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Video begins to show more aggressive tendencies

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Video begins to show more aggressive tendencies

Thursday, 15 March 2007

In the heady days of bidding for 3G licences, mobile operators had believed that video would be a killer application – it was part of the business plan. Seven years on, video has proved to be a wimp, not a killer, but is finally beginning to display some more aggressive tendencies.

There’s been a number of problems with getting video on mobile. Cost has been the most serious inhibitor. Jeremy Flynn, founder of D2See, doesn’t mince his words; “Operators’ data charges are absurd. How can they charge £5 or £7.50 per megabyte for downloading a product that probably is worth £1. In what other situation would a customer pay £15 post and packaging for a cheap item?”

There is no doubt that consumers are confused about how and what they will be charged because operators’ tariffs for video services are, in general, varied and complex, with too much small print. How are consumers supposed to understand the implications of per megabyte charging for downloads and streaming, and on and off-portal?

A great and much publicised example of what happens if you don’t understand exactly what those implications are was reported widely just before Christmas. A British man, Michael Schaefer, was charged £950 for watching two hours’ TV on his mobile. His O2 tariff included 100kbit/s of free downloads, after which he was charged £3 per megabyte because the download wasn’t from O2’s portal (where film clips can cost just 35p). O2 ultimately waived the fee.

Likewise, Paul Goode, vice president of product development at market analyst M:Metrics, tells of how a colleague inadvertently ran up a £141 bill, streaming clips off the BBC web site one lunchtime to try out a new phone. The clips cost £18 each to stream and he didn’t even have anything he could watch again for his considerable outlay.

As Flynn says, why build a 3G network, at colossal expense and then make it prohibitively expensive? D2See’s solution is video calling to avoid heavy ‘carriage’ charges. He explains, “All users pay is the call charge, so if it’s a £1 a minute, there are no extras. All 3G phones and networks can support video calling. It works by the user sending an SMS short code to the video service and off you go. You’re connected to the service and you don’t have to worry about WAP.”

He adds, “Few Western Europe countries support short code SMS apart from the UK, but that’s not a big problem. The alternative is to run the video services behind a standard phone number and deploy a different payment mechanism, such as premium SMS or credit card. In the UK, video call prices range from 50p and rise in small increments.”

Stephen Dunford, chief executive officer, Celltick, has other ideas. He says, “The only way round confusing data charges is by offering a subscription service which is a good way over the pricing hurdle. Most of the time, this could be by the operators because most people spend most of their time on-portal. Then there are technology issues, particularly with streaming, set-up can be difficult because 2.5G technology can’t support video as well as 3G, but the user doesn’t know about the network they are using and shouldn’t need to know how to use a mass medium.”

M:Metrics’ research confirms that take-up of video is closely allied with the availability of 3G. Goode says, “Italy has almost 25 per cent 3G penetration, so it’s a very interesting market to watch to see what happens as 3G rolls out. It demonstrates that 3G drives the growth of video consumption as new handsets come out and in Italy, 4.5 per cent have watched video compared with the US’s 1.3 per cent where 3G penetration is much lower at 6 per cent.”

As of October 2006,

                    % watched       % 3G
                    video           penetration

Italy                4.5%               25%
Spain               3.6%               9%
UK                3%                  12%
Germany          2%                  7%
France             1.9%               8%
US                1.3%               6%

Goode adds, “Contrary to common perception, it’s not just teenagers who are interested in video. For instance, in Spain the biggest consumers of video in the third quarter of 2006 was 25-34 year olds and that is replicated in France and the UK. This has to do with handset ownership and younger people can’t afford the more expensive 3G phones. We have found that males are more interested than females, which is interesting because this gender bias does not apply to other types of content.”

Perhaps the gender bias is explained by the growing popularity of sports clips? Dunford says, “I think the way round streaming problems is video clips, of say 20 -30 seconds, attached to sports, news and gossips items. People love to watch the latest goal. People are looking for short duration content they can do in minutes, not sitting in front of something for an hour, like you would if you were looking at mobile TV. My feeling is that as mobile TV comes along, streaming video will replace much of it, providing content that is repurposed to mobile. But if it’s bad or inconsistent, they won’t come back.”

Flynn doesn’t agree. He insists, “Streaming over video calling will encourage user generated content (UGC), but over time, as operators get to grips with data charges and have fatter networks, we will see IP streamed video on a session basis. It’s perfectly possible now, but it’s simply not safe to launch an off-portal service until the operators address their rip-off tariffs.” He points to T-Mobile’s Web ‘n’ walk flat-rate service as they way things will have to go if video via mobile is ever to be affordable and the fact that T-Mobile has recently launched a per-day charge to capitalise on the pre-pay market too.

“Operators, particularly Tier 1 European operators, have been trying to crack the issues around video some time. I believe they’ll do it in the course of this year. One of the drivers for this is that advertising is going to overtake the ‘pure’ form of content, so a lot of it will be ad-funded and the brands who are funding it will insist of a high quality of service because they do not want to be associated with something poorly served up. There are a lot of projects going on right now. They will come to fruition in 2007 and as we go into 2008, we should see a consistently high quality of service for video clips. It offers a subtle way for advertisers to get their message across, without being intrusive if it’s done properly, and to get an interaction going with the subscriber,” says Dunford.

Another stumbling block is not just poor transmission quality, difficult set-up and problems such as the image and soundtrack being out of sync, but the nature of the content itself. Flynn comments, “The mobile screen is a new medium, it’s a lean-forward, not a lean-back experience like a big screen, but simply reusing stuff made for TV as mobile content is what operators are doing on their portals and it just doesn’t work.”

So what will make compelling mobile video content? Flynn says, “Video on demand will work and two-way traffic, particularly user-generated content (UGC) – everyone wanting their 15 seconds of fame is a mega-trend.”

Michael O’Malley, group manager of portfolio marketing, Tellabs, explains that his company, working with the likes of Forrester Research and M:Metrics, is researching what it describes as the echo boomers, those aged between 16 and 24, in France, Germany, Italy, the Netherlands, Poland, Spain, Sweden and the UK. This generation grew up with the internet and spends more time than any other group online and much of that time is spent on personal stuff – which explains the rocketing rise in web sites such as My Space and Flickr.

Tellabs has sponsored a group of echo boomers to make video blogs and this is what 20 year old Californian student Annie (www.tellabs.com/boomers/videoprofiles_annie.shtml) says, “I am my own historian…as soon as big companies like Apple pick up on it [video blogging] it will be even easier than it is now [to upload video to and from the mobile phone].”

Bena Roberts, senior analyst with BKI Media, says, “UGC is an explosion waiting to happen, as 3’s Kink Kommunity in the UK is proving with its See Me TV service where users send their mobile generated videos to 3 and if other users download it, the originator gets cash back to the tune of 1p per download. Virgin Mobile reckons its Hot or Not UGC content on its portal is definitely hot.”

Goode concludes, “Good things do come to those who wait, as WAP and MMS have proved. Mobile video is nice, but just don’t expect everything is going to happen in an instant. We need the off-portal market to take off, we need flat data pricing, we need more 3G handsets, we need faster data rates. These things take time. Absolutely there is a market for it. Mass market video audiences will probably develop in 2008-9. In the meantime, the industry will continue to experiment.”