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Not surprisingly, the functional roles that exist for broadcast TV overlap with those for mobile TV. Figure 14 presents a typical value-chain model for the multi-channel pay television industry and summarizes the responsibilities of each link.
We expect mobile operators to assume the position of pay TV provider given their control of device distribution and billing. The extent to which they will also control the network capacity as a broadcast operator, will vary depending on the carrier's intentions, as indicated in Figure 16.
The early mobile TV market is characterized by the presence of companies like MediaFLO, Crown Castle, BT Movio and Mediaset who plan to sell broadcast capacity on a wholesale basis to mobile TV service providers (principally the cellular network operator community).
As we have stated, these companies also intend to perform some aggregation of TV content, which they will provide as part of an end-to-end mobile TV solution to carriers. Under the wholesale model, operators are responsible primarily for handset distribution, selecting which channels to offer their customers, providing the return path for interactive services via their cellular network, and marketing and billing.
In contrast, 3 Italia has elected to take control of network ownership and service delivery itself. Its purchase of Canale 7 will allow 3 to use the digital frequencies previously owned by Canale 7 to launch its DVB-H service, La3, which according to its announcement in February 2006 will begin transmission in June 2006. 3 Italia has also been sourcing potentially desirable content to support its offering. In February 2006 it announced the acquisition of exclusive rights to broadcast World Cup 2006 matches live to mobile phones in Italy, MotoGP and Serie A coverage from Mediaset, 4 channels from Sky, (Sky Cinema, Sky Sport, Sky Vivo, Sky TG24), 1 Mediaset channel, and cartoon channel Boing. It also stated that it was in the process of negotiating terms to include 3 channels from RAI to its line up. Furthermore, it is offering a free channel called La3 Live that will promote the TV content available through its mobile TV service, as well as a shopping channel aimed at driving mobile commerce and 3-self produced channels (La3 Star, La3 Sport and La3Show). In total it plans to launch with 15 channels, increasing this to 20 by the end of 2006.
The structure of the mobile TV value chain is presented in Figure 16, along with examples of companies that are planning to occupy the various positions.
Broadly speaking carriers have 5 alternatives with regards to the value chain:
Strategy Analytics believes that carriers should position as pay TV providers, which will allow them to focus on marketing and content acquisition and not building out or managing digital TV network infrastructure. The pay TV model therefore provides a relatively low risk means of participation in an untested market, through the avoidance of large, upfront capital expenditure.
Leasing capacity from the broadcast network operator is sufficient to deliver mobile TV services. We have defined the following pros and cons for license ownership:
Although we see little upside to cellular operators owning a multiplex, carrier groups Elisa and TeliaSonera both entered the beauty contest to own the fourth digital multiplex in Finland and to build out the DVB-H network. In addition German carriers E-Plus, O2, T-Mobile and Vodafone have all expressed their interest towards operating the DVB-H platform for a DVB-H trial that is to be conducted in Northern Germany for the World Cup in June 2006.
For companies such as Crown Castle/ MediaFLO, that are deploying mobile broadcast networks, the addressable market for selling wholesale access is not limited to current cellular network operators. Laptops and portable media devices, such as the Sony PSP, represent strong niche device categories into which broadcast radio receivers could be integrated, with no requirement for broader cellular connectivity. However, the relatively limited volumes in which these are shipped, present problems for the development of a sustainable commercial service unless other devices are also brought into play.
Carrier control of phones sold through their retail channels provides them with a powerful barrier to entry into mobile TV service supply. Conditional access software on handsets will effectively block users from accessing unauthorized mobile TV services. There is therefore, no easy way to access the customers of cellular operators through handsets that have been provided by them.
In South Korea, broadcasters KBS, MBS and SBS had the Korean regulator force SK Telecom to accept the transmission of free to air mobile TV services to subscribers over its T-DMB network. However, without similar governmental intervention, pay TV providers will either need to partner with cellular carriers or form MVNOs or acquire stakes in mobile network operators in order to secure content distribution to mobile phones.
Alternatively, pay TV provides can distribute their own handheld devices for receipt of broadcast transmissions. In Japan a consortium called the Mobile Broadcasting Corporation is offering S-DMB services to non-cellular devices.
Partnership strategies will predominate in the early phase of the market, while demand is tested. However, we anticipate more aggressive moves by established pay TV players as the landscape matures. The acquisition of Virgin Mobile in the UK by cable service provider NTL and the formation of a marketing relationship between SprintNextel and cable TV companies Comcast Corporation, Time Warner Cable, Cox Communications, and Advance/Newhouse Communications in 2005, highlights the growing convergence between fixed and wireless media and telecommunications markets. Operators, such as France Telecom/ Orange, with fixed IPTV services and cellular networks, will be well positioned to bring attractive triple and quad play bundles to market with offers across multiple platforms.
Figure 18 France Telecom NeXT Strategy for Converged Services
The pricing of broadcast devices and services will clearly influence mobile TV adoption levels. The fact that Korean mobile TV provider, TU-Media, reached only 56% of its end 2005 target of 672,000 subscribers can be partly attributed to high prices: device prices in the $800 range, a basic one off charge of $20 and monthly fees of $13.
Different charging structures are currently being tested for unicast TV by carriers:
With capacity limitations removed from the equation, we expect the structure of mobile TV pricing to replicate best practice in the traditional pay TV market with two main pricing options co-existing:
An end-user study conducted by O2 highlighted that monthly flat-rate pricing was the most popular pricing structure for mobile TV, followed by pay per program and then metered viewing. 48% of respondents indicated a preference to monthly fees, compared to 30% for pay per program and 20% for pay per minute.
