For several years now, the mobile TV industry has been searching for the elusive business model that will drive mass adoption. Analysts continue to paint a rosy picture of mobile TV in the future, with Juniper Research predicting that the global user base for mobile broadcast TV services is likely to exceed 330 million by the end of 2013. But despite the optimistic outlook, Diana Jovin notes that it remains unclear how we will reach these future heights when compared to where we are today
In most countries today mobile TV in its current form represents a complex interaction between content owners, network operators and standards organisations. Broadcasters own the relationships with the content owners, mobile operators own the consumer relationships, spectrum and network infrastructure, and there are a myriad of competing standards being pushed by a variety of commercial organisations and regulators. Amidst the discussions of content rights, standards, spectrum and infrastructure - that is how to deliver mobile TV - it is little surprise that the industry has struggled with a more important question - what does the consumer want from mobile TV?
In this last year a clear answer to the consumer question has emerged, and it is one that simplifies the complicated relationship between broadcasters, content owners and operators. Over the last year, consumers have indicated a strong preference for a free-to-air model, which provides them with the same terrestrial over-the-air programming that they know and watch on their TV at home, but simply received on their mobile phone rather than their living room television set. This gives the consumer content using existing broadcast infrastructure that does not require the operator to make considerably outlay on capital expenditures. From a commercial perspective, it has the potential to stimulate a variety of related service and premium markets.
Following on the heels of successful free-to-air mobile TV rollouts in Japan and Korea, frequently cited as the industry's leading mobile TV success stories, more than 20 million consumers in analogue broadcast TV markets chose to purchase TV handsets that receive free-to-air terrestrial broadcast signals - all in a brief eighteen month period between mid-2007 and the end of 2008. In response to this burgeoning consumer interest, several of the leading operators in operator-controlled markets, such as Latin America, have now included these handsets in their mobile phone portfolio. This is a clear indicator, when compared to the more sluggish adoption of subscription mobile TV services in other parts of the world - over the same period of time - that the free-to-air mobile TV model works and can appeal to both the consumer and the operator.
In Europe, the mobile TV industry has been preoccupied with decisions regarding which standard should be the dominant one to drive mobile TV adoption forward, citing fragmentation of standards as impeding progress towards viable consumer solutions. Early in 2008 Viviane Reding announced that the European Commission would be endorsing DVB-H as the preferred technology for terrestrial mobile broadcasting. Yet by late 2008 LG revealed the launch of its latest touch-screen device into the European market equipped with a DVB-T mobile TV tuner putting it in direct conflict with the EU's decision to support DVB-H. With the industry focused on standards discussions, an important question remains in the background: what do these standards mean for the consumer? Looking more closely, mobile TV based on DVB-H or another similar mobile broadcast standard provides content that is different from content traditionally received on a TV set at home - and is usually accompanied by a recurring service fee. In contrast, DVB-T transforms a mobile phone into a portable television set, delivering the same free and familiar content that one would view on a conventional set at home.
To date, mobile TV has been trialed and deployed in various markets in several forms. In many markets, mobile TV is offered as a service, which includes a custom content package offered by an operator for a monthly service fee. These are typically pay TV services delivered via digital broadcast standards such as DVB-H or FLO, or streaming services delivered via WiFi or 3G and an accompanying data plan. The challenge with these services is that they require the consumer to become familiar with a content package that they're unaccustomed to and be willing to pay for it in the process. In contrast, free-to-air mobile TV piques consumer interest by simply place-shifting the same programming that they are used to viewing on their TV set at home. Consumers are able to transfer their TV viewing habits to their mobile phone, watching their favourite programmes at the time they expect them to be broadcast.
A question that springs to mind is whether consumers want to make their television mobile, or would they prefer to subscribe to a tailored mobile TV service? The adoption figures to date begin to point at the answer to this question. Even so, for free-to-air mobile TV to be truly successful, it must ultimately be embraced by operators in markets where they control handset portfolios and purchases. Towards the end of 2008, the industry saw operators such as Telefónica, Telcel, Claro and others adding free-to-air TV phones to their mobile handset portfolios. So what brought about this shift in strategic thinking from operators, and how does free-to-air mobile TV deliver value?
The pay TV business model seems to be the obvious one for operators - it delivers direct monetisation of a new service that can be upsold to existing subscribers. However, one needs to assess a variety of factors to understand the ultimate impact on an operator's bottom line. Here are some of those factors, with a comparison between a pay subscription and a free-to-air business model:
- Cost of entry: The development of new mobile TV infrastructure is quite expensive. Given the recent economic downturn and the corresponding tightening of capital budgets, operators are giving the ROI on subscription mobile TV tight scrutiny, given the size of the required investment. In contrast, free-to-air mobile TV uses existing broadcast TV infrastructure installed by the broadcasters, enabling operators to provide the feature to consumers without having to bankroll costly spectrum acquisition, infrastructure deployment and content licensing.
- Subscriber stability and growth: Most of the operators who have deployed free-to-air mobile TV in Latin America, for example, are leaders in their market. They view free-to-air TV handsets as a way to solidify a leadership position, attract new subscribers, reduce subscriber churn in the existing customer base, and grow service revenue over time by providing a high value service to consumers. In developing markets, where many consumers cannot afford the data plans and service fees associated with pay TV models, and where some countries prohibit the bundling of TV services with operator networks, free-to-air TV provides a vehicle for operators to increase the value they provide consumers without a significant investment.
- Related and premium services: Operators are now recognising that free-to-air TV can be used to attract consumers and then generate revenue from related or premium services. Arima, a Taiwan original design manufacturer (ODM) of handsets, recently announced an SMS-TV design that allows viewers to send and receive text messages while viewing free-to-air TV. Also, once consumers have become accustomed to watching TV on their handset, they will be more receptive to considering complementary subscription offerings around premium programming.
When talking of mass adoption of mobile TV, it is important to think about consumer uptake globally and not just in those parts of the world where digital mobile TV trials have led to deployments. Interestingly, despite the significant focus and discussion on digital standards, by 2012 more than 85% of the world's population will still be receiving analogue broadcast TV signals. This suggests that a comprehensive global strategy must encompass both analogue and digital free-to-air mobile TV.
The second consideration is that despite the fastest subscriber growth figures the majority of the people living in developing markets do not have data plans that accommodate streaming services, nor can they accommodate recurring monthly service fees. Being able to provide free-to-air mobile TV - whether analogue or digital - in entry-level priced handsets opens up opportunities for adoption by a large, global population. This is a particularly important consideration preceding the World Cup activities in South Africa next year, which are certain to hold appeal to soccer fans around the world.
Offering TV on handsets for free at first glance seems counterintuitive as a business model. However, by providing consumers with the content they want, and without requiring costly and time-consuming investment by the operators, free-to-air mobile TV presents a compelling business case, especially as it has the potential to stimulate service revenue and reduce customer churn. Consumer adoption figures underscore the seal of approval placed by consumers on this market approach proving that free-to-air mobile TV is a viable strategy for stimulating the global adoption needed to deliver on industry analysts' market predictions.
Diana Jovin is VP, Corporate Marketing, Telegent Systems