement
62 Balance Sheet
66 Cash Flow Statement
67 Statement of Changes in Stockholders’ equity
69 accounting principles
73 notes
83 audit report
85 annual General Meeting, Financial Information & addresses
“Creating and
delivering mobile
experiences”
Mobile Download
Services
Aspiro is the Nordic and Baltic regional mar- ket leader in download services like ringto-
nes, games, images, videos and music.
20
26
Aspiro’s subsidiary Rubberduck was the first European player to launch mobile TV services and has one of the world’s leading mobile TV solutions for download and broadcast on mo- bile or TV networks.
Mobile tV
Aspiro is one of Norway’s leading text-based directory inquiries servi- ces providers. Aspiro is now piloting a new people search–folk.no
Search Services
30
Aspiro now has a web and mo- bile-based community in Norway, Inpoc Home, a Norwegian youth magazine, Inpoc Magazine, and a Swedish music community, Voolife.
34
Mobile
Marketing
38
Aspiro has one of the market’s best tech- nologies for conducting effective cam- paigns on mobile phones. Aspiro has also launched the Nordic region’s first mobile advertising network.
Communities
° Net sales for the full-year 2006 were SEK 447.8 (407.9) m.
Aspiro consciously downscaled non-strategic sales in favor of improved margins.
° Full-year 2006 EBITDA was SEK 63.5 (35.6) m. The goal for 2006 was minimum EBITDA of SEK 65 m, and the actual figure is consistent with this goal despite increased competi- tion in Finland in the second half-year 2006. Aspiro’s biggest markets—Sweden and Norway—performed strongly in the year.
° On 26 January, Aspiro acquired Finnish mobile services pro- vider Mobile Avenue. In 2006, Mobile Avenue contributed net sales of SEK 29.6 m.
° Consistent with Aspiro’s strategy of always remaining in the top three players on each market, the company decided to liquidate its operations in the UK and Spain, where the company had very limited market shares. This liquidation reduced year-2006 sales by SEK 19.2 m but also made a modest positive contribution to profitability in the year.
° Aspiro started its initiatives in the mobile TV, music, search services, communities and mobile marketing growth seg- ments.
° On 1 October, Aspiro acquired mobile TV player Rub- berduck, which marked the start of Aspiro’s mobile TV initiatives. Rubberduck contributed net sales of SEK 1.7 m.
In January 2007, Rubberduck signed an agreement with operator 3 to supply the technology solution for 3’s Swedish and Danish mobile TV initiatives.
° Aspiro launched its music download services on five Scandi- navian operators’ mobile portals in 2006.
° Aspiro’s new web and mobile people search folk.no was piloted in Norway.
° In the year, Aspiro rolled out one of Scandinavia’s most suc- cessful mobile marketing campaigns alongside Norwegian food producer Stabburet (for the Grandiosa pizza range).
Mobile marketing campaigns were also conducted alongside partners like Spendrups and Coca-Cola.
2006 in Brief
° Aspiro launched a new community concept in Norway in September, Inpoc Home, a web community with mobile functionality. After year-end, Aspiro acquired Swedish mu- sic community Voolife.
° The Board considers that the company will maintain a se- cure market position in its existing operations with retained high profitability.
° To enable high future growth, during the year, the Board de- cided to focus on the mobile TV, music, mobile marketing, search services and communities segments. Over the next three years, Aspiro expects robust growth in these segments.
Investments are anticipated to reduce year-2007 EBITDA by SEK 15-25 m. The Board belives this initiative to turn a profit in the financial year 2009.
KEy FigurEs 2006 2005
Net sales, SEK m 447.8 407.9
EBITDA, SEK m 63.5 35.6
Profit/loss after tax, SEK m 49.5 18.0
Earnings per share, SEK m 0.26 0.11
Ave. no. of employees 133 115
Liquid funds, closing balance, SEK m 79.4 89.4
Cash flow from operating activities before changes
in working capital, SEK m 58.3 26.3
Equity/assets ratio, % 82 78
0 30 60 90 120 150
0 5 10 15 20 25
SALES, SEK m PROFIT, SEK m
2005Q1 Q2
2005 Q3
2005 Q4
2005 Q1
2006 Net Sales EBITDA Profit after tax
2006Q2 Q3
2006 Q4
2006 QuartErly salEs aNd ProFit, 2005-2006
CreatInG anD DelIVerInG MoBIle experIenCeS
Aspiro creates and delivers mobile entertainment, information and community services to consumers. With Aspiro’s services, users can watch TV, listen to music, interact in communities and enjoy games and other activities on their mobiles or the Internet.
FroM a DIStrIButor to ConSuMer Corp- oratIon In the entertaInMent SeCtor Over the last three years, Aspiro has accumulated a secure position by selling mobile content services like ringtones, background images and games, where it is the Nordic and Baltic regional market leader. From this position, Aspiro is now building its new mobile TV, search, music, communities and mobile marketing services segments. The convergence between the Internet and mobile telephony is becoming increasingly palpable, implying that many of Aspiro’s new offerings will be web and mobile based.
SaleS to ConSuMerS VIa partnerS anD aSpIro ChannelS
Sales are through partnerships with mobile operators and media corporations, and via proprietary web and wap portals, as well as advertising. Aspiro collaborates with a wide array of partners like Telenor, NetCom, T-Mobile, TeliaSonera, 3, Sonofon, Tele2, TV3, VG, TV2, MTV Nordic, the BBC, TV4 and Fox Movies.
a hIGh-Growth MarKet wIth SuBStantIal potentIal For new SerVICeS
Aspiro sells its services to consumers in Norway, Sweden, Finland, Denmark, Estonia, Latvia and Lithuania. Estimated mobile content services sales in 2006 in Norway, Finland, Swe- den and Denmark were some SEK 2.5 bn. Aspiro estimates that the total Nordic mobile content services market* grew by some 15% in 2006, and will remain in healthy growth, with the de- mand for music, videos and search services rising particularly.
this is aspiro
SaleS ConVerGe on SeK 500 M
Aspiro has over 130 employees and generated sales of SEK 448 m and profit after tax of approximately SEK 50 m in 2006. In- corporated in 1998, Aspiro is a small cap company listed on the Nordic Exchange in Stockholm. Media corporation Schibsted, with an equity holding of 42.9%, is the largest stockholder.
