Mobile Industry Doesn’t Get Consumers

28 Comments

Imagine a conversation between a person who only knows Norwegian and other who is fluent only in Swahili. Well, that precisely the relationship between mobile industry and its executives and the consumers. RBC Capital Markets at its Mobility Evolution Conference in New York conducted an informal poll of 100 mobility experts, and found out that nearly 63% of those polled believed that consumers want to watch TV/movies on their mobile phones, while a whopping 72% believed that consumers would tolerate advertising on their cell phones.

This is the polar opposite of the findings of another RBC Capital Markets survey of 1,001 consumers released earlier this week. Only 23% of consumers expressed an interest in watching TV or Movies on their mobile phones. Only 20% of consumers said they would tolerate advertising, if an only if it lowered their costs. This is proof that consumers don’t care too much beyond – affordable and cheap voice plans, and simplicity. Experts picked price, wireless coverage network and necessity as consumers’ top three priorities when purchasing mobile technologies, while consumers cited price, compatibility and security.

My take on this: if you are a wireless carrier, might as well save those millions you plan to spend on music download services, or video services, and instead try and lure more customers with better (and cheaper) voice plans to your network. It seems to be working for T-Mobile USA, which attracted 4.1 million new users in 2005, despite its obvious lack of high-speed networks, and fancy offerings. Its unique selling point – despite spotty coverage – low prices.

Photo courtesy (via Flickr) Powerbook Trance

28 Comments

C. Enrique Ortiz

Let them spend the millions. Content in general is kind and will drive revenues. Let them experiment with the next logical thing — streaming. Why not?

I recently got one of those Sprint phones as part of their Ambassador program, and even though I don’t see myself watching TV on the phone, I have to say, the service is much better and smoother than what I was expecting. Such content will become the next “casual” content.

ceo

Jarle Nygård

I feel somewhat proud that you used Norwegian in the example! Being a Norwegian it’s not often our small country is used as an example.. ;)

And, TV on the mobile phone? nah, not for me anyways..

Vinay R. Rao

The complete idiots at CNN, Foxnews and hundreds of other TV networks use video to beam out their tickers.
So what’s to stop regular low bandwith tickers from adding video content [such as analysts predicting doomsday] if a mechanism to send video becomes available?
Anyway, my point was that low bandwidth, low resolution video may succeed but the higher bandwidth stuff is likely to be niche market.
MMS and music are still downloaded to phones via USB/PC Links because using the wireless datalink is still too darn expensive. Only ringtones seem to be doing well if offered for free.

Onofrio ("Norm") Schillaci

Maybe …

About 5 years ago Mobile operators differentiated themselves on coverage, reach and quality. When was the last time you heard a pin drop or emphasis on reach?

The market in its analog form was created as a Duopoly, the deployment of digital allowed for spectrum efficiency resulting in a more open market. Resulting in a market with a large number of mobile operators and their virtual counterparts serving demand side choices.

The mobile operators need to increase ARPU in a competitive market while growing revenue – they have no choice but to seek alternative revenue streams in the current non-consolidated market.

5 years ago, I never imagined that Ringtones would be a significant contribution to both their top and bottom lines. Boy was I wrong.

The world is changing, enabled by technology. Last month I read an article about new patents and the companies behind them (http://www.forbes.com/2006/02/02/cxrr0202patentslide.html ). I saw a common theme, the market is moving to services that are either marketing tools and/or providing some level of entertainment.

There’s even a satirical song by MC Lars ‘Download this song’ where he pokes fun not only at the music industry but technology companies enabling convergence, my favorite part of the song “ … Music was a product and now it’s a service”

Entertainment enabled by technology is an opportunity for mobile operators to further differentiate themselves while providing alternate revenue streams.

Anonymous

“What complete idiot would use video to stream a ticker?

A ticker needs a few bytes of information a minute to keep up to date, the presentation can be rendered locally. You only need the data streamed. “

Agreed – Mobile ESPN does it with a few bytes and so does Cingular’s Media Net Live Ticker – w/o video.

ELS

“No one is talking of HDTV or even standard TV quality on a cell phone. Primary application would be for a video ticker such as the news channels, stock market reports, sports, etc.”

What complete idiot would use video to stream a ticker?

A ticker needs a few bytes of information a minute to keep up to date, the presentation can be rendered locally. You only need the data streamed.

C’mon people, think.

Vinay Rao

No one is talking of HDTV or even standard TV quality on a cell phone. Primary application would be for a video ticker such as the news channels, stock market reports, sports, etc.
Today you can get SMS updates on cell phones but video feeds are just a matter of time.
Even CNN and BBC don’t have full screen TV on their websites. But, they do have a 1.5 inch window as default. Is that a coincidence?
Most of the new web standards now have hooks for text to speech as well as display formats for cell phone based web access.
However, the streaming TV to phones may be a pipe dream for now.
The internet access network has been crippled with asymetric architectures so the true end-end applications are inefficient or impractical.
This only leaves the streaming model requiring a fat backbone and fat downstream. I can count the number of countries who have that kind of backbone/access network in place on my fingers.
Only a low resolution low bandwith video application stands any chance of becoming ubiquitous. Streaming TV may work in a handful of counties if people are really willing to pay for it.

Henrik Feldt

The price elasticity of demand for mobile phones is highly elastic because of all the substitutes and because of the good price information distribution, so lowing prices increases total revenue ;).

Basic economics.

ELS

You’re never going to get ” just-like-home-TV quality, instant-on, CNN, ESPN, Lost, CNBC, soaps” on a 1.5 inch diagonal cell phone screen. At home I have a 42 inch HD screen connected to 5 speakers. Tivo let’s me watch what I want when I want to on a big screen. It’s not like it matters when it’s on.

