KIRILL PETROV and his two partners are conquering the markets for mobile pictures and music in India and Mexico. How? They learn to draw Hindu gods and follow the plot of Mexican TV series

Last year, the St. Petersburg company i-Free, which sells mobile content, set out to explore the vast Indian market. The search for local partners began, a joint project was hotly discussed for several weeks... And then the Indians disappeared. Lost interest? Not at all. Two weeks later they returned to negotiations as if nothing had happened. People who know local traditions explained to St. Petersburg entrepreneurs: in India this is the order of the day - if a businessman has more important things to do, he is distracted by them without warning.

Unfamiliar business ethics are not so bad. The i-Free company had to suffer a lot to find the key to the heart of the Indian consumer: not to sell a melody from “Boomer” or the TV series “Brigada” to a resident of Mumbai. So why was all this started? Partners from i-Free would not have made their “last push to the South” if stagnation had not begun on the Russian market.

The situation has changed in just a few years. In 2001, three young IT consultants from St. Petersburg, Kirill Petrov, Kirill Gorynya and Sergey Shulga, decided that an explosion in mass demand for pictures and ringtones for mobile phones was expected in Russia. “Cellular communications are like television. All segments of the population are gradually beginning to use it,” explains Petrov, who took over the post of managing director of the company. They turned out to be right, but their proposal did not meet with a response from mobile operators, who then had enough worries about developing networks. And the very idea of selling a virtual product after the bubble of the Internet economy burst did not arouse enthusiasm.

I had to act at my own peril and risk. In December 2002, the newborn company i-Free distributed advertising cards: it was offered to download several dozen New Year's pictures and melodies via SMS. The $1,000 spent on postcards could not be returned, but the company earned $25,000 from voice reference services before the new year.

Further more. Cellular content has become fashionable. The pages of tabloids and TV guides are filled with advertisements for mobile pictures and ringtones that can be downloaded for no more than a dollar. If in 2003 i-Free's turnover was $834,000, then in 2004 it was already $27.9 million, and last year it reached an incredible $40 million for a small technology company. In total, i-Free has about 4,000 melodies and more than 10,000 pictures, including animated ones. Moreover, for every $1 earned from ringtones, only $0.4 comes from the sale of pictures. The disproportion can be explained simply: the call makes the owner of the phone stand out more clearly; few people will pay attention to the picture. Screensavers and ringtones bring i-Free about 60% of its revenue, the rest comes from interactive games, dating services and SMS voting.

The trade in ringtones and pictures quickly became a serious industry. True, the rapid, exponential growth of the market lasted only a couple of years, and then slowed down to tens of percent per year. Analysts from the J'son & Partners agency promised the market a turnover of $550–650 million for 2005. In reality, it did not exceed $330 million. Last spring there was even a recession: buying new melodies and pictures ceased to be a trendy entertainment. Content creators and cell phone operators (who receive 30-50% of music and image sales) are trying to spur demand. Pictures for phones are becoming better and better; polyphonic ringtones (melodies specially arranged for mobile phones) are being replaced by “realtones” - fragments of real music and even full-size soundtracks. New products helped overcome the recession, but in turn created new problems for the company.

The fact is that wireless data transmission technologies are still imperfect. High-resolution images and music clips cannot be received via SMS, they are only available using WAP (a truncated version of the Internet for mobile phones). For a subscriber, using WAP is not an easy task. In every fifth case, the subscriber simply fails to cope with the task: in response to an SMS request, instead of the desired hit, he receives a WAP link - using it, he still needs to go to the Internet site and download music from there. Moreover, due to communication problems, the download is not always successful. As a result, only 46% of attempts to download paid mobile content are successful. Another nuisance for lovers of bright pictures and fashionable melodies: transferring a file via a WAP connection is more expensive than sending an SMS. If the file is large, then instead of the $1 indicated in the advertisement, the subscriber pays the entire $5 (and the main consumer of the service is young people from 14 to 27 years old).

At the same time, there are more than enough people who want to get rich by trading mobile content. The market already has several dozen participants. About 60% of the market is controlled by the five largest firms, and if in 2002-2003 their profits were measured in the hundreds of percent, now, in order to stay afloat, companies, according to their admission, have to spend from 30% to 70% of their income on advertising. “Out of the 10 leaders in the Russian content market, only 3–4 companies are profitable today,” says Petrov.