Aspiro has 190.5 million shares, and as of 31 March 2007, its market capitalization was some SEK 509 m.
* Aggregate value of premium sms/mms and wap billing.
In an interview, Johan and Gunnar tell us about the past year, and Aspiro’s future focus.
Gunnar, how would you how view Aspiro’s current role on the market?
“Aspiro’s role is the clear market leader in mobile content services in the Nordic and Baltic regions. Where previously, this was about ringtones, images and games, it now also cov- ers music, mobile TV and communities. And these are more segments where Aspiro intends to be a market leader.”
What are your plans for Aspiro and what are the main things you’re going to start off with?
“Aspiro is the result of a series of acquisitions. In order to suc- ceed in the future, we will have to build on integrating these companies and simultaneously separate several services seg- ments from each other. Our challenge is that several segments are mutually dependent, which can counteract the growth we want to achieve in each services segment. That’s why our first big task will be to make the units more mutually independ- ent, without losing many of the synergies between them. Thus we’ll enable high organic growth according to each services segment’s conditions,” continues Gunnar.
What do you regard as Aspiro’s main strengths that will make the company successful going forward?
“Our secure and stable position in mobile content services in the Nordic and Baltic regions is the foundation of our busi- ness. This will enable us to aim for growth in adjacent services
an Interview with Johan lenander & Gunnar Sellæg
segments in the coming years. I’m taking over after Johan in a position where we’ve got all the right prospects to take Aspiro into this growth with our organization now in place.”
Johan, what are you most satisfied with in your work at Aspiro?
“When I joined, sales were far lower and we were generating a sizeable loss. Nowadays, we’ve got healthy sales and are highly profitable. This has put Aspiro into a unique position to grow from in mobile content services.”
Summarize briefly what brought Aspiro to its current position.
“It took several years and a series of acquisitions to get where we are now, with a clear role in the mobile content services value chain. As market leader, we’re the obvious partner for the major content providers that want their product to reach the mass market, and this means we can offer the best content and services. It’s one of the reasons we’re an attractive sales partner,” responds Johan.
What have been the management’s strategies?
“ To achieve economies of scale in mobile content services, you need to be leader, particularly on limited markets like the Nordic and Baltic regions. That’s why we’ve acquired most of the local players here. Mobile phones are becoming increasingly important for the consumer, and for young peo- ple particularly. Everything we do on computers today will migrate to mobile phones tomorrow—that was our convic- tion when we formulated our current strategy.”
Gunnar Sellæg became Aspiro’s CEO on 1 March 2007, succeeding Johan Lenander, who had
been CEO since May 2005. Mr. Lenander joined Aspiro in autumn 2002, and built the company
into the Nordic and Baltic region’s mobile content services leader. Most recently, Mr. Sellæg
was CEO of Norwegian daily newspaper Aftenposten’s new media business, and has extensive
experience of running business through digital channels. Aspiro is now on the verge of a mo-
mentous phase—transforming itself from a mobile content services distributor into a consum-
er corporation in the entertainment sector. As the distinction between the Internet and mobile
telephony fades, many of Aspiro’s new services will be web and mobile based. Mr. Sellæg’s task
is to bring Aspiro forward to this new position.
Are there any defining moments in Aspiro’s history?
“Aspiro has been highly successful as an attractive collabora- tion partner for Nordic operators. I’d also like to highlight our directory inquiries services, which we accessed through the acquisition of Schibsted Mobile in 2005. These are the kind of defining moments that brought us to the position we’re currently in and how we will grow ahead,” continues Johan.
You posted EBITDA just under your SEK 65 m goal for 2006, how come?
“We’re active on several markets and sales can vary quite a lot through the year. My ambition was to hit our target precisely.
So I’m very satisfied that we were just 3% off, especially considering the fact that we made some progress in our new growth segments in the year.”
Has Aspiro’s existing business got what it takes for the next step in the company’s growth cycle?
“Yes, Aspiro has a very strong position in mobile content services, which is what we’re going to build on as we now consolidate our consumer relations further and expand in adjacent services segments. For example, Aspiro’s market leadership in text-based directory inquiries in Norway, with over 40,000 inquiries a day, is paving the way for the suc- cessful launch of the company’s new people search. And the fact that Aspiro easily sells the most ringtones in the Nor- dic region—actually way above total CD single sales—also provides us with a very firm foundation to grow on. Aspiro is building its new music initiative based on the same technol- ogy, delivery and reporting systems, and contracts with record labels,” continues Johan.
Gunnar, do you expect consumer behavior to change through the coming years?
“It’s very likely that consumer behavior will change in many ways. The young people of tomorrow will start demanding more and better entertainment and communication products than are available now. They will want more music, better games and access to communities from their mobiles. And what’s more, young people will probably stay like that as they age, while simultaneously expecting more utility services. I think they will use their mobiles to consume entertainment and news, which might mean watching TV, reading the press and listening to music.”
Will Aspiro’s role change ahead?
“We’ve come a long way in consolidating Aspiro Channels, where we get closer to the end-user of our services. This means we’re well-equipped to extend our strong position into new mobile services segments like music and search services.
