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In his 14 September WWJ Viewpoint, MobileTV: Hype or Reality?, Philip Sugai raised some valid criticisms of the new TV cell phones and points to both technological and end-user behavior limitations that he believes doom TV phones to “DOA” status. Of these, the behavioral problems appear to be the most difficult to overcome, and he points to cell-phone TV watching as particularly incompatible with “between-time” usage that researchers are noting during mobile Internet (MobiNet) access studies.
I believe, however, that these criticisms seriously underestimate both the technological developments that the devices will undergo in the next 18-24 months as well as the imagination and creativity that end-users and broadcasters will apply to receiving and delivering, respectively, useful content via mobile TV (and FM radio).
There is no doubt that the present, first-generation analog TV phones suffer from severe fundamental technology constraints. The most obvious is that battery life is pretty poor — typically 1 to 2 hours — and makers have had to include automatic limiting functions that switch the TV tuner off when remaining battery life drops to around 10 percent (so that mobile TV watchers aren’t unwittingly left unable to make voice calls); FM radio-enabled keitai batteries last only slightly longer.
Battery limitations are well known and Japanese electronics makers in particular are actively conducting R&D aimed at boosting battery life while reducing volume, weight, cost, recharge time, and heat is an active area (see battery technology sidebar).
In the same manner that they have solved miniaturization problems in other areas (think D-RAM, LCD displays, and cellular handsets themselves), Japanese tech firms will solve the present battery problems. And they’ll do it in an economically feasible fashion (once economies of scale kick in). It’s a question of when, not if.
Addressing MobiTV Criticisms
The other criticisms mentioned by Professor Sugai are tougher to address.
It’s true that current mobile data services in Japan have been highly fine-tuned to take advantage of between-time usage — usage that occurs on the train platform, in-between classes, during boring meetings, etc. In fact, the i-mode (and Japan’s other mobile data services’) content business model is entirely predicated on such usage.
How TV and radio broadcasts to mobile devices can fit into such well-established usage patterns is not immediately obvious.
Finally, the most serious charge laid by Professor Sugai was that delivery of TV and radio content (whether analog or — in the quite near future — digital) to mobile phones avoids the existing air interface and cuts the mobile operator out of the revenue loop. If this is true, he argues, it would be impossible for them to subsidize the retail sale of such handsets for any sustained period.
TV and Radio Content to Morph
But it is a mistake, I believe, to assume that current TV and radio content can never be morphed into a form suitable for between-time consumption. Consider mobile data itself (Web browsing, email, Java application download, etc.). For the first decade of the Internet’s existence, data content was delivered to big PCs in forms that required deliberate, if not actually lengthy, online sessions.
Checking mail, for example, required switching on, booting up, dialing into an ISP, launching the mail program, downloading the mail (at a decidedly pokey 9600 Baud — does anyone even remember “Baud” these days?), logging off (since time meant money), and then (finally) reading the mail; replying meant repeating the same steps all over again. Say goodbye to a solid hour — or two!
Who would ever have predicted that this simple data-using activity — reading and replying to mail — could be miniaturized and ported to a mobile terminal?
The fact is, of course, that it was. Once the technology became available (i-mode: a 9.6 kbps connection, a monochrome display, a few kilobytes of memory), the business model was defined (carrier bills for packets but shares content revenue with provider 10/90), and a willing, seasoned user base of potential users was found (the pre-1999 mobile-phone using public), people willingly flocked to mobile email. Moreover early users figured out how to force-fit the i-mode mail (and Web content and services) into their available between times.
The same argument applies, I think, to TV and radio content. Yes, TV programming is now produced by huge media houses at great cost in 20-minute chunks to be married up with 10 minutes of commercials to create a 1/2-hour program (radio is similar, thought he scale is smaller).
But as mobile TV technology enables a better and better mobile viewing experience (just as i-mode did), producers will realize that the audience is growing — and start to cut their programming to fit (a) small displays, and (b) shorter and shorter chunks of time (just like fixed-line Internet content producers did with i-mode).
In fact, they already do so with the evening news and sports highlights; viewers’ attention spans were long since found to be about two minutes, even when couched in front of a 29″ monster Sony TV. When news, sports, and other programming is produced for mobile distribution, viewers will start to access such content in their individual between times — and they’ll enjoy it, too.
The beauty of the mobile phone is that there’s a packet-based back-channel.
