Mobile television is going to be the next big thing

By : Mark Halper November 06, 2005

PUBLIC relations executive Heikki Lehmusto was driving along the Finnish motorway in his BMW 525 last May, heading to his summer house on one of the year’s first warm, sunny days. Suddenly he decided to pull over to watch the noon news on television. Helsinki publisher SanomaWSOY was announcing stellar financial results, and Lehmusto wanted the full, visual story.

No, he didn’t park up at a restaurant to gaze at the 25-inch screen perched above the bar. Rather, Lehmusto simply sat by the roadside and tuned into Finnish channel YLE 24 on his mobile phone. He was taking part in a trial to use TV transmission towers rather than mobile networks to air regularly scheduled programmes on CNN, BBC World and other channels. “I’m a little bit of a news freak, so this is good, because I can watch when I’m out or when I’m at work if something interesting is happening,” says Lehmusto.

Welcome to the next big thing in the small screen: mobile television. With the world’s mobile phone population rapidly approaching 2bn, and with its total of TV sets at an estimated 1.3bn, the time has come to combine what are arguably history’s two most successful consumer electronics products.

“The mobile will be the main device to enjoy radio or TV programmes anytime anywhere,” Yun-Joo Jung, chief executive of Korea’s largest broadcaster, KBS, told a packed audience at the Mipcom broadcasting conference in Cannes recently. He predicted that at least 5m people will watch TV on mobiles in Korea by the end of next year – more than a tenth of the country’s population.

And lest you think that Korea’s fascination with technology and its cultural differences make it the exception, his enthusiasm is shared by plenty of familiar western media companies, such as Big Brother creators Endemol.

Mobile TV “has to be the biggest opportunity that I’ve had the privilege to face,” Endemol chief creative officer Peter Bazalgette said at Mipcom in a quick take on his 28-year career. “For the first time, I can access the audience anytime, anywhere for 24 hours.” To chase that opportunity, he announced that Endemol in the UK has formed a mobile TV division that will make entirely new programmes – not just spin-offs of existing shows – for the phone. These will include youth-oriented soap operas, comedy and “extreme” reality shows.

Even former BBC director general Greg Dyke weighed in. “The time is coming where all the traditional broadcast shows will be available on your mobile phone, if that’s what you want,” said Dyke, who is now chairman of Bob The Builder makers HIT Entertainment and an adviser to venture capital firm Apax Partners.

The US TV industry signalled its interest in mobile TV in September, when the Academy of Television Arts and Sciences presented a technical Emmy to US cellular operator Sprint and its partner MobiTV, for delivering standard programming over mobile networks. Television executives are hopeful that mobile TV could generate revenue and win the eyeballs back that it has been losing to the internet and gadget generation. Mobile TV has come squarely on to the agenda at the broadcasting industry’s biggest conferences, such as Mipcom and IBC in Amsterdam last October. Executives from the likes of Disney, the BBC, BSkyB, US sports broadcaster ESPN, Turner Broadcasting (CNN), Pop Idol and Baywatch owners Fremantle Media are flocking to these events to try to figure out how best to fulfil mobile TV’s promise.

MOBILE TV is in its early days and is taking many forms, so analysts are struggling to measure its potential. Research firm Informa estimates that the global market for mobile entertainment (not all of which is TV) will hit $42bn (£23.5bn, E34.8bn) by 2010, when, predicts UK research company Juniper, 65m people around the world will subscribe to mobile TV. That forecast does not take into account millions of other individuals who could watch mobile TV free in advertising supported services, such as one launching in Korea in December and another under development in Malaysia by broadcaster MITV.

So far, most of the world’s mobile TV has been delivered to consumers over costly mobile networks to consumers who pay a premium to watch, often using pricey 3G services. Bazalgette said that in the past year, more than 1m people have watched 6m minutes of Big Brother on their mobiles, using mobile networks in the UK, Italy and Australia.

But in a radical change personified by Helsinki’s Lehmusto, broadcasters are experimenting with technologies that transmit regular programming from television towers straight to mobile phones, by-passing mobile phone masts and networks.

This opens up the possibility of reaching mass audiences with a single broadcast, just as standard living room television does.