Moreover, our secure infrastructure and market position gives us a good financial position so we can conduct active concept development,” continues Gunnar.
Is your strategy to pursue organic or acquisition-led growth?
“Our prime aim is successful organic growth in our current business, simultaneous with making complementary acquisi- tions in segments where organic growth is insufficient. This might mean us adding skills in various segments or acquiring businesses with existing customer bases.”
You clearly have a sharp focus on new services segments. Will ringtone download services and games disappear in a few years?
“If anything, the demand for download services will increase,
but there is a natural shift from entry-level to more value-
added services. For example, music downloads will expand
briskly at the expense of ringtones. We use the same technol-
ogy platform, and the same suppliers for both products—the
only difference is the time, three minutes instead of 30 sec-
onds. And now, we’re also starting to see older users starting
to download music, resulting, for example, in oldies appear-
ing on the top ten downloads in Sweden,” concludes Gunnar.
asPiro’s rolE iN thE MobilE CoNtENt sErviCEs valuE ChaiN
Consumers
• Sources
• Quality assures
• Modifies technology
• Packages
• Creates campaigns
• Runs entertainment segments
• Produces graphics
• Distributes
• Measures sales/
efficiency
• Gives strategic advice
◄ Broad distribution
◄ Consumer knowledge
◄ Reporting systems
Consumer ► knowledge
Attractive ► product portfolio
Broad selection ► Delivery ► reliability
VALUE-ADDED VALUE-ADDED
Content providers
Media Partners
aspiro Channels
BuSIneSS ConCept
“We create and deliver mobile entertainment, information and community services to consumers.”
Aspiro’s organization is the company’s primary asset.
Our unique market knowledge and technology enables us to aggregate content from the best suppliers, while creating new concepts and services in-house that reach the market direct from Aspiro and through partners.
VISIon/oVerall GoalS
“By filling mobile life with the best entertainment, experienc- es and interaction, Aspiro will be the Nordic region’s leading mobile entertainment corporation.”
Aspiro believes in a future where the mobile phone dra- matically transforms the way people communicate, interact and enjoy life. Our goal is to deliver world-class mobile experi- ences that really make a difference to people’s everyday lives.
aSpIro’S role In the Value ChaIn
Over the past three years, Aspiro has built a strong position by selling mobile content services—mainly ringtones, background images and games. Aspiro is the market leader in the Nordic and Baltic regions, and a valuable link between a broad array of suppliers and a wide portfolio of sales channels. Aspiro is an obvious partner to many of the world’s leading vendors of mobile content through its broad distribution network and sophisticated reporting systems.
Aspiro is transforming from a distributor of entry-level mo- bile content services to supplying integrated services in music, communities, mobile TV and games.
Aspiro’s proprietary channels are strategic, with many of its new initiatives, like search services and communities, being targeted directly at consumers. In parallel, partnering sales, primarily via Nordic operators, will remain a priority. For companies that want to sell mobile services to consumers, Aspiro offers high delivery reliability, unique technology know-how on mobile terminals, an attractive services portfolio and intimate consumer knowledge.
Business Concept, Goals
& Strategies
Aspiro is building its new mobile TV, search, music, communities and mobile marketing serv-
ices segments on its market leadership in download services to mobile phones. Aspiro is ex-
tending its offerings, targeted at the same consumers and partners. The convergence between
the Internet and mobile telephony is becoming increasingly palpable, which means that many
of Aspiro’s new offerings will be web and mobile based.
Services segment Who pays? Example consumer price How does Aspiro get paid?
Mobile phone download services
- unit sales Consumers SEK 15-35 per ringtone, SEK 30-60
per game, SEK 15-30 per animation and SEK 15-20 per track
From operators (the consumer via mobile bill)
- subscription Consumers SEK 60 per month From operators (the consumer via
mobile bill)
Mobile TV Consumers (early phase) and media
corporations and operators for mar- keting purposes
SEK 49 monthly or SEK 3-5 per clip Initial start-up cost, monthly operating and hosting fees plus revenue share
Communities Consumers, advertisers and busi-
nesses that want research conducted SEK 50 monthly for premium mem-
bership From consumers via subscription and
businesses via advertising
Search services Consumers and advertisers NOK 7 per search Revenue-share with content provider.
From operators (the consumer via mobile bill)
Mobile marketing Advertisers and media corporations Usually free to the consumer From businesses
GoalS
In its Annual Report for 2005, Aspiro stated a number of goals for a three-year perspective. Some have already been achieved, and Aspiro has also added some new goals.
Aspiro intends to be the Nordic region’s largest distributor of music to mobile phones.
In 2006, Aspiro launched its music downloads service on five Nordic operators’ mobile portals. Music to mobile sales gathered real pace in 2006, from a few hundred tracks daily in July to between one and two thousand by year-end. Aspiro’s goal is to supply its music solution to a number of other Nor- dic operators in 2007. Another of Aspiro’s ambitions is to build one of the market’s strongest music channels targeted directly at the consumer.
Aspiro will consolidate its positioning as the leading distribu- tor of mobile games.
In 2006, Aspiro sold over 2.5 million mobile games. Mo- bile game sales on comparable markets were some 5 million units (EJL Wireless Research LLC, 2007).
Aspiro has one of Europe’s strongest mobile game port- folios. The company anticipates increasing interest in mobile games both as a result of mobile phones becoming more sophisticated and progressively better games being launched in mobile formats. Aspiro’s goal is to further secure its position- ing in mobile games.
Aspiro will maintain Nordic market leadership.
Aspiro estimates that the Nordic mobile content market grew by an average of 15% in 2006. In 2006, Aspiro chose to
downscale sales in unprofitable advertising and media channels in favor of improved margins. Even if looking ahead, the com- pany will continue to prioritize profitability in its existing busi- ness and simultaneously maintain its secure market position.
