500 Channels on Your Cell Phone?
Not quite yet, but watch out! Here’s what programmers are working on now…and for tomorrow.
By Mavis Scanlon
The Weather Channel’s mobile content experiment has ended. Now it’s a mobile content business.
“We went from thinking that wireless is a secondary and somewhat experimental platform, to a primary platform for us,” says Louis Gump, VP, mobile products and services, for The Weather Channel Interactive. The growing number of handset devices capable of delivering data and video has convinced the network that it could generate substantial returns on what Gump calls a “major investment.”
It’s easy to see why programmers, like The Weather Channel, are so bullish. The Cellular Telecommunications and Internet Association estimates there were more than 182 million cell phone subscribers at the end of last year. Consumers spent $111 billion on mobile services in 2004, according to the Yankee Group. About 5% of that, or $5.5 billion, was spent on wireless data services, a figure expected to grow to $14 billion by 2008. Thirty percent of that data revenue will be generated from entertainment, the research firm predicts. That includes graphics, games, ringtones, interactive entertainment and TV and film content.
Stats like these have led more programmers to move plans for mobile distribution up on their priority lists. Two years ago, NBC Universal began making content available to cell phone carriers via video streaming. There wasn’t a lot of premeditation; the company just jumped in, says Brandon Burgess, EVP, digital media, international channels and business development.
The “lightbulb moment” for Burgess was the realization that there are a billion cell phone users around the world. “To me, that’s a confirmation of the significance of the mobile phenomenon,” he says. “Not to be thinking of that as a sustaining channel of news and information would be a mistake.”
Evolving Mobile Strategies
Like NBC Universal, the programmers that have gotten in on the ground floor of the mobile content market now have to figure out how to make their investments pay off.
“We started working [on applications for this market] before it was clear there was a market,” says Debora Wilson, president and CEO of The Weather Channel. “Now we’re seeing everything we envisioned start to come together. All the data is pointing toward not only mass availability but mass usage.”
In addition to staffing up, “we have been buying more servers than I’ve seen us buy in awhile,” Gump says. Last August the net launched its first true mobile video product on Sprint TV. (The channel launched its first wireless application in 1998.) Of the four types of mobile content The Weather Channel develops, video is the fastest growing.
Over the next few months, Weather will launch simple logo advertising on its wireless websites. “Advertisers have expressed strong interest in this product,” says Gump, but “we want consumers to have a great time as they learn about this medium. The key to being successful in this market is understanding customer segments. There are segments of devoted fans who will pay a very significant fee in exchange for receiving content they can’t get any other way.”
Next year ESPN will target avid sports fans with its branded cell phone service, replete with customizable sports news, information, commentary, analysis, statistics, ringtones, graphics, photos and logos, as well as streaming audio and video. A key part of the offering will be the handset itself. ESPN wants manufacturers to create “somewhat different looking phones,” says Manish Jha, SVP of ESPN Mobile.
The mobile content landscape today is fairly fragmented, with at least five major carriers pursuing different strategies and hundreds of handset devices in the marketplace, Jha says. ESPN decided to follow the example set by Virgin founder Richard Branson, who targeted the youth market with the launch of his firm’s eponymous wireless service in 2002.
“We thought that by creating a phone service where we actually picked the network partner, where we can pick the handsets and ensure the capabilities of the handsets in terms of screen size and processing capability, then we can create a much deeper, much more immersive content experience,” Jha says. Like Virgin, ESPN partnered with Sprint for its cell phone service, and is in discussions with multiple handset manufacturers. It partnered with Convergys for billing, and is working on lining up partners for customer care and direct distribution of the handsets. Jha declined to provide specifics on the company’s investment or total number of people dedicated to the cell phone project. (ESPN has staffed up to handle research, distribution, warranty and repair services.) Meanwhile, ESPN continues to fine-tune its current mobile content offerings and downloads.
Even before wireless video was on the radar screen, ESPN rival Fox Sports Interactive was approached by several carriers seeking branded content. Over the past three years, Fox has learned and evolved along with everyone else, says John Smelzer, VP, business development, at Fox Sports Interactive Media.
FSIM partnered with developer Sorrent for its mobile games and the production of Fox Sports Mobile, its flagship website for wireless phones. FSIM shares revenue from those services with Sorrent. “Though the money is small in News Corp. terms, the margins are nice,” says Smelzer. “It’s true business development in that it’s a new revenue stream that didn’t exist before.”
FSI edits and encodes its video content, and distributes it directly to carriers. It keeps the fees it garners from carriers for supplying the content. FSI uses equipment that produces broadband content to repurpose programming for the mobile platform. Many of the video clips produced by FSI come from Fox’s regional sports networks.
While some nets simply repurpose content, NBC Universal is developing content specifically for mobile devices. Up until now, NBCU has focused on news and information from NBC, CNBC and MSNBC. NBCU offers CNBC and MSNBC as streamed channels via content aggregators MobiTV and SmartVideo, plus short video clips from NBC Mobile. NBC also offers its NBC Mobile video clips via Sprint and Verizon.
Entertainment programming will come next. NBC Universal has a huge content library, but still will need rights clearances for content it does not own, a potential stumbling block for all programmers. “On the entertainment side many times we rely on other people’s productions that are cleared mainly for television,” he says.
For mobile content to work as a business, there will have to be a certain amount of original production, Burgess says. As much as 50% of NBC Mobile’s content is original. For example, two-minute news digests on the pope’s funeral produced for mobile devices were shot in a different format that made use of tighter shots.
