ORGANISING MOBILE TV - Build it - but will they come?
Companies wanting to succeed in mobile TV provision can no longer ignore the wider ecosystem 
and rely purely on the technology to drive demand explains Markus Hochenbleicher
Is mobile TV going to be another technology with huge potential destined to failure? The adage ‘build it and they will come' no longer applies to new technology services and if this technology is going to be successful then we need to step back and look at the wider ecosystem that makes up the market. For example, why has football been one of the major success stories in encouraging mobile TV take-up? 3 Italia gained 400k subscriptions in 10 months, equivalent to six per cent of its base when it launched its mobile TV services in time for the world-cup. It has then successfully managed to leverage this take-up and continued this growth beyond the world-cup. The answer is simple - football supporters don't care about mobile TV technology. What they care about is receiving football on a sociably acceptable handset when they are not able to watch it through traditional mediums, utilising packages that are geared around their needs and wallet.
Success is dependent on the whole ecosystem working together to deliver against the value chain. Companies have been guilty of often releasing technology for technology's sake, handing a product, which does not resemble the market, to marketing, expecting them to make a success out of it. What the value chain shows is how the different work streams across the value chain need to work together to target the market on its level.
Making users pay
Creating combinations of the value chain will lead to mobile TV revenue generation but finance departments need to be aware that the time revenue will be long, as many success stories rely on initial free services and subsidised handsets.
What operators and service providers can expect to charge
In 2005/2006 O2 and Arquiva conducted an extensive trial in Oxford, UK with several hundred users. Oxford O2 participants watched up to 4 hours per week. 85 per cent of the users were satisfied with the service and 72 per cent indicated that they would take up the service within 12 months at an acceptable price. The stumbling block was current data tariffs that could cost over £400 per month whereas data from recently launched mobile TV services in Korea, US and Italy suggest a price point of £5 to £10 per month.
Low prices alone do not guarantee success for mobile TV
In the UK Virgin Media with BT Movio had a working technical delivery platform that achieved 10,000 subscribers and was turned off in mid-2007. They offered a free mobile TV service in a bundle with voice minutes, one type of handset and five channels. Similarly the US broadcaster Crown Castle turned off its mobile TV network in New York called Modeo, in mid 2007.
Creating demand depends on the combination of three key elements: themed content, appealing handsets and attractive prices
A clear demonstration of this combination working is in Korea. TU Media launched a mobile TV service based on a satellite infrastructure in 2005. The service includes 15 TV channels, 19 radio channels, real-time traffic information and mobile shopping. Since reducing the monthly price below $11 take up accelerated and in mid-March 2007 TU had 1.15 million customers and is expecting to sign up another million during 2007.
3 Italia points out that thematic channel, primarily sports and news, are the main drivers for adoption. 70 per cent of viewers indicated that they preferred those channels. Usage peaks are through lunch and before dinner and appears to be mainly during outdoor activities. After all who would not like to spend the lunch break with a sandwich in the sunny piazza watching the news, or drinking a glass of Italian wine in the garden before dinner checking the goals of the day? 3 Italia offers various payment options starting at P3 per day to a full service package including voice for P49 per month.
With three competing mobile operators, TIM, 3 Italia and Vodafone, offering alternative services, Italy is currently the most competitive mobile TV market in Europe. Italy however also exemplifies how difficult the position of mobile network operators is. Content distribution, the natural home of network operators, is highly contested. Broadcast mobile TV does not necessarily require an operator's wireless network. Standards such as DVB-H allow market participants to build TV broadcast networks similar to today's digital TV networks, for example Freeview in the UK. This enables content aggregators to set up their own networks and distribute content to portable digital TV receivers, plug-ins for existing media players (iPod, PSP, etc.), or mobile TV ready mobile phones.
Mediaset, the Italian TV and media company owned by Silvio Berlusconi has acquired broadcast frequencies and set up a mobile TV network. TIM and Vodafone Italy are both using services from Mediaset in order to supply their subscribers with mobile TV services. The role of those operators is limited to subsidising the handset and billing the end customer for the service. They do not control the distribution of the content, nor what content is provided and can hardly use it for differentiation.
The danger for mobile operators is that they loose control over handsets, which they have used so far to tie in customers to their own add-on services and content.
Becoming media companies
For media distribution 3 Italia has gone a different way than the other mobile operators. They have built their own broadcasting network covering 75 per cent of the country. This gives 3 Italia the freedom to decide on the type of content for their customers. 3 Italia still use a wholesale content aggregation service from Mediaset but has also started to produce their own content. In particular they have developed free news and sports channels as well as recently inaugurating their own TV studios. Potentially 3 Italia will be able to source or produce content that allows them to differentiate their offer towards end-customers.
The downside is that the costs of such a strategy are high. 3 Italia has spent P80 million on the network alone. Further investments into media rights, TV studios etc. are required. So far, 3 Italia appears to rely primarily on end customer tariff packages to finance this expansion but there are further revenue earning possibilities. One of these could be advertising, particularly if these can be targeted to defined user groups. In the UK the new MVNO Blyk has started to subsidize mobile telephony for young users who receive advertising SMS and MMS messages.
In order to take advantage of this P2 billion market, companies can no longer ignore the wider ecosystem and rely on the technology to drive demand. The perfect ecosystem is attained from the right mix of the value chain, shaping the supporting organisation around this. The key rules are:
- The road to making money and achieving the business case is long
- Thematic channels for specific user groups are a main driver of adoption
- Share the burden, you don't need to own the whole value chain, just exploit it
- Differentiation and positioning are the most difficult elements to achieve
Above all the wave of successes and failures within the mobile TV market has taught us one important lesson, technology is only important to engineers.
Markus Hochenbleicher is Consultant in Communications, Media and Entertainment at PA Consulting Group, and can be contacted via tel: +44 207 881 3365; e-mail: innovation@paconsulting.com
www.paconsulting.com/industries/telecoms
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