Aspiro will retain high profitability.
Full-year 2006 EBITDA was SEK 63.5 m, against SEK 35.6 m in the previous year. The goal is to maintain high profitabil- ity in existing operations. The new mobile TV, music, search services, communities and mobile marketing initiatives are expected to reduce year-2007 EBITDA by SEK 15-25 m. Aspiro expects these initiatives to go into profit in the financial year 2009.
Aspiro will achieve success in its new services segments, thus creating healthy growth.
Several of the new initiatives that began in the second half-year 2006 have already noted some successes, one example being music to mobile sales rising significantly in late 2006. As- piro intends to be a growth company, and will grow in its new mobile TV, music, search services, communities and mobile marketing services segments. In the next three years, Aspiro expects robust growth in these segments.
Aspiro will have a strong position on operators’ mobile portals.
In its download services segment, Aspiro has defined the major Nordic operators as a prime strategic segment. Data and mobile content services will gain increasing significance to operators, and Aspiro intends to be the most attractive partner for them. Aspiro’s goal is to increase sales on operator portals
rEvENuE ModEls
by supplying the best and most in-demand content, plus the best campaigns. Aspiro will also offer delivery reliability and professional customer services. Aspiro will operate entertain- ment segments on portals so that operators can focus on the total solution for their subscribers and portal marketing.
Aspiro will posses some of the most attractive brands/chan- nels in its services segments.
In 2006, sales through Aspiro Channels were 28% of total, and the goal remains that Aspiro channels will represent one-third of sales. In its existing business, subscription services and text-based directory inquiries, will be priorities. Many of Aspiro’s new initiatives will target the consumer directly.
Aspiro will have some of the most attractive brands in its services segments in the Nordic and Baltic regions.
StrateGIeS Broad Distribution
Aspiro will be everywhere consumers want mobile services.
Accordingly, Aspiro’s sales are partly via partners, mobile operators and media companies, and partly via proprietary web and wap portals, as well as advertising. Aspiro develops long-term, exclusive collaboration agreements with partners that have large user bases. In tandem, Aspiro enhances and consolidates Aspiro Channels to create direct relationships with the consumer.
Offering the Latest and Best
Aspiro will always offer in-demand mobile phone services.
Aspiro purchases those services that are in demand from a high number of leading content suppliers. Aspiro will always have the most attractive services portfolio because of its unique knowledge of consumer purchasing patterns and thanks to economies of scale with centrally coordinated procurement.
Keeping pace with technological progress and demand, Aspiro will continually enhance its offering with new types of mobile services. With its size, well-extended distribution network and sophisticated reporting systems, Aspiro will be the self-evident partner for many of the world’s leading suppliers.
Size and Integration Bring Economies of Scale
To succeed in the mobile content services sector, size matters.
By being a market leader, Aspiro reinforces its market posi- tion with content providers and also secures its relationships with sales channels. Additionally, Aspiro focuses on develop- ing services that can be integrated to tie the user closer to the company.
Moreover, Aspiro achieves economies of scale, particularly in the management of content, operations and administration, and creates the right prospects for building strong brands. This
is why Aspiro has pursued the unequivocal strategy of consoli- dating the mobile content services market since back in 2002.
Aspiro has grown from sales of some SEK 18 m in 2003 to some SEK 448 m in 2006. As a result of this strategy, profitabil- ity has also increased sharply.
Growth through Organic Initiatives and Complementary Acquisitions
Firstly, Aspiro will create growth through an enhanced con- sumer offering, and secondly, by entry into new geographical markets. Expansion in the Nordic region is feasible to respond to the convergence between the Internet and mobile telephony, and in new services segments and distribution channels.
Corporate acquisitions may be considered as a complement to organic growth.
Where Aspiro primarily offers a solution to other compa- nies, as in mobile TV and music download services, its strategy is also to grow outside its domestic markets in the Nordic and Baltic regions.
The Acquisition of Rubberduck
The acquisition of Rubberduck is an example of how Aspiro has succeeded in securing positioning in the new services seg- ment at an early phase.
Normally, Aspiro outsources the services it sells. The mo- bile TV market is in a very early phase, and as yet, any revenue streams from consumers are limited. For Aspiro to secure a position in mobile TV at an early phase, the Board chose to acquire Rubberduck, which has one of the world’s best mobile TV technology solutions. This enables Aspiro to secure access to the best technology for its future initiatives, and to comple- ment its offering to existing partners.
Aspiro also gained access to a wide range of international
partners whose mobile TV initiatives are already underway.
aCQuisitioNs
Company Acquired Price sales & Profit Headcount Incorpo- rated
Active in Motive for Acquisition
Mgage 2001/
2002
SEK 16.0 m (via shares)
– 10 2000 Sweden and
Germany
Consolidate the Nordic mobile content services market. Complementary services offering.
Picofun 2002 SEK 10.7 m
(SEK 5.2 m via shares and SEK 5.5 m cash)
– 10 2000 Sweden,
France, UK and US
Consolidate the Nordic mobile content services market. Complementary product portfolio (strong in mobile games) and more than double mobile operator customer base.
Mobilehits 2003 SEK 35.8 m (via shares)
2002: sales SEK 12.2 m
12 2000 Sweden and
Spain
Consolidate the Nordic mobile content services market. Complementary in product and cus- tomer terms. Acquisition of the market leader in music-related mobile phone content, particularly ringtones.
Emode 2004 SEK 23.4 m
(SEK 20,9 via shares and SEK 2.5 m cash)
2003: sales NOK 25 m, profit NOK 1 m
10 2000 5 European
countries, focused on Sweden and Norway
Consolidate the Nordic mobile content services market. Advance positioning in advertising sales in the Nordic region.