In general, going abroad in such a situation is a completely natural step. The first companies to cross the border were Playfon (5% of the Russian mobile content market, one of the leading providers of games for phones) and i-Free, which had already invested $3 million outside Russia. Playfon operates in Sweden, Great Britain, Hong Kong and Ukraine. According to Ilya Gorodetsky, head of Playfon's information department, adapting the games for other countries turned out to be easy; problems arise with music and pictures.

i-Free did well abroad at first. Having started working in Ukraine in May 2004, the company sold more than $3 million worth of mobile goods there. The first steps showed that the same things are generally popular here as in Russia, and local specifics do not pose big problems for the company. For example, in Ukraine they fell in love with the animal Spunya painted by Kharkov artists (but not in Russia). During the Orange Revolution, the “Tak!” logo became a bestseller. Naturally, the melodies of the Ukrainian groups “Okean Elzy” and “Vopli Vidoplyasova” go well. In Kazakhstan, where i-Free also opened an office, the share of local music and pictures was only 5%, but many Russian hits were surpassed by the ringtone “Fly Away” by the Kazakh group A-studio.

In the summer of 2005, i-Free decided to try its hand in foreign countries. Sales began in India in November. For a population of 1.15 billion, there are only 65 million mobile subscribers, and their number is growing rapidly. And in December, a business started in Mexico, where out of 105 million residents, 40 million use cell phones. There was almost no need to change technology, but the expectation that Indians would buy Western pictures and music, as happens in Russia, did not materialize. “Both consumer tastes and business practices diverged 99% from our expectations,” admits Nikolai Matveev, i-Free coordinator for working with India. “Psychology, traditions, ideals, canons of beauty—everything is different here.”

What has i-Free learned over the past few months of working in India? The share of local content in the company's Indian sales reaches 90%. The main purveyor of style, cultural icons and music here is Bollywood, a group of film studios centered in Mumbai (formerly Bombay). The share of Bollywood content among ringtones for cell phones is more than 90%, among pictures and games - more than 50%.

In India, hits from a future film are promoted on discs and on the radio 2-3 months before the premiere (the success of the music often affects the success of the film). It would seem that there is nothing simpler - invest a little money in advertising and sell ringtones. But Bollywood is a large, closed and bureaucratic industry. The press often mentions connections between film studios and actors and crime. The rights to music and images from the film in India belong to the studios, and it is difficult to negotiate with their owners. They prefer to sell the rights to one willing buyer at an inflated price. Copyright holders get about 30% of the money received from subscribers, while in Russia it is 10%. And the content itself is sold here three times cheaper than in our country.

Another trendsetter in this industry is the premier Indian sport of cricket. The emblems of local teams and portraits of players are going great. Images of Hindu deities sell well. Residents of India also readily order mantras via SMS. They forward the ones they think are most useful to each other - this is how Russians exchange jokes via SMS.

At the same time, there are great restrictions on erotica in the country of the Kama Sutra. Girls can only be depicted in one-piece swimsuits. Models have to be selected locally, but light-skinned: tanning is not popular in India. Erotic jokes are completely prohibited. What about dating via SMS? This is permissible, but with reservations: acquaintance can pursue only two goals (at least formally) - innocent friendship or immediately marriage.

India also does not have the usual channel for advertising mobile content - high-circulation “yellow” publications such as the Russian Komsomolskaya Pravda or Zhizn. You have to advertise in high-quality press, thick newspapers “for the whole family,” such as the conservative Times of India.

Maybe it's cheap to do business here? Nothing of the kind, says i-Free Director for International Development Alexey Korobkov. Even opening an office in India is a problem. A good office here costs about $20 per sq. m. m per month, approximately the same as in St. Petersburg. So both pictures and music for India are created in St. Petersburg. And the office in Mumbai only formulates orders and selects materials. Even hiring staff has local specificities. Most Indians live without passports; not every village has numbered houses, so one day an employee may simply disappear.

In Mexico, the creators of i-Free say, it is easier to work. Western films and music are very popular here. But still, half of the melodies and pictures that the company sells are local. Mexican television series are unrivaled, says i-Free coordinator for Mexico Maxim Goloshchapov. “The assortment” should include not only melodies and portraits of soap opera characters, but also mailing lists with TV series news. Mexican pop music and photographs of local football players are in good demand.

By the way, now i-Free knows: our country, in terms of the degree of “cultural autonomy,” occupies an intermediate position between India and Mexico. Our share of local content is about 60%. The taste preferences of Russians rarely change. Until now, the top sellers are the ringtone from the 2003 movie “Boomer,” and the most popular pictures are girls and kittens. New for the year are “non-musical” ringtones. Russians especially like “idiotic laughter” and “heavy swearing.”

Having learned to understand the tastes of Indians, Mexicans and compatriots, the founders of i-Free are preparing to conquer Brazil and China.

Only numbers

12–15 million - this is how many times Sergei Shnurov’s melody from the film “Boomer” was downloaded. Subscribers paid 7–9 times more for it than moviegoers paid for watching the film itself ($1.7 million).
More than 60% of cellular subscribers in the Moscow region have purchased a mobile content service at least once.
100 million pictures and melodies have been downloaded by i-Free clients throughout its history.
8% of revenue comes from dating and communication services for mobile content sellers.

Source: i-Free, Forbes rating

From "Boomer" to Shiva