News, and other temporally significant programming might do well on a cell phone (although I think the lack of resolution might kill sports programming).

Anon

I’ve seen the focus groups personally; just-like-home-TV quality, instant-on, CNN, ESPN, Lost, CNBC, soaps… are going to be a huge success. We are all addicted to TV already – making it available when, where, and how consumers want it isn’t such a giant leap. If you’re stuck at the airport, have a long commute on a train, or find yourself watching 5 year olds play soccer — live or Tivo’d TV on a cellphone is a necessity. Consumers don’t know what they want until it’s made available to them. Consumers polled said they’d never use a shopping cart in a supermarket, use an ATM card, or even use the web. The survey said 70% are NOT interested in TV on their phone. Let’s see: 30% x 50 million = 15 million x $10/month = $150 million/month in revenue. TV on cellphones will be a monster. There may be a dotcom hiccup in the beginning, but dismiss this market at your peril.

Sridhar T Pai

The title of this piece – probably should read: US mobile industry doesnt get consumers. In Europe and Asian mobile industry, value added services (read music ring tones) have reached – cash cow – status. In India for example, voice calls cant get any cheaper (most are now – ‘life time free’ calling plans) and national long distance has touched 2cents (Rs 1/ per minute)! But music downloads are premium at 20cents (Rs 9) per download. At millions of downloads a day – the mobile content industry is on the cusp of a boom. 80 mil subscribers cant be wrong…
Sridhar Pai

ELS

I question how quickly advanced phones will gain market penetration.

The carriers are getting squeezed big time on margins. If those margins continue to narrow can the carriers continue the HUGE handset subsidies they pay? If the carrier is no longer picking up 1/2 to 3/4 of the cost of a smart phone and the customer has to pay $400 or $500 for that handset, how many of them will they sell?

Sam

I’m SO glad I came across your article today, as last night I embarked on the hunt for a new cell phone and carrier plan. I couldn’t agree more and many of the commenters here bring additional points to the table.

Blog on!
Sam

Jimmy Gambier

Living in the Seattle area, which is looking like the next epicenter of mobile content, I don’t see mobile content being big on this generation of phones.

I think this will need to be revisited in a few years, when more powerful phones continue rolling out. I doubt many people considered watching movies on their computers a few years ago, before DVD and streaming became tolerable.

Noel

Hollywood feeling bad is exactly what we want. Their business model is based on sending the MPAA and RIAA after users with threatening lawsuits based on extortion. They’ll fill mobile phones with crippleware, flaky DRM loaded with rootkits, etc. You’ll be sued for downloading their boring TV shows and mindless bubblegum pop music even though you don’t know how to do it and only wanted the device to make phone calls (which it wasn’t able to do because of all the bloated crippleware Hollywood’s lobbiests enticed the government into requiring). This is Hollywood’s vision of your mobile phone, this is what will make Hollywood happy.

Srinivasan

“This is proof that consumers don’t care too much beyond – affordable and cheap voice plans, and simplicity.”

Om, you might have got this one wrong. this will all happen (watching TVs, mobiles, everything), soon. Remember, we are in 2006 already. hollywood will feel bad if it doesnt.

mark

I have my phone to be a phone. (I am a T-mobile customer.) When I can be sure my phone will be able to operate as a phone for 16 hours, while playing multimedia for 8 hours, then I’ll become a bit more interested depending on the price.

In any case, because of rebates and what not, I’ve had 400 minutes a month (free nights/weekends/Tmobile-to-Tmobile) with 2 lines for the last 2 years for just the cost of federal & state taxes. This year, I’m paying about $20 a month plus taxes for 700 minutes a month over 5 lines. Price is number 1.

Vinit

Patrick,
Even the younger generation would be more in line with youtube.com on the cellphone, rather than the tv programming (that they already TiVo out of their lives)

Patrick Mullen

Would be interesting to check the demographics of those surveyed. Myself, I can’t imagine watching movies or even TV shows on my phone, but then again, I don’t really get text messaging either. Doesn’t mean that younger generations are not or won’t be into it (and that in and of itself is kind of depressing for me.)

Figures I have heard for desire for content like this is 2-4% of subscribers would want this delivered to a mobile phone. I could see that attraction of watching a live event like sports or breaking news, other than that, very limited attraction for me, but maybe I am not in the carriers target market.

Vinit

I’ve lived the T-mobile dream for about 5 years now … and am extremely satisfied. Simple reason … great rate plans … who needs roll-over, etc when I get 1000 minutes a month and free nights and weekends for under 40 bucks?!
And lets be fair about T-Mobile’s coverage … they are pretty good in all metro/urban areas.
Also, their 24×7 customer service helps. Compare that to a few others that offer from 6am to 6pm.

Also, as today’s article in the WallStreetJournal points out … Nokia is going back to the roots of simple phone design … why?
Because unlike mobile video, tons of feeds, music on the go, etc … people want some things kept simple … if only to reign the price. If Nokia understands it, why can’t the rest of the industry?

Might be, it will take a MVNO to work this out and provide a stripped down service (opposed to AmpD’s biz plan) to keep regular users happy.

anonymous

The emphasis on streaming TV to phones beats me as well. Nice-to-have eventually, but why not test side-loading (Apple iPod style, using manual sync versus presently expensive over-the-air networks) with TiVO like functionality on consumers first? Much cheaper to test demand that way than to build an entire overlay wireless network which will only offer a limited number of channels to watch anyway!

I’d say the carriers are being aggressively sold the streaming TV concept by Qualcomm and Nokia/DVB/Crown Castle. No one wants to be caught or criticised (by the Street, by their bosses, etc.) for not having a product, so they all are moving on it.

Apple has already proven the side-loading concept and will do so again when they release the iPod wireless phone.

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