Cellus 2004 SEK 125.8 m
(64.5 million shares and SEK 61.3 m cash)
2003: sales SEK 128.3 m, operating profit:
SEK 13.0 m
33 2000 Sweden,
Norway, Spain and the UK
Become one of the Scandinavian mobile content services market leaders and achieve cost syner- gies through increased size.
Inpoc 2005 SEK 233.1 m
(via shares)
2004: sales SEK 170 m
50 2000 Norway,
Sweden, Den- mark, Estonia, Latvia and Lithuania
Double sales. Advance mobile content services market positioning in Norway and Sweden, and establish the company as a major player in Den- mark and the Baltic region. Also access to Inpoc, one of the Nordic region’s strongest brands, and reinforce Aspiro Channels.
Boomi 2005 SEK 51.9 m
(SEK 14.0 m via shares and SEK 37.9 m cash)
Annual estimate: sales approx. SEK 45 m, EBITDA SEK 9 m
20 1999 Finland,
Norway and Denmark
Start up in Finland. Secure strong market posi- tioning in mobile content services across Nordic region. Gain access to Boomi’s strong proprietary channels.
Mobile
Avenue 2006 SEK 32.5 m
(cash) Annual
estimate: sales approx. SEK 28 m, EBITDA SEK 3 m
20 2000 Finland Advance market position in mobile content serv- ices in Finland. Supplement with strong media partner business in Finland.
Rubber- duck
2006 SEK 25.7 m (cash) excl.
potential sup- plementary purchase price
2006: sales SEK 7.7 m
6 2004 Customers
in the Nordic region, Europe and US
Start of Aspiro’s mobile TV initiative. Access to one of the market’s best mobile TV solutions and a significant number of major partners and customers.
Yoyota 2007 SEK 1.5 m
(cash) - 6 2002 Estonia, Latvia
and Lithuania Grow in the Baltic region and secure market leadership there. Expected synergies, mainly in marketing and sales.
Voolife 2007 SEK 4.8 m
(cash, new shares in DemoRadio Nordic AB)
- 2 2005 Sweden Start of Aspiro’s Swedish community activities.
Early-phase acquisition to enable high organic growth.
MarKet trenDS
Mobile services are a global mass market with over 2 billion potential consumers. With increased mobile phone penetration and improved functionality, the demand for more value-added services will rise. But for more consumers to take the step from traditional voice services to other mobile services, the user benefit must be obvious, while starting to use the services must be easy. To get to this point, buying and usage processes must function smoothly, which raises challenges for payment and delivery systems, and on content quality.
The market for mobile content services is in high growth.
Record labels now view mobile distribution as a strategic sales and marketing channel. Major games players like Electronic Arts and Vivendi Universal entered the mobile market fully in 2006. Hollywood has also started to focus sharply on the seg- ment., with one example being Fox Entertainment’s acquisi- tion of 51% of mobile content distributor Jamba to access a mobile distribution channel for its media content.
These examples are unequivocal evidence of the conver- gence between different media formats, with TVs, computers and mobile phones starting to converge. Consumers want to access the same content from different platforms. TV is migrat- ing into the computer and mobile phone. Users want to log onto their Internet community wherever they happen to be.
When buying a track from a mobile phone or computer, users should be able to have it delivered to whichever unit suits them at the time—computer, mobile phone or mobile media player.
This progress, in tandem with growing bandwidth on fixed and mobile networks, suggests that the mobile content services market is heading for continued growth through the coming years. For example, sector commentator Gartner anticipates the consumption of mobile music growing by 400% by 2010.
The communities segment is also evolving from primarily be- ing something for young people into a mass market phenom- enon for all age groups. As yet, mobile TV is almost only for early adopters, but the forecast potential is enormous.
the ConSuMptIon oF MoBIle SerVICeS Mobile phones are becoming an increasingly important part of many people’s lives. In 2005, 51% of all private individuals in Sweden used mobile content services, a 4% increase year on year, with download services like ringtones, games and background images being the most popular (see diagram on next page).
Research in the US revealed that over 90% of people asked would go back home if they had forgotten their mobile phone, while the corresponding figure for a forgotten wallet was 60%.
Mobile phone penetration is increasing across all age groups.
In the 5-24 age group, basically 100% will have a mobile phone in 2007 (Mobile Youth 06). Additionally, young people are spending more of their disposable income on mobile phones and mobile services (see diagram on next page).
Research in Norway showed that mobile phones have a high status in the 6-13 age group. 58% of the so called trend- setters stated that mobile phones were one of their five biggest interests. The corresponding figure for the total 6-13 age group was 47% (TNC Gallup, Game & Mobile Report, 26 January 2006).
Consumer behavior has changed in many ways. The de- mand for mobile services has increased sharply through recent years, but for demand to keep increasing, the quality of services must improve. This applies to the quality of buying and deliv- ery processes, as well as actual product quality.
Satisfied customers become loyal customers, spreading news of their positive experiences to the people around them.
This is a prime factor for older and younger people listen- ing to people around them before taking decisions to buy goods. 92% of young people aged between 5 and 24 said word of mouth was an important factor affecting their buying deci- sions. 65% of the 5-24 age group said they told other people about what they liked (Mobile Youth 06).
the Mobile Services Market
Customer participation in making products is also becoming more important. Personalized visiting card services, where users add their own text or photos as an integrated part of products, is an obvious developmental step. For example, peo- ple interested in games or music are communicating with other people with similar interest by offering tips on various services or publishing personalized top tens or game high score lists.
From primarily being a youth phenomenon, there are now clear indications that the usage of mobile phone services is proliferating through age groups (see adjacent diagram).
