Wireless Rivals Primed for Mobile TV
On March 1, Verizon Wireless introduced a service that, for the first time, lets cell-phone users watch programming from the likes of Comedy Central, Fox, and MTV right on their handsets. If TV via handset takes off, wireless carriers and cell-phone makers will win big. But even after years of development and mountains of mobile-TV marketing hype, that's still a very big if.
Verizon Wireless isn't alone in wagering on mobile TV. AT&T (T) will launch its own service later in the year. Modeo, a subsidiary of Crown Castle International (CCI), is carrying out trials of a mobile-TV offering in New York. Samsung, LG Electronics, and HTC have begun delivering mobile-TV phones for the U.S. And chipmaker Qualcomm (QCOM) has invested about $800 million in the technology.
It's natural to assume that a country as addicted to TV as the U.S. will also crave television programming over cell phones. Some 46% of U.S. households own three or more TV sets, according to Nielsen Media Research. The average U.S. family watches almost two hours of prime-time TV a day—that's up from 10 years ago. And some 6.2 million people already watch video clips on their phones, up from 2.5 million in early 2006, says consulting firm Telephia.
To meet the perceived demand, Verizon Wireless, a joint venture of Verizon Communications (VZ) and Vodafone (VOD), will offer eight broadcast channels, including News Corp.'s (NWS) Fox, Viacom's (VIA) Comedy Central and MTV, and Disney's (DIS) ESPN. Users will later be able to sign up for premium live channels for an additional charge.
Verizon Wireless and AT&T will provide the services over Qualcomm's MediaFLO network. Users in trials were pleased with performance, says Gina Lombardi, president of MediaFLO USA. "The rate of acceptance was high," Lombardi says. Video quality was considered "excellent" by 85% of the more than 4,000 participants, she says. Many participants didn't want to return their phones at the end, she says.
It's one thing to elicit praise for a service offered free in a lab setting, but another to entice customers to buy TV-compatible phones and pay a per-month usage fee—and then get them to use the service. What's more, mobile TV won't offer the same conveniences as those available for the living room set. No TiVo (TIVO) to fast-forward through commercials, for example. AT&T is expected to charge $15 to $20 a month for its broadcast mobile-TV service. Analysts say that's higher than the mass market will bear.
And it's not like mobile TV has taken off in some of the other markets where it's been available for about two years. In Europe, former mobile-TV users outnumber existing users by 19%, according to a recent survey by M:Metrics of 22,000 people in Britain, Germany, and other European countries. Gripes there include high prices, poor service quality, and a limited channel lineup (see BusinessWeek.com, 2/12/07, "Glitter and New Gizmos at 3GSM").
Carriers are confident they'll avoid those pitfalls on this side of the pond. Consulting firm IDC expects 24 million Americans to use broadcast mobile-TV and video-clip services by 2010, up from 7 million today.
As mobile TV becomes a standard feature on phones, just as cameras and MP3 players have, profits should follow, reaching $1.5 billion a year by 2009, according to researcher Frost & Sullivan.
And mobile TV is destined not just for wireless handsets but also laptops, ultra-mobile PCs, and portable media players. Modeo is working on mobile-TV-only devices, says company President Michael Ramke. "We see the market opportunity as going beyond the mobile phone," he says. "Many consumers don't want their phone to be a Swiss Army knife." He hints that his company may be in talks with consumer electronics makers that could include the capabilities in their music players. He's not naming names, but contenders include Apple (AAPL) and Microsoft (MSFT).
The U.S. market is also likely to benefit from competition amid different mobile-TV technologies. Besides MediaFLO, there's Modeo's DVB-H, which is common in Europe. Sprint Nextel (S) is testing video delivery through broadband wireless technology called WiMAX. That service could be available in late 2007. Upstart Sling Media offers a service that lets users watch home TV channels and TiVo recordings on mobile phones (see BusinessWeek.com, 3/3/06, "Will Sling Media Shift Places?").
Amid the scrum, expect mobile-TV capabilities to improve, analysts say. Texas Instruments (TXN) is working on chips that will enable so-called picture-in-picture viewing, where the user can watch two channels on the same screen, and in-phone personal video recorders. In Korea, Samsung already sells phones that let users record a mobile-TV broadcast for a few minutes while taking a call. Yoram Solomon, a senior director of strategic marketing at Texas Instruments and president of industry consortium Mobile DTV Alliance, reckons that by 2010, a cell phone might boast 100GB of storage. That's enough capacity to record a month's worth of video.
"Only the Beginning"
Phones could eventually be used to project mobile-TV footage onto larger PC and TV screens. In one to two years, a mobile might project content onto a home TV via a Wi-Fi network. Some consumers could even end up cutting their cable TV bill or using mobile TV to supplement their current channel lineup at home.
CBS (CBS) in February formed a special division, CBS Mobile, to produce and format content for mobile TV. "The broadcast element is only the beginning here," says Cyriac Roeding, executive vice-president of CBS Mobile. Interactive and customized content will be a key part of broadcast mobile TV as well. On Feb. 28, Modeo showcased a technology called media-casting. How it works: You tell Modeo what content—local weather, golf, local news—you'd like to watch tomorrow. Overnight, Modeo uploads the video clips onto your phone. And in the morning, or whenever, the channels will be streamed to your phone as though they are being broadcast live, explains Modeo's Ramke.
"People are still not grasping the enormity of having a TV on your phone," says TI's Solomon. "The technology is there. Now, the consumers need to get used to making these big leaps."
Click here to see a slide show of upcoming mobile-TV offerings.