Mobile TV, The best things in life are free
Suppliment July August 2008
With the CEO of Vodafone Germany recently questioning a subscription-based model over a dedicated network and 3 Italia launching a free DVB-H service, Joe O’Halloran asks if free-to-air mobile broadcast TV can succeed in Europe
The best things in life are free, so the song said, and if many in the industry are to be believed, so will be broadcast mobile TV in Europe. In fact, many are arguing that the only hope for mobile TV development is not, as hoped for by the European Commission and others, the adoption of DVB-H as the de facto wireless standard for mobile TV broadcasts, but instead the launch of free broadcast mobile TV services.
Indeed, the predictions for the last two years or so have been centred around the concept of mobile TV being a paid for entity, whether streamed over 3G telecoms networks or broadcast over the air interface such as DVB-H, the US-based MediaFLO, DMB and other variants. But it may well be the case that it is a free-to-air (FTA) mobile TV market that really gets the ball rolling. But before anyone thinks that is a Eureka moment, be warned that there is a great difference about launching a network and launching a profitable one.
There are a plethora of standards in play at the moment in the worldwide mobile TV arena but they can basically be broken down into either telecoms-based networks or broadcast networks, and the latter allocated on a more or less national or regional basis. For example, currently the T- and S-DMB standards dominate in Korea, ISDB-T in Japan and also Brazil, MediaFLO in the US (although DVB-H services are strongly mooted for launch) and DVB-H in Europe. China has its own standard, CMMB/STiMi. There have been DAB-IP services dotted around the world, but these have generally been small scale affairs and in the celebrated case of Virgin Mobile’s DAB-IP mobile TV service in the UK wholly unsuccessful, shutting down after just about a year in operation.
Even if DVB-H is the de facto European standard for subscription-based mobile TV, only five commercial networks had been launched — in Finland, Italy, Germany, Austria and Switzerland — with plans afoot to launch a network in the Netherlands to coincide with the Euro 2008 football tournament in the last two countries. There have, however, been trials of DVB-H services in most European countries and rollout has been delayed for a variety of reasons some financial, and notably in the UK, due to spectrum allocation reasons.
So far, so not so good, especially when compared with the situation in the other territories, in particular Asia where mobile TV is booming. Why has mobile TV been so successful in Asia to date? The answer may well be due to the fact that in the vast majority of cases in Japan and Korea, services are delivered on an FTA basis. By the end of April 2008, in Asia there were about 28 million FTA mobile TV viewers. Japan had seen over 20 million ISDB-T handsets shipped for mobile TV applications and South Korea, boasted some eight million T-DMB devices. Keeping up the momentum will be China’s CMMB service and the imminent launch in the US of a service backed by LG and Samsung who in May 2008 signed an agreement to develop a new FTA standard for mobile TV technology in North America.
The question then arises whether Europe should just launch an FTA service and then watch take up rise. Yes, but it’s not as simple as that argue industry experts. Service operators want money, in the form of monthly service revenues whether from DVB-H or telecoms-based services. Moreover, FTA is free only to end-users; somebody has to pay somewhere and such services, like commercial TV in general, will only work financially if advertising-funded.
But the evidence is positive. A recent European survey by video solutions provider QuickPlay Media found that two-thirds (65%) of consumers said they are willing to watch an advertisement on their mobile phone in order to access free or discounted TV and video content.
“Genuine FTA mobile TV is always going to be commercially difficult, because the capital expenditure of building a new transmission network is significant. The real issue is how service providers balance the level of the subscription with other sources of revenue. End users will accept the need for a small subscription for mobile television, provided the quality and content is high and the additional subscription is low,” explains Alban Couturier, marketing manager at Thomson NIS.
FTA’s first steps in Europe
The first steps in FTA in Europe are actually just about to begin in somewhat of an indirect way. Mobile operators in Germany will be launching handsets based on the DVB-T standard to bypass the subscription based broadcast mobile TV model (over DVB-H) and leading the charge is Vodafone, who — in what some see as a fit of pique after failing to land a DVB-H licence, and others an act of honesty and vision — has poured scorn on the concept of subscription-based mobile TV as a whole. Vodafone Germany recently slammed the prospects of the country's mobile TV industry, after CEO Fritz Joussen told the Financial Times Deutschland in May that “the model with a subscription-based offer over a dedicated network is very difficult”.
One eminent European mobile TV expert, who wished to remain anonymous, describes the current mobile TV market in Germany as a crazy situation. He asked what content would be available on an FTA basis, that is to say would it just be readily available digital TV content as transmitted by the regular terrestrial broadcasters and not specially configured for mobile devices. “Mobile TV might be technically possible where you can have simulcast TV channels, whether FTA or subscription: it doesn’t mater. But for successful mobile services there must be specialised content. Subscription-based services offer interactive benefits such as advertising specialised for mobile. It’s a question of how to finance. If the services can be financed by advertising or by fees, such as those paid to the public broadcasters, and subscriptions then there is a real opportunity,” he says.
Peter White, principal analyst and founder of Rethink Research, agrees with this analysis and argues that there are plenty of things for operators to do. “They need to be dragged with a viable business model. The 3G-based streaming model has given operators a boost in ARPU over the past four of five years and as a result they are very happy. But there’s a whole community of people and to make money from FTA, the problem is that the broadcasters can’t do it on their own. Customers, when given the choice of FTA digital video on a handset, typically automatically accept it. It’s a no-brainer; such as in Japan and Korea. There’s a staggering market penetration for two to three years’ of effort. If you can find an economic reason to give FTA to people, then people will want it: as do the broadcasters.”