Differing interests and drivers affect consumption in different age groups. Younger teens want to be part of a group and ac- cepted by their surroundings, where for example, the external features of mobile phones such as ringtones or background images are important. In slightly older age groups, the need to differentiate becomes important, and then alternative music becomes more interesting, while acceptance by a smaller group to identify with becomes important. People also become more interested in consumption for their own entertainment, and as a leisure activity, which means the interest in games and music increasing generally. More than half of all games are sold to the over-25s. The communities segment is also starting to become a mass-market phenomenon, with 68% of visitors to MySpace being over 25, and 52% being over 35. 55% of YouTube’s visitors are between 35 and 64, which means that the overall market is growing, and a somewhat older target group is con- tributing to greater purchasing power.
But looking ahead, the younger target group will continue to lead the way, and be first to use and adopt new mobile services.
200 300 400 500 600 700 800
0 3 6 9 12 15 18
% OF DISPOSABLE INCOME YEARLY SPEND, USD
Norway Sweden Finland Denmark
sPENdiNg oN MobilE tElEPhoNy/MobilE sErviCEs, 5-24 agE grouP
Source: Mobile Youth 06
0 5 10 15 20 25 30 35
%
2005 2004
Downloaded ring- tones, games, etc. SMS text voting Information or news services Reminders Surfing/wap Text to TV by SMS Positioning service Source: PTS, 2006
MobilE CoNtENt sErviCEs salEs iN swEdEN
BACKGROUND IMAGES RINGTONES
GREETING CARD/MESSAGES GAMES MUSIC SPORTS SCORES DATING
YEARS MobilE sErviCEs CoNsuMPtioN by agE grouP
Source: Mobile Youth 06
MarKet SCale
Aspiro sells its services to consumers in Norway, Sweden, Finland, Denmark, Estonia, Latvia and Lithuania. Aspiro is the Nordic and Baltic regional market leader in mobile content services, with between 10 and 30% of the total market in each country. The total market is for all premium sms/mms and wap billing, which means that figures include all text-based competitions and votes, etc. In its major services groups of ringtones, games and images/films, Aspiro has a far higher market share. In text-based directory inquiries, Aspiro is one of the Norwegian leaders. In 2006, estimated mobile content services sales were some SEK 970 m in Norway, SEK 850 m in Finland, SEK 450 m in Sweden and SEK 250 m in Denmark.
The market for mobile content services has grown briskly over the past five years—in 2005, the Nordic market grew by an average of 10%, and by an average of some 15% in 2006.
The ringtones, images/film clips and games services segments grew somewhat, while the biggest growth in 2006 was from text activity for competitions, votes and other interactivity.
Aspiro expects the total mobile content services market to remain in healthy growth in 2007, with the demand for music, videos and search services rising particularly. Demand for ring- tones and background images has stagnated, and is expected to decline somewhat ahead.
CoMpetItorS
Mergers and acquisitions are a major feature on the mobile content services market. Aspiro is the only major player in the Nordic and Baltic regions, while the major content distributors in the rest of Europe are:
• Buongiorno Vitaminic (Italy)—quoted on Borsa Italiana
• Index Multimedia (France)—quoted on Euronext Paris
• iTouch (UK)—owned by For-side of Japan, formerly quoted on the London Stock Exchange
• Jamba (Germany)—owned by News Corporation, which also owns Fox Entertainment (thus a mobile partner to the MySpace community)
• Jet Multimédia (France)—quoted on Euronext Paris
• LaNetro Zed (Spain)—owned by the Wisdom Entertainment Group
• Monstermob (UK)—quoted on the London Stock Exchange
The largest structural deals conducted in 2006 in Europe was Monstermob’s acquisition of the two Chinese businesses M Dream and W-Infinity Communications, the UK’s Mobile Stream’s acquisitions of Cyoshi Mobile and Mobilemode, Jet Multimedia’s buyout of Avantis of Poland, Buongiorno Vitaminic’s takeover of Rocket Mobile of the US, and finally, Verisign’s sale of Jamba to News Corporation of the US. In February 2007, LaNetro Zed acquired a majority stake in Monstermob.
new SerVICeS
Aspiro expects the demand for mobile TV and community services to increase sharply when the penetration of more sophisticated handsets, resulting from the build-out of 3G that has occurred in recent years, attains critical mass in Aspiro’s target groups.
The ‘Operations’ section reviews the market for each services segment.
Understanding consumers’ everyday lives and needs is central to the mobile services market’s evolution. The drivers differ:
• Basically everyone needs to communicate, which is the actual foundation of mobile services. Examples of products that satisfy this need are sending messages and mobile greeting cards, as well as paging.
• Apart from communication, there are straightforward social needs, which are about having fun when people meet, inter- acting, playing, gaming and challenging each other. Examples of products that satisfy this need are multiplayer games, community services, novelty video clips and various types of audio clips.
• Many people have a considerable need to assert themselves or project an image, particularly younger consumers.
Examples of this behavior include people putting their mobiles on the table as soon as they sit down. This trans- mits a signal about someone’s identity, by showing the phone, background image or ringtone they have. Examples of products in this needs segment include ringtones, back- ground images and ringback tones.
• Consumers also have a need for entertainment and leisure, which become more important with age. Examples include listening to music, audio books, gaming, reading news and watching video and TV.
