On top of launching full-scale digital-satellite-to-mobile-terminal broadcasting services on July 1, Mobile Broadcasting Corp. (MBCO) and its main technology backer Toshiba Corp. are making a strong, and they believe attractive, push to generate digital broadcasting revenue streams for Japan’s wireless carriers in April 2006 when DoCoMo, KDDI, and perhaps Vodafone K.K. will unleash mobiles with digital TV tuners on them. Talking to Shigekazu Hori, vice president and general manger of Toshiba Corp.’s Network Services & Contents Control Center last week, the planets could finally be aligning for a tailor-made revenue model that will finally convince Japan’s carriers to equip mobile phones with television. And, of course, as mentioned by DoCoMo’s Keiji Tachikawa last week, the fact that MPEG-4 standards have been settled and H.264 is coming doesn’t hurt either.
As WWJ watchers will know, we’ve been really skeptical about whether MBCO will be able to really meet the 1.2-1.4 million subscriber target the company says it needs to break even for its services. But after a long talk to the company, and Toshiba, we can see more light at the end of the tunnel for them.
For those of you who want to skip the updated look at MBCO and why they might get over a very bumpy start, and go straight to their intriguing and possibly successful satellite to mobile phone ideas, please skip the following 10 paragraphs.
First a recap of MBCO: Founded back in 1998, the company has had a dreadful time of it getting its concept of using a satellite to beam digital TV and CD-quality radio to handheld devices. First there was a rival concept by Hitachi Inc. involving a small satellite constellation that had to be put down, then, of course there was the “consolidation” of Japan’s CS (Communications Service, or private company backed) commercial digital service market amid a titanic battle between the Mitsubishi Group-backed Space Communications Corp. and rival satellite services provider JSAT over prime orbital real estate. Now that’s a saga all by itself that we don’t have the “space” to get into.
Then, for MBCO there have been a series of technology and partnership issues, and not last and certainly not least getting permission from Japan’s lumbering bureaucracy-the aptly named Ministry of Public Management, Home Affairs, Posts and Telecommunications-to get permission to broadcast.
The long and short of it is that MBCO will be able to offer 6 digital TV and up to 40 CD-quality radio channels to a first-generation mobile device this July, while partner SK Telecom in Korea is looking at a similar deal, except that it is looking to switch its ready-made audience of one million subscribers who already own TV-turner enabled mobile phones onto a monthly subscription service.
We won’t concentrate on what’s happening in Korea at the moment just to say that SK seems to have overcome its own minefield of problems getting regulatory approval from the Korean Ministry of Information (just a few weeks ago, in the end) and subsidiary TU Media still has to finish building its own broadcast center.
Here in Japan, MBCO’s service launch looks at first sight a bit of a shambles, but in the longer term, seems to have more potential than we first thought.
Immediately, the service, which will use a 2.6 GHz S-band beam from a satellite at 144 degrees East only has one type of terminal available, weighing in at about 130-150 with a 4-inch screen and a battery life that maxes out at 90 minutes. In addition, the company is still working hard to place gap-fillers, or small fixed antennae that relay/ boost the satellite’s signals in high-rise areas where buildings obscure the satellite, tunnels, and so on. In an interview last week, Masaaki Igarashi, group manager of MBCO’s Business Promotion Department admitted that the service will not be available on subways, etc.
The dearth of terminals will be rectified, said Toshiba’s Hori, when a number of key Japanese partners, including the likes of Matsushita/ Panasonic, Sharp and Fujitsu come out with models over the summer and fall. Beyond that, however, things really won’t take off until 2005 when Toshiba develops an advanced processor and tuner combi that will reduce power and battery drain. In fact, said Hori, Toshiba, and perhaps Samsung, which is now also developing silicon, will be able to produce solutions that will enable to be mobile phone mounting.
With no terminals and poor performance to start with, the service looks initially, and quite frankly, doomed. In the late 90s, three companies tried to enter digital broadcasting in Japan and by 1998 there was only one. DIRECTV Japan threw in the towel and so did Japan Sky Broadcasting and that left Sky PerfecTV, which is barely profitable with 3.5 million subscribers against the 13 million subscribers of the quasi-governmental Nippon Hoso Kyokai broadcaster. Against this, MBCO needs something approaching 1.4 million subscribers to break even.
Igarashi argues that through a series of capital injections, and with a 72-company consortium backing it, MBCO has no debt and can ride out low subscriber adds for at least the few years it will take to build the base. In addition, the company has already signed up NTV, a major terrestrial broadcaster here, as well as CNBC, and there are even rumors that state broadcaster NHK is coming abroad. Igarashi argued that with compelling contents, a maximum monthly fee of JPY 2,300 (about $21) and a couple of years, MBCO will be out of choppy waters and operating in the black.
But the most interesting point from Hori was when he talked about the level of R&D Toshiba is pouring into the third-generation LSI-tuner combo above and beyond what other mobile phone makers are putting into making sure that they have digital TV tuners that don’t drain battery power faster than an SUV guzzles gas (or attracts scorn or envy).
WWJ is a big fan of TV tuners, but only Vodafone KK and NEC have official bothered for the 601 because TV ability has three big strikes against it. One is the power drain of course-and Hori said that in 2006 this will not be an issue any more. But the second and third problems are related. A digital tuner, worse than a mulit-megapixel camera, adds cost but little gain. A camera module might cost $100, the price of which has to absorbed by carriers, for little gain, because only a tiny number of subscribers are sending pictures. And now with flat rates coming in, well, there are compelling reasons why DoCoMo doesn’t want to have to pay $200-250 for each handset with a turner for sweet nothings in return.
Enter MBCO with its revenue sharing model. By 2006 the company expects to be running a parallel (ghost?) digital broadcasting service with a simple monthly billing system for premium content with a platform of other, as yet undisclosed services. Igarashi and Hori say they’ve talked to DoCoMo, KDDI and Vodafone and have met with “positive responses” about the company’s pitch.
“We’ve been talking to the carriers and I can tell you that we have had a positive response; carriers are looking for what’s coming after megapixel digital cameras,” Hori said.
If that sounds like hot air, this is what Tachikawa himself said on March 24: “With H.264 we are going to have the technology in place not only for TV but also other embedded services. TV contents mechanism will move to paid and value-added services, and we need creative services with broadcasters.”
– Paul Kallender