NHK and other broadcasters have already shown regular TV demonstration programs (analog and digital) that include live, clickable links to archived video; the link data are sent in parallel via the mobile network, in the case of analog TV, and are directly embedded in the signal in the case of digital TV. (Again, the same can be done for radio.) If you watch 90 seconds of some news program on your mobile and you want more, just click the link to pop the phone’s onboard browser to start playing archived versions of similar content. If you have five minutes and want to see the weather or sumo highlights, they’re just a click away.
And as for the oft-repeated criticisms on mobile-phone screen size, consider that the TV display on a current celly is not much smaller than that on a typical Sony “Watchman”-style portable analog TV, which nonetheless sell well.
But ditch that mini TV, baby, because with the phone you can also do voice, email, Web, Java games, and meet a boyfriend/girlfriend.
In fact, in several surveys reported in 2004, Japanese consumers indicated that TV display capability is one of their most desired features. Also, in a recently recorded (but not yet posted) WWJ video program, a series of on-the-street interviews in Shibuya, 10 out of 10 randomly selected interviewees told us they wanted radio or TV on their handset. Wow!
Will Carriers Pay Subsidies?
Finally, what about the carriers — and the fact that they directly subsidize every handset sold in Japan? Why would they want to pay for cellies that freely access broadcast signals, generating zero packet revenue?
First, we must understand that no Japanese carrier deploys a technology onto the handset that generates no revenue (except in some cases, as noted below). Even if the new technology only generates secondary or tertiary revenue, that’s fine — so long as some money comes in.
Consider cameras. At first, this technology was considered to be a direct revenue producer: mobilers would take pictures and email them to friends, thus incurring packet fees. Fine. So long as phone camera technology was in its infancy, picture files were small enough that snap-happy teens wouldn’t bankrupt dad with picture-mail packet fees but would, indeed, use the network.
As soon as mega-pixel cameras were introduced, people stopped sending pictures by email — it was just too darned expensive. Did DoCoMo et al then remove cameras from handsets? No; by then, a camera was a required sales feature and any handset without one couldn’t compete. But economies of scale had made the marginal cost to add a camera almost negligible by then anyway.
Similarly, removable memory was initially not allowed on any DoCoMo 2G cellular models (to avoid the risk that a phone maker would enable the OS to copy for-pay content onto the memory); later, DoCoMo did permit removable memory (with the 505i-series) because that was the only way to get ultra-large picture files off the handset. This was necessary to support camera usage — again, a sales feature; but the phones’ OS still won’t allow for-pay content (ring tones, etc.) to be saved to the memory.
Likewise: WiFi, or 802.11b, has been rolled out on dual-mode terminals by DoCoMo. But you can’t just run around Tokyo and Osaka connecting to free hotspots and downloading all the data you want, avoiding the i-mode bill. The system only works within a tightly controlled service package that DoCoMo controls and offers as a corporate solution (for big bucks); consumers can’t even buy the handsets. And while I’ve used DoCoMo for examples here, KDDI and Vodafone follow the exact same policy.
Of course, the case of 3G itself was different. In DoCoMo’s case, the carrier subsidized a colossally expensive new network as well as brand-new handsets (some of which were subsidized at the 50,000-yen level in the first year) from 2001-2003. Ouch! It was only when the network became reliable, costs for terminal R&D feel, and one million customers had signed up that the FOMA system started to become profitable.
Now, some three years after launch, DoCoMo’s handset subsidies on some FOMA models are as low as 4,000 yen and the average user generates over 10,000 yen in ARPU; thus it costs the company 4,000 yen to immediately start earning 10,000 yen per month — that’s a hugely positive price-to-earnings ratio!
In their September 2004 IR roadshow documentation, DoCoMo forecast operating revenues for 3QFY2005 at 4,158 billion yen (FOMA plus 2G cellular), up a stunning 250 percent from 1,042 billion yen in 1QFY2004!
But in general terms, no technology appears on handsets in Japan without some sort of associated service model and revenue stream.
Mobile TV will be no different, and carriers will pay subsidies for MobiTV handsets because consumers will what to use them and the mobile TV content and services now under development. Keep in mind also that MobiTV will be a value-add for individual users and if carriers don’t offer the function (while the competition does) this is a recipe for churn disaster; Japan market new net-adds are starting to flat-line and many predict that before long the only source of new customers will be another carrier.
Interestingly, Vodafone’s V601N analog TV phone has more or less kept its full initial launch price in the market at retail (handset prices often fall by 30-50 percent in the first 6 months); current versions, like V402SH, are no more expensive than other handsets that don’t have TV.
Recall that back-channel I mentioned earlier: everyone involved in mobile TV (carriers, terminal makers, software developers, TV broadcasters) is furiously working to define and develop how to use the phone’s browser (or other onboard software — think Java and BREW) and network connection to enable feedback.