CoNsuMPtioN drivErs—MobilE sErviCEs
our ValueS anD prInCIpleS
Aspiro will have one clear goal that all staff work towards. As- piro’s overall goal is to deliver world-class mobile experiences that really make a difference to people’s everyday lives. The company’s values are intended to support this goal.
leadership and Credibility
Aspiro is a market leader, and will thus lead progress in its sector. Leadership will feature in everything Aspiro does, which extends into day-to-day activities. This implies high standards on the people leading staff in a growing organization. Within Aspiro, leadership will feature responsiveness and openness; all leaders will endeavor to set an example and communicate clear goals.
proactivity and a Go-ahead attitude
Aspiro is active in a sector in rapid change in terms of its serv- ices and technology. Aspiro’s target group wants it to always be first to offer the latest. What was attractive yesterday may not be so today. Responsiveness and trend-watching are necessary to keep up. Brisk technological progress on the mobile phone market also sets high standards for innovation and flexibility.
togetherness and Mutual respect
Aspiro is the integration of a number of enterprises with operations in seven countries. Aspiro will utilize the dynamism and diversity it possesses, with everyone having respect for each other’s know-how in each country and function. A high proportion of Aspiro’s operations are similar in each country, and thus, we must benefit from each other. Aspiro will stimu- late this by creating processes that promote collaboration and utilize the aggregate know-how in the whole group.
the prInCIpleS oF aSpIro’S huMan reSourCeS polICy
Aspiro’s human resources policy will be well rooted in the legislation and contracts that formalize conditions on the labor market. Aspiro’s human resources policy will have natural links to the values that are fundamental to the company’s decisions and actions. A summary of Aspiro’s principles:
• High ethical standards
• Unequivocal quality standards
• Good internal communication and participation
• Clear responsibility for goals and results
• All staff having high skills levels, and goal-oriented skills enhancement
• Motivation and recognition of performance
SKIllS enhanCeMent anD MotIVatIon Aspiro’s staff will gain sufficient, relevant developmental opportunities to realize the differing expectations of each indi- vidual’s working situation. High skills in Aspiro’s strategic seg- ments, and the will to enhance them rationally, comprise a key competitive edge for the company. Aspiro will have a system- atic and needs-oriented skills enhancement process, intended to enable its staff to progress with the company so Aspiro can lead progress in the sector.
All staff positively committing to operations and being ac- countable for achieving goals is vital to Aspiro’s success. Highly motivated staff at all levels represent an important competitive edge for Aspiro, and thus a means of achieving established goals. Corporate managers possessing knowledge of staff quali- ties, ambitions and wishes is viewed as a strategic issue for suc- cess. Relevant recognition and rewards for good performance and achieved results are methods to motivate staff.
hIGhly QualIFIeD proFeSSIonalS
Aspiro is an out-and-out knowledge business, where staff skills are decisive to the company’s progress; 81% of Aspiro’s employees are graduates whose skills extend from marketing, sales, business development and accounting to Java technol- ogy, programming, design and traditional/digital advertising production.
FoCuSInG on a GooD worKInG enVIronMent Aspiro’s working environment should help employees get on together, feel proud of the company, make progress, and feel good physically and psychologically. Working environment issues are part of daily activities in collaboration between line managers and staff. Planning a positive working environment should proceed from an overall assessment, and be part of business planning. Aspiro pursues all staff feeling togetherness
Know-how and Values
and participating in the company. All staff are encouraged to contribute actively to a positive working environment by being accountable for their activities and showing mutual considera- tion. The working environment should be tailored to the dif- ferent conditions facing staff members. Decoration, premises and equipment should be of a high standard. The purpose of environmental activities is to increase satisfaction at work and maintain low sickness absence.
Staff turnover was some 11% in 2006. Sickness absence for the Aspiro group was 3% in 2006. No accidents at work occurred.
orGanIzatIonal reSourCeS
Aspiro had 134 employees at year-end. Almost half of employ- ees are stationed in Norway, from where operating activities are managed. The central technology and product functions are located in Norway. The company’s accounting and cor- porate communications function are in Sweden. With Aspiro starting its initiatives in new services segments, these activities had been organized into separate units to sharpen focus and enable growth according to each segment’s conditions.
Technology and product sourcing are centralized in the mobile download services area, while sales and some marketing functions are located at offices in Norway, Sweden, Finland, Denmark, Estonia, Latvia and Lithuania. More information on the company’s organizational resources is published in the
‘Corporate Governance’ section.
EMPloyEEs, KEy FigurEs 2006 2005 2004 2003
Ave. no. of employees 133 115 65 30
No. of employees at year-end 134 112 59 22
Share of women, % 26 22 35 11
Average age 33 33 35 36
Share of graduates, % 81 80 90 88
Average no. of years’ work
experience 11 10 - 10
Sickness absence, % 3.00 1.98 - 3.92
Staff turnover, %* 11 11 15 23
Net sales per employee, SEK 000 3,367.0 3,546.6 1,992.7 605.2 Value-added per employee,
SEK 000 2,715.8 2,874.9 1,642.9 426.6
* Excluding staff downsizing conducted coincident with restructuring.
0 10 20 30 40 50 NO.
<20 25-30 31-35 36-40 41-45 >46 YEARS agE ProFilE
EduCatioNal staNdard
0 10 20 30 40 50 60
%
Compulsory/
senior high school Undergraduates Post-graduates
lENgth oF sErviCE
0 10 20 30 40 50 60 NO.
<1 year 2-3 years 4-5 years >5 years
Aspiro sells its services direct to consumers and to consumers via various partnerships. Success with mobile experience-re- lated services necessitates understanding of what the market is demanding and world-class technology skills, two segments where Aspiro is in a unique position.
SaleS By SerVICe Group, 2006
sErviCE grouP NEt salEs, sEK M salEs sharE
Ringtones/music 141.1 32%
Information/search services 96.5 22%
Games 78.9 18%
Images/film 68.5 15%
Mobile TV* 1.7 0%
Other 61.1 13%
* Fourth quarter only.
