There is not a media company in the world today that is not addressing the issue of how IT is transforming the business. Until recently, anyone buying or selling television productions in the global market had to trundle along to one of the major salons, two of the biggest being LA Screenings in California and MIPCOM (Marché international des programmes
) in Cannes. These venerable networking events still thrive, but much of the day-to-day business has shifted online.Even Hollywood studios have begun licensing their most popular series 24 hours after their US network broadcasts the premiere to web-based on-demand services. The popular American series “Heroes” is available on-demand on TFI Vision with French subtitles in this format.Hollywood views this not just as an additional source of revenue, but primarily as a means of encouraging legitimate ways of viewing their content online, and short-circuiting piracy.Nowadays, younger people are increasingly turning away from the conventional television set to the Internet as an alternative source of viewing and consuming information. This is where the mobile phone also plays a key role, as texting and now viewing are second nature to many younger people.How is the television industry facing these new challenges and adapting their traditional advertising-funded model?Internet-delivered television services or IPTV (Internet Protocol Television) enables users to watch quality streamed video content via broadband to their PCs. The goal of the Internet TV companies is firstly to persuade people to view content on their PCs, then to watch it on their television sets, and then possibly to use it on their mobile handsets. This approach is mainly attracting early adopters, but it is predicted that IPTV will be in more than 38 million homes worldwide by 2012, compared to 11 million households in 2007, according to research company Informa Telecoms & Media.They also estimate that by that time IPTV will be generating revenues of nearly US$15 billion. The US will be the leader in revenue terms, generating $3 billion, but China will have the largest number of subscribers with 6.6 million by 2012. Interestingly, Hong Kong, China’s predicted penetration of 49% dwarfs France’s in second place at 18%.A typical IPTV service like Italy’s Babelgum is free to the consumer and is funded by advertising. The same company pioneered Fastweb, which delivered one of the very first Internet-distributed TV services.One of the industry’s conundrums is that the convergence of TV, telecoms and broadband means that content owners have tough decisions to make about how to define digital rights and whether to ascribe exclusivity and on a territorial basis, which is one of the main ways in which they generate revenue. Contrary to myth, it is actually the commercial rights holders who are territorial, not just governments.One Internet TV platform, Joost, argues that their IPTV service is not intended to cannibalise television viewing, but to increase the time audiences spend watching content. Catch-up TV, which allows viewers to watch programmes they missed in their own time, is a key component of their on-demand offer and that of other aggregators like Netflix, Apple TV and Comcast. However, the rights owners want to keep this content as a magnet for their own sites. Joost believe that the best way to monetise content is to forge non-exclusive relationships between content-owners and distributors. Some content owners have decided to launch their own branded on-demand services, offering classic shows free of charge via the net.This begs the question as to why any customer would pay. The answer is that there has to be a compelling reason and compelling content.Advertising may well start to attach itself to on-demand content. Then there is Mobile TV. Korea is clearly a leader in this field, with France, Germany and the UK ahead of the US. There are 2.4 billion mobile phones in the world today. Only 100 million are watching TV on their mobile phones but in the next two years this is estimated to increase dramatically to 600-700 million Mobile TV viewers. It was agreed that by 2015, mobile service providers will be entitled to some of the broadcast frequencies which have so far been reserved for terrestrial TV or radio operators. These UHF frequencies will enable Mobile TV to reach larger audiences and at a significantly lower cost for mobile operators. However, mobile broadcast on DVBH or Media Flow is a very expensive model to maintain compared to normal streaming.Also, as with IPTV, why would anyone pay to watch programmes on a mobile phone when they can watch the same programmes free of charge on television or on the web? Only 10% of the French population watches Mobile TV, for instance, even though all the regular and thematic channels are available. The main challenge facing Mobile TV is clearly to find a profitable and viewable business model.
The incentives to do so are great. Mobile digital broadcasts to handheld devices are estimated to be a $2-billion-a-year business by 2012, with advertising predominant, according to NAB and BIA Financial Network. Clearly the individualism of the mobile phone will draw closely targeted advertising.The market for subscription services on Mobile TV is primarily for short time span information and revolves around clips and headlines, and short-form content analogous to the SMS. In many cases, like music, this is all people want. Programme content is now being re-tailored for Mobile TV, with shorter episodes called “mobisodes”.China is also investing heavily on sports and China Mobile will be testing 3G at this summer’s Olympic Games in Beijing. In the long term, original content must be produced to justify people paying on-demand, in the same way that “The Sopranos” and “Sex and the City” were specifically produced for HBO’s pay TV service in the US. Both series were responsible for increasing HBO’s subscriber base beyond the traditional core of movies’ customers.Sport has become the killer application for Korea’s TU Media. It was in 2005 that TU Media launched the first commercial satellite digital multimedia broadcast. TU Media now has 600,000 subscribers paying $13 per month to access 12 video and 36 audio channels. The average consumption is 64 minutes per day. As conventional television is watched in the mornings and evenings, Mobile TV has found a niche during the day, like a snack taken in the office or on the underground.Consumers are watching major networks but also genre-specific channels, including adult channels, and usage peaks during major sports events. Even though there is a broad range of channels available, quality of reception is an issue. Orange France provides all of its TV options in high definition at no additional cost, and it is proven that HD mobile usage is much higher than in standard definition.As with the Internet, the content owners are territorial in the Mobile TV too. For instance, Orange France blocks its roaming subscribers from accessing its Mobile TV services. This of course eliminates the risk of exorbitant charges but also acts to restrict the content to the country in which it is licensed. As people travel more this model will become more anachronistic, and people will seek other options if it is not remedied.Orange France is also launching Orange Cinema, uniquely offering customers the possibility of viewing movies, linear television channels and on-demand programming on up to five devices, ranging from PCs, TV sets and mobile devices. It will also be possible to transfer content from PCs to mobile. In the UK, Sky Anytime transmits 47 live television channels on Mobile TV through Vodafone live; switching channels takes between 10 to 13 seconds, and there is the facility to quit out of Mobile TV and text or email and then return back. Moreover, Sky Anytime imitates the EPG (electronic programme guide) and enables the customer to record a programme, simultaneously sending the request to the Sky recording box in the television set-top-box within seven seconds. In the sports field, there are football score alerts and specific highlights from individual matches. In the US, Turner Broadcasting has introduced a killer application for NASCAR racing entitled Pick Command, which provides live tracking of a race in action.Internet and mobile phones are revolutionising the entertainment and television industries, and the market will grow as more operators allow customers to browse for a fixed monthly fee. Within four years all mobile phones will have Wifi, and 4G will emerge in the next two years. There are currently approximately 20 standards of delivering Mobile TV, but consolidating technology is not far away. A television marketer’s dream may come true, as people begin watching their favourite programme on a PC, continue viewing it on Mobile TV on the way home and watch the outcome on their high-definition TV set in the comfort of their living rooms. On the other hand, technology is developing so fast, something new may be around the corner!*Tim Horan has formerly worked in sales at BBC Television and Warner Bros, and at Amedia productions in Moscow. The ITI Group is one of Poland’s first privately-owned companies and a leader in television, film and digital entertainment.
©OECD Observer No 268 June 2008