A paper that BMCO was brandishing at IBC last week promised to explain Mobile Broadcast business models and it does just that. It was written by
The Executive Director of bmcoforum, Prof. Dr Claus Sattler with contributions from Alcatel-Lucent, Nokia and Nokia Siemens, NXP, Qualcomm, TDF, Digita and Swisscom.
What it does well is describe in Technicolor detail the exact business models that are in use today in broadcast mobile TV services in Italy, Germany, Finland, Switzerland, Austria, the Netherlands and the US, and those that are proposed for France. What it does NOT do is really come down on one side or another of the key issue ‘ should mobile TV be paid for, free to air or a combination.
However diagrams like the one below describe operator led, broadcaster led, wholesale and shared network models focusing on the key issues ‘ who controls the flow of the service deliverable and where does the cash flow from the customer.
In this model the channels flow into an independent mobile broadcaster who sends them on to another company that controls the broadcast network. Payments flow from the consumer to any one of the mobile network operator, a pay TV service provider, the access network operator or some other, perhaps retail based, distributor.
And while the descriptions are well worth the reading of this 60 page report, the conclusions are perhaps a little behind the times or more to the point, not there at all. And we can understand that. How can an organization that wants to promote broadcast mobile services pick one approach above another, especially with all the rivals it has as members.
What Sattler does say is that in markets with limited spectrum available for mobile TV, it is the shared network model that is the best for using the spectrum efficiently and supporting all the players. Not quite sure how that opinion must sit with Qualcomm which delights in owning Mobile TV spectrum in the US (where Spectrum is sparse) and something which can be considered mobile TV spectrum in L-Band in the UK.
In the shared network model a dedicated mobile broadcast service provider offers a network to distributors. A special case of the shared network model is the wholesale model, where the mobile broadcast service provider also purchases channels and other broadcast services from broadcasters and other service providers, including the mobile network operators.
Sattler says that the stakeholders fulfilling the role of the mobile broadcast service provider may come from investors not involved in either mobile or broadcast such as Mobile 3.0 in Germany (and look what has happened there); broadcasters, providing channels on their own or on third-party transmission capacity; a consortium of broadcasters as foreseen in France, a mobile network operator having access to broadcast transmission capacity, in the case of KPN in the Netherlands, a consortium of mobile network operators (as initially planned in Germany); an existing broadcast network operator such as Digita in Finland and Media Broadcast in Austria or a technology provider (like Qualcomm in the USA with MediaFLO).
We argue in our recent report ‘In search of a Mobile TV Business Model,’ that the motivations of each of these roles are different but predictable and they offer sway either to broadcasters or to MNOs with more or less influence on these for technology providers.
As such when a broadcaster is dominant there is a move towards a free to air service or low service subscription model; where MNO operators are protecting their existing paid streamed TV operations there is a tendency to opt for a pay TV model.
Sattler then goes through the countries one at a time finding none of them using the exact same model, and tries to assess the success of each one. Germany he says has some peculiarities which because Mobile 3.0 is a new entrant and carries the entire risk, is in a weak position in relation to both, broadcasters and mobile operators who are not under any financial pressure and can wait for this or other service offerings. Perhaps he wrote the paper before Mobile 3.0 was bankrupted by its investors and felt vindicated by these comments.
He talks about a flexible and liberal regulatory framework endorsing technology neutrality principles leading to the substantial investments made in Italy creating 2 separate networks, saying that it is clearly H3G taking all the risks and rewards. While the involvement of Vodafone and Telecom Italia Mobile, because they have no up front investment, is reduced, which perhaps explains why they refuse to subsidize handsets in the Italian market.
We have found this rule everywhere, that if there is no risk, then the company puts in no investment. As in the case of Verizon in the US, where Qualcomm has taken all the risk.
Sattler concludes that Mediaset is the best positioned firm from a financial risk standpoint in Italy, but it is 3 Italia that has added 2 million new customers there (850,000 taking TV) since the mobile TV service was launched. Admittedly Mediaset gets some programming revenues from this, as it is carried on the 3 Italia service, but it didn’t have to spend money buying the spectrum and building a network to achieve that.
Sattler concludes that 3 Italia got all its take up by more advertising, but neglects the handset subsidy issue.
And on Switzerland, as Austria, he adopts a wait and see attitude, not wishing to get into the prediction business, but points out that only a few channels are available at present.
He says that the Finnish shared network business model opens a lot of options for broadcasters, mobile operators and distributors but on the other hand complains that it is overly complex.
In France the idea of ‘Forum Television Mobile’ which is a gathering of representatives from MNOs, media companies, broadcasters, which contributed to the business model thinking, has left a model that is still not public. The report agrees that there is still no consensus on a common business approach there even now.
The report then offers a note of praise for the way the US FCC has established healthy competition and has auctioned spectrum early, on a technology neutral basis. But it is here that we have the lowest take up rate of any country, or at least we suspect that, but since no figures have been issued, it’s hard to say.
Finally the BMCO talks about Japan as if no-one is making any money there, and as if KDDI and Softbank will change the entire offering there, once MediaFLO services are launched or once NTT Docomo brings in ISDB-Tmm, the next generation of ISDB-T. This despite 25 million handsets being shifted, and people watching mobile TV 62 minutes each day on average. Interestingly the Korean experiment (disaster) of a government mandating a business model and an independent rival springing up ahead of it, resulting in a huge market penetration and diversity of devices ‘ was not mentioned at all.