Mobile TV: the big picture on small screen opportunity
By Olivier Lemaire, Gaël Denis and Alexandre Minarelli*, Ernst & Young, Luxembourg
Business Review
November 2009
Most of the CEOs in the Media & Entertainment (M&E) sector believe the greatest impact on the future is the change in consumer demand, enabled by new technology. Ernst & Young Strategic Business Risks reports actually revealed that consumers demand shift was the top risk in 2008 and the second one in 2009 (after cost control and reduction efforts, a resultant of the economic downturn). The key challenge for the sector today definitely remains the shift of consumers from traditional to digital media and from mass to individual entertainment. In this context, mobile TV is one of these evolutions.
The whole mobile TV revolution actually began with the release of the video iPodTM in 2005. Making streaming or downloadable video content accessible and consumable wirelessly on a portable device was at its inception. However, up to 2007, the lack of interest for watching videos on mobile phones, the limited capacity and speed of networks, the misfit screens and devices were preventing the adoption of mobile TV. At that time, the future of video content over mobile devices was pretty uncertain. But the last years’ success in Italy, Japan and South Korea tends to demonstrate that consumers are now ready to watch TV shows, movies and other entertainment on a small screen.
At least, the infrastructure is now laid out in most of the developed markets with broadband access and massive increase in bandwidth. Third generation mobile network technologies have been rolled out (soon the fourth generation) and provide nowadays high speed data transfer with low latency, enabling reliable transmission of TV programs to mobile phones.
In parallel, “entertainment on the move” has boomed with the embracing of digital music and portable media players: consumers now look to take their content with them. This underlines a cultural change already captured by the handsets vendors, driving the development of devices that meet entertainment and communication needs. Standard mobile phones have thus been transformed into Converged Mobile Devices (CMDs) or smartphones that can support a range of features beyond mere telephony, including gaming, photography, music, and TV. These enhanced devices are now widely adopted thanks to their improved user interfaces, screens, applications and graphics.
With any emerging platform comes the compelling supply of content to the consumers to sustain and accelerate the growth. There, the strategies for providing mobile TV and video are different for every country, every Mobile Network Operators and M&E companies. The offer model may indeed vary from premium services (extra fee) to ad-supported services (sponsored by advertisers) and hybrid of the previous. Through premiums, free-to-air (TV broadcast onto mobile phones), live events and internet mobile content, mobile TV starts driving significant new advertising and licensing revenues for content producers and broadcasters. But consumers are usually reluctant to pay for subscription-based content… and with the wide scale of third-party applications and portals enabling access to videos (just consider the thousands of applications for Apple iPhoneTM, or the plethora of video-streaming websites), it is likely that the online advertising become the dominant business model.
The efforts surrounding the development of network infrastructure, the introduction of multifunctional portable devices and compelling content all align, poise mobile TV for mass consumer adoption. Along with this favorable environment, the generation 12- to 27-year-olds rose on the concept of media consumption “anytime, anywhere, anyhow” and as such, constitutes the ideal target market for mobile TV growth. The key players of the M&E sector captured early - and bet on the further - maturation of this generation, which indeed spends much more time with media and cell phones than adults in general.
However, the development of mobile TV services delivery is unequal across the mature mobile telephony markets. Looking at some of the Luxembourg’s neighbors, the same statement applies. Italy invested early with a certain success in mobile TV. On the opposite, Germany launched mobile TV in 2008, but several hurdles (regulatory, technology choices…) made it unsuccessful so far. France and Belgium could be ranked somewhere in between, betting since the summer 2008 on live-sport or Reality-TV content to foster mobile TV growth.
As far as Luxembourg is concerned, the approach towards mobile TV is both cautious and wise although the service is right at the door. In its 2008 annual report, the Institut Luxembourgeois de Régulation reported the researches and tests conducted as part of the project “MOVIES” (MObile Video and InteractivE Services), combining DVB-H with other wireless networks (UMTS, GPRS and WIMAX) to test TV broadcast onto cell phones. Local mobile telephony operators are starting to launch their first mobile TV offering.
We may be approaching the tipping point for increased adoption of mobile TV and video. Mobile TV and video will create new challenges and growth that represent lucrative opportunities for M&E companies as well as mobile operators. The question to ponder now is more about the amount of money that consumers will spend on mobile technology and content and what successful companies are or should be doing to maximize their revenue from this burgeoning base. Anyway mobile TV is on the agenda of every media players and telecom operators, including the Luxembourgish ones.
By Olivier Lemaire, Partner of Ernst & Young, Head of Telecommunication, Media and Technology (TMT) Practice
Gaël Denis, Senior Manager of Ernst & Young, TMT Practice
Alexandre Minarelli, Manager of Ernst & Young, TMT Practice
Posted on 16 November 2009
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