Revenue primarily is generated from license fees. Ultimately advertising and sponsorships will account for a larger chunk of the company’s revenue from mobile delivery. “The phone companies are hesitant to overwhelm customers with advertising clutter in a new product,” Burgess says. “But once there is adoption it’s obvious that people are going to want to aggregate the audiences.”
Over the next three to five years, Burgess expects this new delivery platform to bring in “tens of millions” to NBCU’s coffers. “I think it will be meaningful,” he says.
Paul Palmieri, executive director, business development and programming, at Verizon Wireless, says the marketplace is so new that both carriers and programmers are still looking for its “sweet spot.” Verizon Wireless launched its VCast video service in February. “I think it will probably take the next 12 months for us to come to a firm perspective on how you measure something that turns out to be a rousing success,” Palmieri says.
For programmers, jumping into a new distribution platform entails walking a fine line with current distributors.
“You’ve got to embrace and protect your existing business model, which very much involves cable companies,” says Fox’s Smelzer. “And at the same time you’ve got to be able to assess and experiment and look at the emerging platforms so you always know what’s coming down the pike.”
Room for Cable at the Table?
Some of the biggest cable operators, including Time Warner Cable and Cox, have made no secret of their desire to add a mobile component to their voice, video and data bundles. Fears of cannibalizing existing revenue streams appear to be no deterrent. As Burgess at NBCU says, “You’re really trying to reach viewers in places when they’re not at home.” Burgess is interested in working with cable operators to adapt mobile content to the larger screen.
“Cable is expert at packaging and subscription-based relationships,” says Greg Ellenoff, director of voice product management at Adelphia. “[Mobile content] is great example of doing that.”
As the biggest operators incorporate wireless into their service bundles, mobile content likely will be included as part of the packages.
“Comcast is interested in serving our subscribers with content across multiple platforms,” said Amy Banse, SVP, content development, Comcast, in an e- mail. “Today that includes both television and online. As content become more mobile, we will provide customers with choice, convenience and control, even on the go.”
Last month, Rogers Wireless, Canada’s largest wireless provider and a sister company of Rogers Cable, launched Rogers Mobile Television, which could prove to be a model for U.S. cable operators.
“Because we’re a cable company as well as a wireless company it made it a hell of a lot easier for us because we know these people already,” says Philip Lind, vice chair of Rogers Communications, referring to Canadian and American programmers. Lind says that Rogers often shares information about its services with U.S. cable companies. “Cable operators in the States are very envious of our wireless operation here,” he says.
A Mobile Economy
Video-enabled phones that use the latest 3G technology are a fraction of the overall domestic market.
There are about 3.9 million video-enabled handsets in North America, compared with 24.9 million video-enabled handsets in the Asia Pacific market, research firm Strategy Analytics estimates.
The market should to remain small in the immediate future, says Strategy Analytics senior analyst Nitesh Patel. “Watching TV on your handset is not going to be appealing to that many people,” he says.
Still, stats from Verizon Wireless indicate that more people are using phones to send and receive various types of data. Of Verizon Wireless’ 44 million customers, almost 40% are active data users. The data segment contributed 5.6% of the company’s fourth-quarter revenue, representing an annualized revenue stream of $1.4 billion.
As the market grows, the revenue opportunity for content providers will be good, Patel says, “given that their costs are low.” That means any added revenue “is just cream on top for them.” They’re not going to give away their content for free, he adds. As the market matures, pricing for content will become a sticking point. –M.S.
The Smaller Screen
Mobile content is hot–so hot that ESPN is launching its own branded wireless service next year (enabled by Sprint). Other mobile video services already bringing linear TV network content to cell phones include:
Sprint PCS Vision customers can subscribe to individual streaming video channels such as Cartoon Network, CNN, E! and Music Choice, or get Sprint TV, which aggregates video from ABC, Cartoon Network, Discovery, Fox Sports, Fox News Channel, NBC and The Weather Channel. Among Sprint’s ringtones are themes from HBO series.
Verizon Wireless subs can now sign up for VCast ($15/mo.), which offers 300-plus video clips per day. Content providers include CNN, Comedy Central (clips from The Daily Show), E! (segments from E! News and Wild On), ESPN (news, excerpts from original series), VH1, Fox Sports and NBC.
GoTV is compatible with major carriers including Sprint, Nextel and Cingular (it is pre-loaded on Nextel’s Motorola handsets). Partners include ABC, which offers exclusive content from its news, series (Desperate Housewives, Lost, Alias, The View) and daytime soaps, plus Fox Sports and The Weather Channel. Premium products include Sports Tracker ($3.95/mo.).
MobiTV offers live East Coast feeds of TV networks for an additional subscription fee to Sprint PCS, Midwest Wireless and Cingular subs. Content partners include ABC, C-SPAN, CNBC, CSTV, Discovery Channel, Discovery Kids, Discovery en Espanol, Fox Sports, MSNBC, NBC and TLC. Premium packages are being added.
SmartVideo bills itself as “the world’s first cross-platform, cross- carrier service for live content, on demand and download and play programming.” Video providers include ABC News, CNBC, Fox Sports, MSNBC, NBC Mobile, The Weather Channel and Hispanic-themed programs from OlympuSAT. –Shirley Brady
[Copyright 2005 Access Intelligence, LLC. All rights reserved.]
COPYRIGHT 2005 Access Intelligence, LLC.
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