We recommend that operators provide free access on a limited basis to all new digital TV enabled handset owners in order to promote service education and experimentation, and ultimately, to drive adoption. Many carriers have used this strategy when launching their streaming TV service and have reported high initial take-up rates as a result. Free to air/ commercial services could be used as a promotional tool, but this is risky. Given that viewing times for mobile TV are expected to be short 5 - 15 minute sessions, consumers may opt to stick with free TV services for short bursts of entertainment and be reluctant to commit to a fixed monthly fee for premium content.
In the US, unicast TV services are being increasingly bundled into data access packages, such as SprintNextel's Ultimate Power Vision pack, which provides flat rate access to various services including MMS, browsing and multi-channel TV. We expect that broadcast services will be first positioned as a standalone product but that bundling options will come to market within 18 - 24 months of launch.
Advertising plays a strong role in supporting commercial broadcast television. Although advertising revenues have declined in many markets since 2000, Figure 20 clearly illustrates the continued reliance of TV broadcasters on advertising revenues. Total Net Advertising Revenue (NAR) in the UK, was GBP3.1 billion (2002 prices), with the commercial terrestrial channels accounting for nearly 80%.
Advertising and sponsorship accounted for roughly a quarter of total revenues of all commercial digital channels in the UK in 2003. In the US advertising revenues contributed to 61% of the total $132 billion TV distribution market, Figure 21.
If broadcasters are making entire schedules of TV content available for access via mobiles, then they should gain additional revenue opportunities from advertisers. Advertisers, after all, are paying for TV advertising slots, according to their perceived value in targeting audiences, with the costs depending on several factors, including the estimated size of the audience and the consumer segments attracted by the programming. While the target segments are unlikely to change too significantly as a result of mobile access, the size of the audience might, particularly as 3G-handset penetration and network capabilities ramp up.
As the BMCO trial results illustrate (Figure 22), mobile TV can incrementally boost viewing figures as a result of its additional mobility, with 3 peaks of viewing corresponding to commuting times and the midday/ lunchtime break. Similar results have also emerged from TDF's trial in Paris and are presented in Figure 2.
Will TV broadcasters, that distribute scheduled TV programming through mobile operator portals for unicasting over the cellular network, be able to negotiate more advantageous terms with their advertisers as a result of the additional viewership opened up through mobile?
Certainly, we do not believe that this is yet happening on a widescale basis in the embryonic world of unicast mobile TV. However, MobiTV, who aggregates and delivers mobile TV channels to cellular users through 25 operators, states that it is making money by selling advertising slots on the mobile TV channels that it offers.
Given high consumer price sensitivity towards mobile TV packages above the $10 per month range, (figure 23), it is clear that advertising revenue will be required to support the business models of mobile TV service providers with business plans based on raising $15-20 per subscriber.
By their nature, broadcast networks such as DVB-H, FLO and DMB are unidirectional and cannot support interactivity on their own. However, linking mobile broadcast services with the cellular network can enable a number of interactive mobile TV services such as real-time voting, electronic programming guides, and commerce applications (which includes selling program related mobile content including video clips, music and ringtones among other types of targeted content). These types of value-added services not only provide an additional source of revenue for carriers, but also to allow differentiation from mobile TV services provided by non operator mobile TV providers, such as the Mobile Broadcasting Corporation in Japan, who cannot support interactivity without carrier participation.
Figure 24 demonstrates the architecture required for an interactive voting service from Nokia.
The BMCO promotional shot below shows, the vision for mobile broadcast services is one in which programs can be broadcast to devices alongside options for interactivity (Figure 25). These include content purchases, community or voting options and shopping or advertising channels, which users can choose to view.
There has been some early evidence to suggest that interactive mobile TV services can stimulate incremental revenue gain through additional data usage associated to programming. During February 2006 Ericsson and the Norwegian Broadcasting Corporation announced that they had conducted a nine week trial using Ericsson's interactive TV platform. 20% of mobile TV users participated in interactive services, which enabled viewers to vote for the next music video or to chat to program hosts or other viewers. Typically, users of the interactive services spent five minutes per mobile TV session, which according to NBC is double the length of time spent by a non interactive service user.
Cellular carriers already benefit financially from viewers interacting with TV programs. SMS voting in particular has been the most successful date, with broadcasters introducing SMS premium rate voting platforms in parallel with existing premium rate telephone voting. To cast votes using SMS consumers are charged a basic SMS rate by their carrier in addition to a premium charge that is set by the broadcaster. An indication of the popularity of SMS as a mechanism for interacting with TV is highlighted by the example of UK commercial TV provider ITV, who stated that 22% of its GBP31 million interactive TV revenues in 2004 were generated by premium SMS services. This compares to 70% from premium rate telephone calls and just 8% from the interactive button on the television's remote control.
Interactive TV allows for further opportunities for carriers to stimulate incremental spending from viewers of mobile TV, through browsing sessions initiated by a call to action on a program or advert, program related content sales, e.g. video clips, mobile games, ringtones and program alerts among others. These will represent a small but important component towards achieving return on investment for network operators.
| Industry Report
Mobile Broadcast TV: Caution Needed as Bubble Grows! March 2006 |
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