The Mobile Industry Heralds Mobile TV As The Next Huge Money-Maker Even Though Surveys Indicate It's Going To Be A Hard Sale, And Now The Experience Of The UK's Virgin Mobile Bears That Research Out

Philip M. Stone January 19, 2007

Maybe Virgin Mobile didn't go about it the right way it could only offer one expensive mobile model that receives its DAB Digital Radio signals and customers seem to think it's a bit old-fashioned and clunky -- but whatever the reason its mobile TV platform launched last October with none other than Pamela Anderson leading the £2.5 million ($5 million, €3.97 million) pitch has done miserably.

Even Pam watching TV on her phone by the pool couldn't convince the British to buy Virgin's service.

In its three months of operation less than 10,000 subscribers have signed up. Part of the reason could be that the Lobster 700 phone’s price of £199.99 ($400, €300) turned people off, but even when Virgin recently cut that price in half the pickup remained low.Virgin Mobile offers the mobile TV phone and service for free for customers on a contract of £25 ($50, €33) a month or more, for the life of their contract. On a different plan the phone, originally available at £199 has now had that cost slashed in half, and the customer receives free service for an initial three-month period, followed by a charge of £5 a month. But that has not done the trick. Still price resistance at the phone’s cost, or maybe people just don’t like that phone?

And that could well be a lesson not to be lost on competitors. It’s imperative to keep the cost of the handset down if mobile TV is to be a big success. That’s one of the prime reasons why the world is waiting for China to issue its first 3G licenses because when vendors start ramping up to meet the handset demand in that market then the cost of handsets globally will come down.

Virgin hopes to offer additional DAB reception phone model phones later this year that will allow customers to download and store programs. The storage could be key to mobile TV’s success.

Most trials have shown peak viewing time for mobile TV is during the morning and afternoon work commute. It’s not unusual for a Londoner to have an hour or more commute and reading the newspaper is currently the most popular method to kill time. But if those commuters on, say, the underground (subway) could watch TV programs they had previously downloaded and stored on their mobile then mobile operators could then well be onto a good thing.

Virgin uses the DAB system because the UK won’t have spectrum available until 2008 for the globally more popular DVB-H system that transmits over the air using TV transmitters. When 3 Italia launched its DVB-H system in time for the World Cup last year it got an initial 100,000 customers and never looked back.

There is also a view that part of Virgin’s problem is that it doesn’t offer enough programming choice. It has four stations including the main BBC and ITV channels, plus a news service but trials elsewhere have shown the more stations offered the more time people spend watching. DVB-H can handle up to 80 channels.

But none of that stops the positive spin from continuing. “The future of Mobile TV is certainly looking bright, with recent industry activities and consumer take-up laying the foundations for significant future growth,” according to Understanding & Solutions. “By 2010, we predict Mobile TV and Mobile Video on Demand will achieve combined revenues of around $18 billion worldwide ($14.3 million for mobile TV and $3,7 million for video on demand), excluding revenues from advertising, sponsorship and added interactive services,” according to Alison Casey, business director, content & services, at Understanding & Solutions. That’s considerably higher than the $11.7 billion estimate by 2011 that Juniper Research released last summer for mobile TV.

But to reach those kinds of numbers vendors have to keep their hardware and programming prices down, since several research studies conclude that people are not willing to spend much money on mobile TV services. A UK survey last summer by BMRB said that 70% of 3G users had never made a video call, or had made just one, and that more than half never watched a video clip or downloaded music, and 75% said they were unwilling to pay even £5 ($10, €7.70) monthly for mobile TV services. And a TNS Technology report came up with similar results – 23% said cost was a major factor against using 3Gs for anything but talk.

Research says there must be low fixed price plans – people do not want to be charged by the kilobyte downloaded, or by the time using the system.

But even if the pricing is right the big question still out there is what do people actually want to watch. Is it television like those four channels on Virgin’s service or something else?

A study by Deloitte in Canada says there is not much demand for long television programs delivered to mobiles. Instead it is short clips of about five minutes in length that are gaining favor, especially sports clips.

The study, noting that mobile this year will likely become the primary network for voice calls over fixed lines, said that high on the customer wish list is not video but rather that operators invest in providing more reliable voice service in buildings and that systems are expanded for the increased voice volume so calls don’t drop off or fail to get connected.

Virgin’s service is provided by BT’s wholesale mobile broadcast entertainment service, BT Movio. Besides TV, it broadcasts DAB digital radio, offers ‘red-button’ interactivity and features a seven-day electronic programme guide (EPG).

At the time of the October launch Emma Lloyd, managing director, BT Movio, said: “BT Movio looks forward to working with Virgin Mobile as our first customer. We fully anticipate that their well-known marketing flare will attract many UK consumers to the service, which will offer the strongest TV and digital radio content for mobile phones yet to be seen in the UK.”

‘fraid not, Emma.

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