By comparison, even the beefiest 3G mobile networks could quickly collapse under the weight of such voluminous, bit-heavy transmission. “3G doesn’t have the bandwidth,” says Nokia vice-president Richard Sharp. Dozens of broadcast trials like the one in Helsinki are under way from Malaysia to Paris to Pittsburgh, and Korea has already implemented one commercial version that will compete with a second one starting in December.

Assuming that people want TV on their phones, the arrival of broadcast technologies also sets the stage for a slugfest between the broadcast industry and mobile operators for control of mobile TV’s revenues. By using broadcast technologies, broadcasters can potentially collect more revenue than they would when a mobile operator distributes a clip over a mobile network.

In the UK, mobile operator O2, which received a £17.8bn all-cash offer from Italy’s Telefonica last week, launched a broadcasting trial in Oxford last month, in part to see whether it should partner with broadcasters and embrace the broadcast technologies that could siphon viewers away from 3G networks. Even the UK’s 3G-only operator, 3, owned by Hong Kong’s Hutchison Whampoa, concedes that broadcasting technologies could have a place. Hutchison 3G UK technical director Ed Candy told an IBC audience last month that broadcasting technology “fits” with 3’s video services, although he would not elaborate on how.

“Broadcasters will look at this much more than 3G, as theirs,” notes Arne Rees, head of strategy and partnerships for European football association Uefa, which sells broadcast rights to its matches to traditional broadcasters and mobile operators.

Programme creators often say privately that mobile operators strike stingier deals with them than do producers’ traditional broadcasting outlets. If broadcast technologies start to give broadcasters more bargaining power in deals with mobile operators, that could lead to better deals for independent content creators, many of whom complain that they are footing the bill to create all the new made-for-mobile programmes.

“Does this give us more control? Potentially,” says Claire Tavernier, senior vice-president for FremantleMedia Licensing. “Operators are our friends; we just wish they shared more money with us.”

Some media companies, such as ESPN in the US and the UK’s Extreme Group (producers of Extreme Sports) are starting their own branded mobile networks to give themselves more control over the distribution of their shows. Ironically though, the revenue from these media-branded networks is expected to come largely from the voice business, rather than from video.

But before anyone ends up dominating mobile TV, there are plenty of issues to sort out if it is to become a mass-market phenomenon. Perhaps the biggest question of all is: what will people watch on their small screens?

“We don’t know what they`ll watch,” says Greg Dyke. “It’s unlikely you’ll want to watch War And Peace on the phone, but you will watch sports clips.” For that reason, mobile TV handset makers such as Nokia are scrambling to have TV-equipped phones on the market in time for major events such as next year’s football World Cup in Germany and the 2008 Beijing Olympics.

That makes sense to Finland’s Heikki Lehmusto, who recalls an evening in the terrace restaurant at the Savoy Hotel in Helsinki last spring, when others gathered around him as he tuned into the quarter-final world championship ice hockey match between Finland and Russia. “People were eager to look at the match. I said, ‘I have a phone we could watch’,” he recalls.

And as Lehmusto demonstrated on his drive to his summer house, news will be popular. When O2 launched its mobile TV broadcast trial along with transmission company Arqiva last month, 25-year-old trial user Gina Policelli was on hand watching updates of Hurricane Rita and of the Liberal Democrat conference on Sky News and BBC News 24.

WHILE pornography has been popular in many 3G mobile services, so far it has not featured much in broadcast trials. One exception is in Holland, where Dutch mobile operator KPN has included the Playboy channel alongside BBC World, Eurosport, Nickelodeon and others. Commenting on user patterns around the world, KPN business development manager Rogier van den Heuvel says: “The Koreans watch in their cars, the Italians tune into sex channels – the Dutch do both.”

Media companies are also experimenting with short, made-for-mobile programmes called “mobisodes”, such as a teenage soap opera that Endemol shamelessly calls Cellular, about a group of teens whose intense social lives pivot around their mobiles. Endemol transmits Cellular over the Orange network in France. While Cellular originated on mobiles, many mobile shows are knock-offs of existing TV programmes.

In the UK, Vodafone has been showing one-minute episodes of the drama 24, produced by the show’s US creators, Fox TV, reportedly with heavy funding from Vodafone. Disney makes clips of the shows Desperate Housewives and Lost available on mobile networks in the UK and Italy. A cottage industry of made-for-mobile production specialists such as Cinema Electric and Fun Little Movies in the US is also developing.

ANOTHER unanswered question: where and when will people watch? While trialists are turning up in predictable places – on trains and buses during their commutes – many are watching at work. Some, like Policelli, have reported watching in bed, and others have said they watch the news while shaving in the morning. One Helsinki triallist watched in the bath. Potentially, the mobile phone will extend primetime, as mobile viewers watch at times other than at home peak hours, albeit for a shorter duration.

While there’s an assumption the youth market will drive the mobile TV industry, Lehmusto’s age suggests otherwise: he’s 58, and chairman of Lehmusto & Co, a marketing and public relations firm. Broadcasters and mobile operators should also not take it for granted that young people will watch.

In a sobering mock focus-group session at a conference called Mobile Content World in London in late September, five people aged 18-21 said they were not interested in fancy new services. They made it clear they would watch video on their phones only if it was free or cheap.

That insight should hearten the advocates of free-to-air mobile TV supported by advertising. Some industry experts believe that mobile TV could be a bonanza for product placement advertising.

Nevertheless, KBS chief executive Jung says that it is Korea’s youth that will make up most of the 5m viewers of mobile TV in Korea next year. “They’ll watch on the subway, while hiking, while fishing,” he says. “We can expect a lot of cultural change.”

THERE are also plenty of technical and regulatory obstacles facing mobile TV as well.

Among broadcast proponents, a three-way VHS versus Betamax type standards battle is breaking out that could hold back the mass production of handsets as companies wait to see which technology takes hold. Nokia is not waiting; it backs a technology known as DVB-H, derived from the technology used to transmit digital terrestrial television such as the UK’s Freeview. Another system called DMB is based on the DAB standard used for digital radio, and is popular in Korea and in parts of Germany.

In the UK, BT deploys a DMB system in a London mobile TV trial it calls Livetime. US mobile phone technology powerhouse Qualcomm is marketing a third broadcast system, called MediaFlo. Another impediment is that broadcast transmission requires broadcast spectrum, which is not yet generally available.

Some proponents of DVB-H fear that regulators will not grant spectrum, or that different countries will award different frequencies, undermining efficiencies as handset vendors would have to build different products for different countries. DMB supporters such as BT claim an edge because DMB piggybacks on the existing capacity used by the DAB radio networks. But even that’s limited. BT has only partial access to the UK’s national DAB network, so they carry only three TV channels on Livetime. In the US, Qualcomm has gained access to UHF spectrum, but there’s some concern that it’s already too cluttered with local TV channels. Japan deploys a fourth mobile TV broadcast technology, ISDB-T, although it does not appear to be marketing it globally.

Then there is the question of who’s going to build and pay for mobile broadcast networks. In the US Qualcomm has pledged up to $800m over four years to build MediaFlo. But in Europe, transmission companies such as Arqiva (formerly NTL Broadcast), National Grid Wireless (formerly Crown Castle) and France’s TDF are unlikely to build expansive networks until broadcasters or mobile operators order one, perhaps through a consortium. Dermot Nolan, an analyst with Screen Digest in London, estimates that in the UK alone, a national DVB-H network could cost £500m.

Building a network dedicated to mobile broadcasting would be a risk, especially if mobile networks prevail. And internet technologies such as wi-fi and wi-max may prove to be more popular with consumers for video on phones or on other devices, such as Apple’s new video-enabled iPod, and a forthcoming video device from Sony.

There are handset hurdles as well. There are few commercial handsets available outside Korea that receive broadcast signals. The Korean versions have long, telescopic antennae that westerners would reject. Users in the European trials have complained of the time it takes to change channels – about 12-to-15 seconds on the Nokia model 7710 – and of poor battery life. 3G users complain that the video features can be difficult to use, and that they cost too much.

But these technology walls are likely to fall, freeing the mobile TV industry to take flight and for broadcasters and mobile operators to engage in a battle of the titans to control it.

It seems fairly likely that mobile TV will become a fixture of daily life. But expect a few changes in the balance of media and telco power by the time it does. Like Lehmusto’s holiday drive last spring, the journey will be as interesting as the destination.