Analysts Predict Small, Successful Niche For Mobile Video

Analysts Predict Small, Successful Niche For Mobile Video
Simplicity, Familiarity Should Spur Usage
06.21.06


By Bary Alyssa Johnson
On Wednesday, analyst firm ABI Research released the results of its study on the "fledgling" market for mobile television, which the firm forecasts will continue to grow both exponentially as well as internationally.

The Broadcast and Unicast Mobile TV Services study was conducted by principal analyst Ken Hyers, and examined market dynamics including industry players, enabling technologies and business models. Among the key findings, Hyers said he expects to see upwards of 500 million international mobile TV subscribers by 2011.

In a similar study, Jupiter Research found that the American mobile video market will generate approximately $501 million by 2010, although it will only represent 5 percent penetration among mobile subscribers. In other words, by 2010, 12 million of the 246 million estimated cell phone subscribers in the U.S. will use mobile video regularly.

Analysts said that the concept of mobile video -- essentially TV on the road, with ads -- was familiar to both U.S. consumers and broadcasters, who could see it as an extension of their existing TV content contracts. Still, Hyers noted that, like television, a communications infrastructure would have to be in place before the technology could take off.

"South Korea and Japan are the early adopters, but European and North American markets are not far behind, with three contenders planning to introduce mobile video broadcast services in the United States over the next 12 to 18 months," ABI's Hyers noted in a statement. "Most markets will not be able to support more than two broadcast networks due to the high cost of building them, and the fact that most markets only have three or four major mobile operators selling wireless services to subscribers."

Qualcomm's MediaFLO mobile video broadcast service is one of three competing services that ABI expects to enter the American market. MediaFLO announced plans to launch its service later this year, according to the research firm. Crown Castle's Modeo and Aloha Partner's Hiwire services will make their debut at some point in 2007.

Due to the high cost of building broadcast networks and limited access to major mobile operators that offer wireless services, ABI maintains that there may not be room in the mobile video market for all three services. Success in the U.S. will likely depend on commitment to mobile operators.

"MediaFLO has been built for this purpose from the ground up, and…Verizon Wireless has already committed to it," Hyers said. "Modeo and Hiwire are competing for the business of just three major operators and one of them will fail. Modeo plans to be faster to market, and if it signs a major operator quickly, its battle is half-won. On the other hand, in Hiwire's favor is its large (12 MHz) and valuable swath of spectrum with more favorable characteristics than Modeo's."

"The service we expect to offer on the MediaFLO network would be multicast broadcasts, which are essentially many different channels that would be pre-programmed -- similar to cable TV," said Jeffrey Nelson, corporate communications director for Verizon Wireless, told PC Magazine. "The Qualcomm broadcast service is not 'traditional' TV – it will have different kinds of programming…[because] we don't think many people will sit down for an hour to watch an event on their mobile phone. We don't view our multimedia services as a substitute for TV, bur rather an extension of existing media." Continued...

Modeo and MediaFLO were the only contenders in the mobile video game until Aloha Partners and its Hiwire service showed up on the scene. MediaFLO plans to launch its network based on proprietary broadcast technology developed by Qualcomm, while Modeo is building its own Digital Video Broadcast – Handheld (DVB-H) network. Hiwire also boasts a DVB-H network with a considerable broadcast spectrum space.

DVB-H technology was developed by several major presences in the IT industry, including Nokia, Motorola, Ericsson, Samsung, and more. The companies created this "open" standard in a bid to drive market adoption by increasing competition and subsequently driving down prices.

"The key question is whether Aloha's Hiwire will meet the dual priorities of being based on an 'open' standard, like DVB-H, and being on an ideal frequency spectrum like 700 MHz," Hyers said. "If it is able to trump DVB-H and MediaFLO in these respects, Hiwire might just prove to be the tortoise that beats the hare to the finish line."

"Mobile video adoption is important to wireless carriers to continue trying to figure out ways to make additional money, and I don't blame them," said Todd Chanko, analyst at Jupiter Research, in an interview. "The market for cell phone subscribers is slowing down…so the carriers are making good money from subscriptions, but they need to make more money and the way to do that with already-existing subscribers is charging for additional services – basically they're thinking about video."

"We asked consumers earlier this year what features were most important in considering their next cell phone purchase – text messaging was a very important feature but accessing video content was the lowest on the list," Chanko said. "As of this year the idea that a phone can play video was not considered important enough for the majority of consumers in terms of planning their next cell phone purchase. That speaks volumes to me – it says right now consumers in this country aren't really interested in the 'gee-whiz' factor, they want to use their phones to make calls and send text messages."

ABI addressed other issues related to the mobile TV market including various business models and the possibility of piracy when it comes to copyrighted content, although a company representative was not available to elaborate on these topics.

"Mobile video is very much on the horizon and I think they expect to deliver more and more broadcast content directly to your mobile phone," said Deborah Wilcox, a partner with Baker & Hostetler LLP in Columbus, Ohio, and co-chair of the firm's Intellectual Property (IP) Litigation practice. "We know technology facilitates authorized broadcasts, but it can facilitate unauthorized broadcasts too."

Wilcox maintains that although piracy is a major issue on the Internet, it is not yet clear whether such problems will extend to the mobile video market.

"The Supreme Court Grokster case found that when you're using technology that enables people to share information and are inducing people to copy copyrighted works you can be found liable for copyright infringement," Wilcox said. "When this new technology comes out you have to see what developers are telling users to do with it – it becomes problematic when someone starts profiting from content copied off their mobile phone. It seems like it would be less of a problem than issues like P2P file sharing that goes on over the Internet."

In terms of business models for mobile video distribution, Wilcox and Chanko agree that an ad-supported approach would likely be the most logical.

"An ad-supported business model would be similar to how television is today – when you're getting content on your phone you'll be watching ads as well as the broadcast programming," Wilcox said. "The advertising model lets advertisers reach out to mobile phone users. This is a way to reach users who are more on-the-go and not sitting at home in their living rooms."

"Consumers can get content for free if it's supported by ads, but somebody has got to pay for content to be formatted and delivered via phone," Chanko said. "ABC and CBS are more than happy to enter the mobile video business because it's incremental income for them. What traditional content providers are doing is leveraging existing brands – this is a way to reinforce the popularity of existing programming and make additional cash on the side."

Last edited Jul 12, 2006 - Note created Jun 26, 2006
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