The pricing landscape is shifting in the nascent mobile video market in the U.S. First it was the reduction in price for Hulu Plus, to $7.99. Not long after, Netflix (NSDQ: NFLX) announced that it was cutting the price for its streaming-only service to $7.99.
With the apps for both services available on select devices, mobile video is getting the momentum it has struggled to find for years. But it’s going to take more than adjusting prices to keep that momentum, which will rely on a broader variety of factors ranging from convenience to content.
This sector has seen its share of setbacks. There was the recent demise of FLO TV, Qualcomm’s broadcast network for television service to mobile devices. And the jury is still out on whether the Mobile Content Venture from local stations will be successful in building its own mobile platform to launch in late 2011.
While subscribers watching video on a mobile phone is still only a small fraction of the total audience, the year-over-year growth is a whopping 43 percent as noted in Nielsen’s Q2 State of the Media Report. There’s a growing number of sources for mobile video including MobiTV, