There are few services that have attracted as much hype within the wireless industry as mobile TV. And it is not without justification. The ability for a consumer to watch Lost, 24, their soccer team play a league game or even the Superbowl live on mobile represents a very compelling content proposition. And one that has seen the major manufacturers around the globe invest millions of dollars in infrastructure and handsets capable of delivering a rich media TV experience.

According to the latest research released by Informa Telecoms & Media, the mobile broadcast TV market will be worth US$219 million in 2007, driven primarily by the Korean, Italian and US markets. By 2012, mobile broadcast TV is forecast to generate revenues of US$4.4 billion, with the US predicted to become the largest market contributing 20% of total revenues. Informa believes that the US will overtake Korea as the biggest mobile broadcast TV market in 2009.

But before the wireless industry over-hypes the potential of the service and encourages consumers to throw their 42-inch plasma screens out of the window, the potential of mobile TV needs to be placed into context. Would friends really come round to your house to watch the World Cup Final on a 2.5 inch screen?

The answer to the question is a resounding ‘no’, but then the mobile phone has not been designed for public broadcasting purposes, nor is it expected to replace the TV. It is a personalised media device with relevance specifically to that consumer. So the assumptions that the potential of mobile TV lies in the service’s ability to deliver a personalised experience to the consumer based on his relevance and immediacy (ie location) is a logical one.

The opportunity for mobile TV largely stems from consumers becoming upwardly mobile and their consumption of content migrating away from the fulcrum that was once the television set. To meet this demand, production studios such as Sony, Warner and Fox Entertainment, along with broadcasters such as CNN, ESPN, BSkyB and the BBC, are collaborating with tier 1 mobile operators such as Verizon Wireless and Vodafone to ensure the 24/7 delivery of consumers’ favourite programmes.

With so many major corporations nestled in the value chain all jostling for what they deem a fair slice of the revenue pie, creating a successful business model capable of satiating every player has become an increasingly complex task, even more so considering the commercial background of each industry – publisher, broadcaster and mobile operator. Nevertheless, the focus must centre on the consumer and establish a business model that will deliver the service to the mass market. Discovering such a business model is nonetheless being made that little easier as consumers buy into the concept of television on their mobile phone around the world.

South Korea is seen as the principal flag bearer to date regarding mobile broadcast TV, and with good reason. By the end of April 2007, there were almost 4.5 million subscribers using the country’s available satellite-DMB (S-DMB) and terrestrial-DMB (T-DMB) mobile broadcast TV services in less than 2 years since launch.

The business model behind the S-DMB service is based on a monthly subscription fee of US$13 on unsubsidised handsets costing between US$500-800. S-DMB has over 1.2 million subscribers as of the end of April, and has introduced advertising on the service to supplement revenues.

Advertising revenue has formed the foundation for the free-to-air business model used by T-DMB. The broadcaster-backed service has over 3.2 million subscribers but continues to lose money because the number of ads are restricted, limiting ad revenues to US$2 million per month per broadcaster. The broadcasters bemoaned the situation which resulted with the introduction of paid interactive data services and the potential for subscription-based channels. This is in stark contrast to the subscription-based business model, where all players within the value chain – technology providers, network operators, content owners and broadcasters – will generate revenues from the service.

It is by no means a coincidence that both the S-DMB and T-DMB services started out at the opposing ends of the business-model spectrum and are gradually converging. S-DMB has evolved from a subscription-only model to incorporate advertising, whereas the ad-funded free service of T-DMB will soon welcome the addition of subscriptions. Both models have adapted to the requirements of the players in the value chain, with a flexibility that extends from the fact that Korea has an abundant mobile TV market.

Just like Korea, the Italian market highlights the consumer demand for mobile broadcast TV in Europe. Italy represented not only the first commercial DVB-H network, but also the first commercial mobile broadcast TV network in Europe. There are approximately 620,000-630,000 subscribers to the DVB-H service in Italy on 3, Telecom Italia Mobile and Vodafone.

The most successful of these wireless operators is 3 Italy with over 600,000 of the subscribers, primarily due to aggressively going after the market offering heavily-subsidised handsets coupled with a monthly subscription (including TV) for €29. Conversely, TIM does not offer subsidised handsets and charges a monthly subscription of €50. TIM’s strategy has not proven as popular with the Italian consumers, with around 10,000 signed up. To date, Vodafone has failed to divulge its subscriber base for its mobile TV service, but is believed to be in only a marginally better position regarding subscribers than TIM. Presently, 3 Italy is generating €17.4 million revenues per month compared to TIM’s €500,000 per month. It is also glaringly obvious which operator the advertisers are most likely to team up with.

While Italy represents a fully-functioning mobile broadcast TV value chain, Finland epitomizes the reverse. Complexities of the business model and companies in the value chain jostling for revenue transformed DVB-H network operator Digita’s desired commercial launch in December 2006 into a soft launch with only one channel. Unresolved content rights issues coupled with the excessive price Digita was charging content providers for a place on its network were cited as the principal hurdles.

A full free-to-air commercial launch was only possible in July 2007 following a decision by the two major Finnish broadcasters, MTV 3 and Nelonen, to pay royalties to air their content on the DVB-H network. Under the latest terms, MTV 3 and Nelonen will only pay royalties provided that the mobile TV service makes revenue, primarily from interactive services, and in the long run, advertising revenues.

With the free-to-air business model, it could be argued that the likes of MTV 3 and Nelonen – or any content provider operating within a free-to-air service – could become disincentivised without the guaranteed revenues generated from a subscription-based model, and consequently limit their investment in mobile. The counterargument is of course, that if they do not invest in mobile TV content, they will not attract the consumers and fail to generate revenue through interactive services and advertising. Under this business model, only the broadcast network infrastructure provider (Digita) is guaranteed revenues.

While Italy and Finland represent the contrasting fortunes of DVB-H launches in Europe, the standard received a boost recently when the European Commission’s (EC) Telecoms Commissioner, Viviane Reding, urged the EC’s 27 member states to deploy DVB-H. Commissioner Reding’s remarks are more along the lines of encouragement than a mandatory ruling intended to overcome the potential fragmentation of the European marketplace and accelerate use (in most markets) of the UHF band which has been identified by the EC for mobile broadcast TV services. A number of organisations have objected to the announcement in favour of market forces determining the pan-European mobile TV technology.

Industry organizations stand by the principal of “technology neutrality” as recommended by the European Mobile Broadcast Council (EMBC), stating that the slow commercial deployment in Europe of mobile broadcast TV networks is due to the lack of spectrum availability, clear licensing terms and successful mobile TV business models. If anything the EC should have stepped in seven years ago to conquer the delays in 3G that dominated the European wireless landscape, not rule in favour of one technology over others for mobile broadcast TV.

That said, there is also the option for EC member states to object to Reding’s proposal. That could possibly open the door for alternative technologies. And the UK is a prime candidate. The UHF band will not be available in the UK until 2012, forcing operators and broadcasters alike to seek alternative solutions to DVB-H. For instance, Orange is considering IPWireless’ TDtv solution based on multimedia broadcast and multicast service (MBMS) implemented over UMTS TD-CDMA networks, while UK broadcaster, BSkyB, trialed mobile TV services using MediaFLO.

UK MVNO Virgin Mobile opted for DAB using BT Movio’s network to launch its mobile broadcast TV service. It is purely coincidental that Virgin failed to impregnate the UK’s mobile market with its DAB TV service in the nine months that it was available. Sidestepping the fanfare that promoted Virgin Mobile TV’s launch in October 2006, the lack of handset choice, not to mention a poor user experience, would inevitably hamper the success of the service. In an age when the two factors that drive uptake in the mobile sphere are price and handset, why Virgin decided to launch its mobile TV service with a device (from HTC) called “Lobster” remains nothing short of a mystery. No doubt crustacean-based device names will be off the menu from operators and handset manufacturers alike in the future and rightly so. The aesthetic appeal of a handset is still the biggest draw for the consumer just look at the likes of the iPhone, LG’s Prada phone, and Motorola’s RAZR. Without a broad selection of handsets, the service will fail. The success of i-mode outside of Japan is a case in point.

Aside from the obvious flaws in the Virgin service, the proposition itself was a compelling one. The service offered content from the country’s leading broadcasters; BBC One, ITV1, Channel 4 and E4. However, Virgin failed to attract over 20,000 subscribers to its mobile TV service, and ultimately paid the price. Without the consumer adoption, it clearly was too great a risk for the MVNO to adapt its business model and move toward an ad-funded strategy.

Speaking to 3 UK CEO Kevin Russell recently, he said that the operator had learnt from its mistakes and would no longer launch services that “did not work”. Over the last decade, the wireless industry, generically speaking, has been culpable of rushing services to market; WAP, MMS and video telephony are the obvious choices. And with Virgin’s haste to become the first mobile broadcast TV operator in the UK, mobile broadcast TV over DAB can now be added to the list.

On the other side of the Atlantic, MediaFLO has made waves in the US with its wholesale business model, which has struck a chord with cellcos Verizon Wireless and AT&T. In March 2007, Verizon launched V-CAST subscription-based mobile TV service, but has not yet published subscriber numbers. AT&T plans to launch the service in late 2007. As with S-DMB in Korea, V-CAST TV is subscription-based (US$15 per month) and will potentially benefit all companies in the value chain, with the incentive of attracting advertising revenues as well as delivering interactive services using the uplink on the operator’s cellular network.

The early commercial launches of mobile broadcast TV, beyond the UK, reveal a market demand for the service, but fail to clarify a prevailing business model. Ultimately, price will inevitably dictate the success of the service, and therein the difficulty lies. Consumers would favour an ad-supported model that is free, whereas the companies in the mobile broadcast TV value chain would prefer the guaranteed financial safety net of the subscription model. As mobile TV markets mature and subscriptions reach an inflection point, such as in Korea, the opportunity for an intermediary solution presents itself, combining both the pay TV subscription model with the allure of advertising revenues.

A version of Assessing the business models for mobile broadcast TV is featured in the September issue of FLOFocus magazine.