However, the European market expert added that despite their success in attracting viewers to their offerings, advertising models in the Japanese and Korean FTA service were not efficient and didn’t deliver enough money to their owners. “They don’t bring in enough money for their owners; they cannot serve as a proof today of advertising based models. The question with FTA is how to get additional money to pay for additional non-public–funded made-for-mobile channels? If they use the normal station in TV they are only maybe incurring a few additional costs but then who will really provide the service? In Germany the operators will sell FTA DVB-T mobile phones, but that is not really a business model,” he says.
In addition, there are many that are not convinced of what a DVB-T service will deliver. Indeed, there is a feeling that mobile and DVB-T just don’t mix; industry pundits argue that DVB-T services typically require large external antennas and the image will be very difficult to capture inside buildings. They point to the fact that analogue TV sets have been available for last 30 years and they all failed due to these issues. Moreover, some even say, pointedly both on and off the record, that the hype around DVB-T is designed to help operators to negotiate better contracts with mobile TV broadcasters and that LG and Samsung are pushing it just to sell more devices.
There’s certainly a school of thought that FTA right now is not realistic. “From a Western European perspective, I don’t believe that FTA is a real alternative in mobile TV right now. T-DMB in Korea is really a specific technology for mobile reception. FTA could be done in lots of different ways such as taking existing DTT on a handset, but in reality what you can’t really get is reception indoors, or in a shadow or in rain etc. I don’t think it’s an alternative to the other mechanisms; basically, if anyone is going to do a specific broadcast to mobile TV in Europe it’s going to be DVB-H based,” comments Tim Sheppard, Cisco’s business development manager for the broadcast market in Europe.
A happy co-existence
The general consensus is that FTA and subscription services will happily co-exist; maybe even from the same operators and in the same service. John Maguire, general manager of S3’s Consumer Mobile Business feels that it’s pretty clear that FTA will play an important part in whatever the final mix will be. He says: “There’s no other mass market that has taken off without FTA in some form or other. But FTA is not the only part of the answer. There’s more to it than that: FTA doesn’t incentivise the owners of scarce resources like mobile spectrum and infrastructure and premium content owners. The whole point in the value chain is there has to be an incentive to put things into the market.” Interestingly, McGuire foresees a market similar to that which exists for DTT in France, Italy and the UK, with a free basic service complemented by top-up payTV.
This is an important point. Familiarity of business models will be good for business, but only if content issues are resolved, adds Sam Sheng, CTO of Telegnet, which has shipped has shipped five million chipsets for analogue mobile TV in emerging markets. “If you step back and see how it works it could be like basic cable; and premier cable. One basic model is for say an operator to charge 2 euros per month to enable FTA on handset but then also offer tiered services on DVB-H with specialised content for an additional ten euros per month. One of the key issues with DVB-H right now is acquiring content and there’s been a lot of negotiating for specialised content such as MTV Mobile, CNN Mobile etc, content that you’d want to pay a premium for. Germany is the test bed. What is the feature set that is going to enable operators to maximise revenue? What does the market really want? Can operators charge that 12 euros per month?”
The idea of co-existence works well, agrees Filip Gluszak, VP of marketing at UDcast, who points to the example of what may happen in the US could well be on the money in more ways than one, but only if some challenges are resolved. “What is likely to happen is that we will have both subscription and FTA in the mobile TV space, just as we have with traditional TV. Today the challenge is that there we are in a new market where there is a convergence of players who have never worked together; there are no examples up to now as to how the business model should be made. The first deployments are still looking at the right way to charge and share the revenues and so what we see as the challenge is to create a model that is replicable around the world.”
It is on this point that the industry is generally optimistic for prospects in Europe. Ronen Jashek, VP of marketing at Siano, adds that success for both subscription and FTA comes down to having compelling handsets and compelling content. “FTA will ensure the success of DVB-T but it doesn’t necessarily mean that payTV operators don’t have a valid business model. On the contrary, the most crucial thing is compelling content and a good handset. Today we have DVB-T handsets in the market that are very attractive, offering a good quality of experience of TV. In the next year or so FTA is going to be very popular; we’re going to see great changes in pay TV with new devices, services and networks.”
FTA is not necessarily synonymous with DVB-T, according to Frost& Sullivan. In Europe, 3 Italia has unveiled a free broadcast mobile TV based on DVB-H, with users being able to watch TV channels between 8 am and midnight at no extra cost. This is supported through dynamic advertising that interact with viewers. This could be significant on a wider scale, believes Frost & Sullivan research analyst Saverio Romeo. “The launch will surely spur the other Italian operators into action and maybe push them to compete head to head with 3 on a free mobile TV platform. The same could happen to other countries across Europe too.”
Before mobile TV becomes profitable there are a number of issues to address and ‘giving it away’ in the form of FTA doesn’t really address all of them. What is clear though is that any successful model will need to balance audience reach and revenues, offering some mix of FTA and paid for premium content – just like normal payTV. Money doesn't guarantee everything, but it does make a market.