Obviously, non-revenue services like choosing What’s Related programming, browsing program guides, and participating in audience responses (surveys, game shows, reality shows — ‘To vote Taka-chan off the island, click on “Yes” ‘) are well under development.
In November 2001 and March 2002, Asahi Broadcasting conducted a series of audience trials with mobile feedback to TV programs. One trial involved a quiz show called “Time Shock 21.” Viewers were asked to predict the winning team from a lively contest and responses were solicited via mobile. A special prepaid “Quo Card” was awarded to the viewers with the correct answer, as well as to those who were able to answer the question toward the end of the program before the program was over.
Another example involved a music-variety program called “Music Enta,” where mobile users were asked to answer the same quiz that the guests on the program were given within the same amount of time; a gift of a special ring tone was awarded to those with the correct answer.
In another trial involving Asahi and KDDI, participants were invited to sign-up via EZweb and Asahi’s “What’s New” mobile Web site; participants had to submit their mobile email address and other personal information, usually a bar to all but the keenest of participants. But one Asahi manager was quoted as saying: “The reaction was more than expected, and most of the applicants seem to be those who happened to see the announcement on EZ Web’s “What’s New.” An overwhelming 98 percent said that they would like to participate in future TV/mobile trials. Even for a fee (of 100 yen), a quarter responded they would want to participate.
Asahi found that Japanese users do not mind dealing with television and a mobile phone at the same time. Conversely, accessing the Internet from a PC while watching TV is “actually more of a pain than one may think.” Asahi decided that “users are … less resistant to the idea of using the mobile phone [while watching TV].”
As a result, I believe that TV-feedback usage of a mobile phone (whether the program is viewed on the mobile or on another device) is well-proven; it’s now a question of actually generating revenue from the program.
Many media companies in Japan are working on how to create revenue streams, including direct sales (digital and real goods), marketing (coupons, tickets, etc.), and provision of value-added services and content (last week’s sumo highlights are free, this week’s are available for 100 yen). Some of this is already happening.
In April, I wrote a story for Japan Media Review which reviewed the FM Keitai service operated by TokyoFM.
The handsets were developed (over six years!) by Sanyo working with KDDI and TokyoFM and the service, launched in December 2003, operates with a pre-installed BREW application. Users listen to the station via FM while viewing scrolling messages pushed to the phone via the digital cellular network. the text can comprise lyrics of the currently playing song or a marketing message. If you wish to purchase the Chaku Uta (high-quality) ring tone of the song, it’s just a click away; you can also purchase TokyoFM goods, CDROMs, and brand-name items offered via TokyoFM’s own online shop.
By April 2004, some 450,000 FM Keitai handsets had been sold — a pretty good result. By summer 2004, the station was expecting one million to be in service and to launch new advertising targeted directly at mobile users (currently, hosts simply announce an add then state: “FM Keitai users can push the TokyoFM button on their phone to find out more…” thus launching the browser at a preset site).
The Future of MobiTV and Radio
All of these developments point to the early creation of significant revenue streams from TV and radio programming delivered to mobile.
Yes, today, there is still a lot of confusion and lack of definition in the industry with respect to MobiTV, as professor Sugai rightly points our.
But once a critical mass of several million (several tens of million?) users has grown, and early broadcasters start to generate marketing, sales, and (admittedly modest) advertising revenues, then all broadcasters will be under pressure to figure out how to reformat and reformulate TV and radio programming specifically for mobile viewers/listeners.
With the start of terrestrial digital TV broadcasting in Japan in 2005/2006, there will be even more impetus behind mobilizing TV programs and services, and the time, resources, and investment that MobiTV players commit now (and have committed until now) will, in all likelihood, be paid back handsomely.
Sure, the Japanese MobiNet players can be criticized for playing around with toy TV mobiles today. But in the not too-distant future, those toys will mature into fully defined mobile TV handsets boasting revenue-generating services combining that combine digital broadcasting, 3G network feedback, and marketing and sales that will blow the socks off of anything elsewhere.
And it’ll happen first in Japan.
— Daniel Scuka
Some sage advise when entering new turf; Stop, Look and Listen.. it’s also good to secure a local guide. Japan is the cradle of mobile civilization – we have been dedicated to this space since 2001 – trust our archives here offer some useful material.
Domestic activities continue to set the pace, and sharp players are looking at global markets. We have hard-earned industry expertise and trusted network of contacts with access to advanced intell. and potential deal flow. Need a lift.. Ok, buckle-up!