What Keeps Putting Mobile Video on Hold?

NEW YORK The potential revenue from mobile video, given the ubiquity of cell phones in the U.S., has content providers and carriers salivating. But progress has been stalled by carrier reluctance, non-existent advertising standards, technical challenges and questions about the types of video consumers want to access.

Today, the U.S. subscriber base for active cell phones is approximately 260 million. In terms of mobile video, the subscriber base is projected to reach 12 million by year-end and grow to 25 million by 2011, according to Lewis Ward, research manager for mobile consumer services, entertainment at IDC. Worldwide mobile video revenue is projected to reach $531.4 million by 2008 and grow to $5 billion in 2011, according to data from eMarketer.

To help advertisers tap into the market, the Mobile Marketing Association is currently working to develop standards for ad units in such areas as sizing and format.

“The key is that the advertising shouldn’t dominate the device, yet remain relevant to the consumer experience,” said MMA president Laura Marriott.

“Having standard metrics and ad units across the different carriers so the mobile advertising space looks a lot more like on-air and online would be the biggest accelerator,” said Greg Clayman, evp, digital distribution and business development for MTV Networks. “The carriers need to embrace that. The good news is, there is a big enough market out there.”

But some say carriers are limiting the growth of mobile media by adapting technology that curbs cross-carrier distribution techniques for fear of losing customers. Although there is some agreement among content providers, agency executives and analysts that carriers need to open up their systems to stimulate growth of the mobile video platform, specific solutions remain elusive.

Navigation tools that help users find content on a mobile device are a critical issue. “No one’s done a particularly good job of making it very simple for consumers,” said John Zehr, svp of digital media for ESPN. This is partly driven by technical challenges, multiplied by the fact that there are countless incompatible devices—even within a single carrier.

Technology aside, all of the constituents involved in the mobile video space are still trying to figure out exactly what content users want to watch on their phones. IDC’s Ward said news, sports, comedy, weather and entertainment gossip top the list. But there are other factors.

“[Industry participants] are trying to determine what consumers are most interested in, in what format, how they want it, when, how they want it programmed,” said Ron Lamprecht, svp of digital distribution for NBC Universal. While the consensus is that ease of use will lead to greater adoption, not everyone agrees how this should be determined.

Some content providers believe that the wireless carriers should collaborate to create a single menu structure that would be the standard across all phone networks and handsets. Those who support that side of the debate insist carriers are hindering growth because they have created systems that make it extremely difficult for their customers to access content other than what is tailored to their platforms.

“The carriers are very myopically concerned with churn to keep their customers. Differentiating themselves is part of the way to do that,” said Linda Barrabee, program manager, consumer research, The Yankee Group. But Barrabee foresees content owners taking more control as the market matures and more consumers opt to consume video on their phones.

“I believe that carriers will restrict market development if they don’t open things up a bit more. Content that’s important for me isn’t necessarily what you want to watch. And content owners know their customers and how to reach them,” she said.

ESPN’s Zehr noted that, as mobile devices were created to make phone calls, the content experience has been a secondary aspect of their core business. However, carriers have realized that the wallet share is going to shift from a good deal of voice-based average revenue per user to content and data. “That attention is going to shift, and this is something we’ll work closely with them on,” he said.

But Paul Palmieri, president and CEO of Millennial Media (and former Verizon Wireless executive director of business development and programming), said the carriers have come to grips with the fact that they are a distributor in this environment, as depicted in ringtone download deals, in which carriers gave the lion’s share of revenue back to the content provider. “I think the track record for these companies is actually pretty good in creating markets and understanding their role as a distributor,” he said.

Nevertheless, some sort of cross-carrier solution must be created to alleviate navigational problems in finding content, said Angela Steele, vp, mobile activation director for Starcom USA. Steele believes that a standardized format based on genre (all sports on one channel) rather than network (ABC on its own channel) would be a good answer. Steele pointed to what is transpiring online, where most of the video traffic does not occur on the content providers’ individual sites (ABC.com, for example), but rather through users seeking out the video they want to view through a search engine (such as Google).

Steele believes one of two things will happen: “Either the carriers will work together and make their decks more open, standard and user friendly. Or, the deck will become irrelevant and there will be off-deck solutions to provide consumers with what they are looking for. Aligned with this will be some sort of content portal where users will be able to go and customize the kind of content that they want without having to involve the carriers.”

John Hadl, CEO of Brand in Hand and strategic advisor to Procter & Gamble for mobile, said commonality in process is the key. “From a media buyer’s perspective, if that process is a lot of work—so much so that it prevents me from doing the rest of my job—then I’m not going to do it,” he said.