The rebirth of the mobile-TV space owes much to the evolution of devices, the growth of mobile broadband, and the rise of the application store business model. These changes are bringing about a diversity of content and service options as well as a mixture of business model possibilities.
When operators first launched mobile-TV and video services, they did so with ambitions to occupy a central role in the supply chain, controlling most aspects of content acquisition, management, service packaging, and delivery. The majority of telcos have stepped back from this position, realizing that they do not have the expertise, resources, or market standing to deliver on this vision. Instead they concentrate on content aggregation and packaging, which is the right way forward.
As the multi-screen paradigm becomes increasingly prevalent, mobile video distribution is becoming the business of pay-TV operators and content providers as well as web companies from outside the traditional TV or telco domains.
Satellite operators are proving particularly adept at using mobile to enhance their single-play TV propositions. Meanwhile, a multi-play cable- or telco-TV operator with capabilities in content delivery over multiple distribution channels can leverage its mobile operation to extend the reach of a pay-TV service.
Content providers are harnessing mobile delivery as a natural extension to their online distribution strategies, and developing mobile applications to provide easy access to their video offerings is becoming a priority for most. Premium content owners are extending traditional distribution networks by working with online aggregators such as Netflix and Hulu, which typically have strong multi-screen strategies. Some, particularly those holding sports content rights, are also developing D2C mobile video propositions alongside their existing delivery options.
Meanwhile, the push by adjacent players into TV and video will become more pronounced, with Google and Facebook showing particular promise. Going forward, Android handsets and tablets will likely serve as a third screen in Google’s proposed web-TV mix. Facebook is already a popular platform for viewing video content, particularly YouTube video, and we expect mobile to play a strong role in any future Facebook TV strategy.
Old mobile-TV service silos are being superseded by more holistic cross-platform offerings, with portable access to video increasingly bundled as part of a wider multi-screen package. Improved network capacity and hence mobile broadband speeds have improved the mobile-TV and video user experience, as has the use of smartphones, which are evolving into a handheld alternative to a TV set-top box. The rising tide of tablet devices will help further transform and proliferate mobile video consumption and interactivity.
The app store model drives adoption and usage as well as distribution
The pace of change in the service landscape owes much to the advent of application stores as both a retail channel and a means of content distribution. The application store business model has facilitated content owners’ expansion into D2C distribution as well as the ability of pay-TV operators to develop their own mobile offerings. This telco-agnostic model works for both mobile and fixed broadband distribution, hence the rapid growth of downloadable iOS and Android applications enabling portable access to pay-TV operators’ multi-screen propositions as well as content providers’ online offerings.
As well as bridging the gap between the computer and the TV set, tablets are also the logical next step in the evolution of the smartphone as a set-top box. On top of their multimedia capabilities, they function as both a TV companion and a supplementary viewing device, providing new opportunities for content providers and applications developers.
Given their ability to provide a more compelling and complete portable alternative than smartphones to the main living room screen (and STB), tablets present a greater disruptive challenge to traditional TV.
YouTube accounts for a substantial proportion of video traffic over the mobile web, with shared clips of both UGC and professional content remaining the most common mobile video category, although user-generated content has yet to be developed into an effective monetization opportunity.
Closely linked with viral clip sharing is the social TV concept, which is becoming core to the online video experience. But the range of applications supporting this kind of interactivity on mobile platforms remains largely confined to those enabling content to be shared across social networks.
Another emerging category of applications allows a mobile device to act as an interactive communications channel to comment on what is being viewed on the PC or TV screen, with minimal intrusion on the main viewing experience. While mobile social TV apps have a novelty value that can attract consumer interest, services are still fairly basic and undifferentiated. They need critical mass to really fly, and at present most have a modest active user base, with the need to sustain consumer engagement remaining a key challenge.
TV and video viewing on mobile is growing fast but revenues lag stubbornly behind usage and the bottom line is that it is still difficult to make significant direct revenues from mobile TV and video.
Standalone subscription offerings are still the dominant model, but beyond sports, movies, and key event viewing, these don’t resonate with consumers. Service providers are therefore exploring freemium models that combine free and paid elements as well as advertising, although this is still at an early stage in the mobile-TV context.
The reluctance of consumers to pay much (if anything at all) for the bulk of mobile TV and video means that advertising by necessity is a critical component of the business model. Mobile is attractive for advertising because it has the potential to support high levels of targeting, personalization, and engagement – all qualities lacking in traditional television.
The personal nature of mobile devices and the constraints of smaller screens have previously been considered a show stopper for mobile-TV advertising.
However, this isn’t necessarily the case as long as adverts are produced with mobile in mind, are well targeted, and provide something of value in the form of the message itself or free services. When this is done properly, consumers respond well to mobile advertising and the conversion rates can be higher than other media.