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Debating European indecisiveness over the mobile TV business case
All the trials suggest that consumers like the idea of mobile television. In Japan and Korea it is a runaway success. But in Europe the business case is not yet settled, and that remains a big barrier to entry.
To achieve mass market take up and satisfaction, broadcast services are required. Sending video clips over 3G is not acceptable to consumers; the trial data shows users watch three minutes of 3G clips a day, against 50 minutes of broadcast television.
So how do we deliver broadcast mobile television, and how can it be funded? Logically there are four basic choices: free to air over dedicated (DVB-H) networks; free to air over existing (DVB-T) networks; pay TV over dedicated networks; or pay TV over existing networks.
Looking at standards
Taking the network issue first, while there is an obvious attraction in using an existing broadcast network, I firmly believe that there is no alternative to
making the investment in a dedicated mobile television system such as DVB-H. Trial deployments have shown that using existing networks for pay mobile TV does not offer an acceptable standard of service.
DVB-T is an excellent transmission standard, for large, stationery, roof-top antennas. For the small, internal, antennas inside a mobile device, often used inside a building, it is not effective. The signal attenuation is typically as much as 35dB, or a requirement for a thousand times more power in the transmitter. Is this relevant? Yes it is; all the research shows that most mobile viewing is done indoors, with as much as 50% of all viewing time in the home.
So a mobile television service that does not use an appropriate transmission format, like DVB-H, will not be able to attract an audience. Even free to air services using existing DVB-T networks fail to obtain even an average of 20 minutes user viewing per day. For a successful, sustainable service it has to be DVB-H, which means a significant initial investment to establish the transmitter infrastructure. But how do we pay for it?
Making money from ads
Free to air equals advertising funded. There are two streams of revenue here: commercial breaks within the programme stream, for which the mobile network operator can hope to get a tiny cut if anything; and additional advertising opportunities in the electronic service guide and overlaying the content.
I have seen advertising content that can take up as much as one third of the viewer’s screen. Even assuming consumers find this acceptable, the revenues that can be obtained for the operator are so small that, even when using existing DVB-T networks, the service is unlikely ever to be profitable. And while mobile TV use is still in its infancy, large advertising budgets will not be available for many years to come, and certainly not until there is a mass market for mobile television. My belief is that mobile television would need to reach 30% of a market before advertisers took it seriously enough to pay real money for space.
That leaves us just one logical strategy; the dedicated mobile television network, as we are seeing in some of the latest deployments in Italy for example. With the right transmitter topography a dedicated DVB-H broadcast network will give good penetration into offices, transport hubs and homes and, by demonstrating the right quality and convenience it will quickly build an audience, provided the price is right, too.
While building out a DVB-H network may appear a significant investment, my calculations suggest that the business model is surprisingly attractive, provided you accept that it needs to be funded by a modest subscription. This may be an overt sum just for mobile television or it may be that network operators will create a dedicated bundle of voice, data and media for DVB-H handsets, rather as they have done recently for the special requirements of the Apple iPhone. One of the reasons that the Japanese and Korean services are successful is that, while they appear to be free to air, the receiver is only available with a premium package. There is a subscription, you just do not realise you are paying it.
Subscription the answer?
And yes, the subscription is modest. My calculation is that, by raising around eight euros a month a user, and achieving an audience of less than 5% of the population, the business case is sound. It is a far easier proposition to win 5% of the market with a good quality service than 30% of the same market with a compromised offering.
Once mobile TV has achieved critical mass an operator can look at more advanced business models for adding personalised services and appropriate targeted advertising. But to achieve that critical mass the offering has to be attractive to consumers, which means carrying the content they want to watch (and not the content they do not watch, like intrusive advertising), and to be available in a stable and high quality form where they want to watch it. That can only be done with a dedicated network, and commercially that can only be delivered as an affordable pay TV service.
Thomson is a global provider of solutions for the creation, management, delivery and access of video, for the communication, media and entertainment industries.
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