SaleS anD proFIt By SaleS Channel, 2006
salEs ChaNNEl NEt salEs salEs sharE
ProFit aFtEr dirECt Costs*
Media Partners, SEK m 227.1 51% 78.9
Aspiro Channels, SEK m 124.8 28% 104.1
Advertising, SEK m 95.9 21% 21.9
* Net sales less costs of content procurement, advertising and revenue share.
SupplIerS
Aspiro collaborates with a wide array of content providers; it has agreements with leading multinational record labels like SonyBMG, EMI, Universal Music and Warner Music, as well as various Nordic record labels to access local content. These agreements cover rights to music and ringtone distribution, access to artist images and promotional material.
Aspiro distributes games from sector leaders Electronic Arts, Vivendi Universal, Mforma, Glu, Real Networks and IPlay. Aspiro also possesses rights to distribute images, anima- tions and video from sources including Sony Pictures and
Warner Bros. Aspiro continuously screens potential and exist- ing suppliers to secure access to the right content.
Within search services, Aspiro collaborates with subcon- tractors like Eniro, Sesam, and Google.
Secure local market positioning and well-extended distri- bution networks for download services to mobile phones in the Nordic and Baltic region are what makes Aspiro an attractive partner for the prime content providers.
GeoGraphICal MarKetS
Aspiro sells its services to consumers in the Nordic and Baltic regions. In the countries Aspiro supplies services direct to con- sumers, the company should have market leadership to attain healthy profitability and economies of scale. Consistent with its strategy, the Board decided to liquidate its UK and Spanish operations in early 2006, where Aspiro had very limited market shares. The market arena is global in those operations where Aspiro supplies solutions to businesses, such as mobile TV and music.
Norway
Sales share: 49% (43%)
Share of employee headcount: 36% (34%) Proprietary distribution
channel/brands: Inpoc, Cellus, Mobilehits and Boomi
Services supplied: Download, community and search services plus mobile TV (not direct to the consumer) Key customers/partners and
distribution channels Egmont, Her og Nå, Hjemmet Mortensen, Netcom, P4, Se og Hør, Telenor, TV2, TV3 and VG et al.
Scale of market*: SEK 970 m (SEK 850 m)
Market share**: 25-30% (30%)
Local competitors: Aller Edge, Eurobate, Unwire, Jamba and Paragallo
Local market summary: Competition from major media corporations has increased. In mobile phone download services, competition has reduced because of the greater complexity of premium content like Realtones and recognized game titles.
operations
Aspiro’s decision to extend its offering and start initiatives in a number of adjacent services
segments has resulted in its operations being divided into five services segments: mobile phone
download services, mobile TV, search services, communities and mobile marketing.
swEdEN
Sales share: 18% (19%)
Share of employee headcount: 23% (22%) Proprietary distribution
channel/brands: Inpoc, Cellus, Mobilehits and Boomi
Services supplied: Download and community services plus mobile TV (not direct to the consumer)
Key customers/partners and
distribution channels 3, Aftonbladet, Egmont, Halebop, MSN, Tele2, Telenor and TeliaSonera et al.
Scale of market*: SEK 450 m (SEK 400 m)
Market share**: 25-30% (25-30%)
Local competitors: Jamba, Eurobate, Emunity, Unwire, Zed, Plusfour- six, Omnifone, Inprodicon and Musicbrigade Local market summary: Competition on operator portals has increased
somewhat from other players replicating Aspiro’s concepts. Record labels are becoming more in- terested in mobile channels. Sharper focus from operators on content services, with players like Telia and Telenor starting global organizations to optimize growth.
FiNlaNd
Sales share: 13% (15%)
Share of employee headcount: 24% (23%) Proprietary distribution
channel/brands: Buumi, MAF and Känny Services supplied: Download and search services Key customers/partners and
distribution channels City Press, DNA, Helsingin Sanomat, IRC-Gal- leria, Radio NRJ, Saunalahti, TeleFinland and TeliaSonera et al.
Scale of market*: SEK 850 m (SEK 650 m)
Market share**: 10-15% (15-20%)
Local competitors: Zed, MixMobile, Elisa and Jamba
Local market summary: Competition has increased. More advertising for mobile content, particularly on TV. Opera- tors have started to invest in new proprietary technology.
dENMarK
Sales share: 8% (10%)
Share of employee headcount: 5% (5%) Proprietary distribution
channel/brands: Inpoc and Mobilehits Services supplied: Download services Key customers/partners and
distribution channels 3 and Sonofon et al.
Scale of market*: SEK 250 m (SEK 210 m)
Market share**: 20% (30%)
Local competitors: TDC Fly, iLoop and Responsfabrikken Local market summary: The Danish mobile download services market is
heavily regulated. Competition from traditional sector players reduced somewhat in the year due to factors including increased regulation and greater complexity of sales of mobile download services. Competition increased somewhat from operator portals.
baltiC statEs
Sales share: 5% (5%)
Share of employee headcount: 8% (11%) Proprietary distribution
channel/brands: Inpoc, Cellus, Super and Gamestation Services supplied: Download services
Key customers/partners and
distribution channels Kanal2, LTV, Postimees, Respublika, Rate.ee, Tele2, TV5 and Zmones et al.
Scale of market*: -
Market share**: 15-20% by country (15-20%)
Local competitors: One, Laika Mobile, Verozona, Vibro Mobile and Yoyota (acquired by Aspiro in January 2007) Local market summary: Small local markets with a variety of small
players. Aspiro is the biggest player in the Baltic region.
Figures in brackets are for 2005.
* Estimate (consumer price excluding sales tax) of the total mobile services market (the value of premium sms/mms and wap billing).
** Share of the total mobile services market (the value of premium sms/mms and wap billing). Aspiro has a far higher market share in the Nordic region in the music, games and image/film product groups.
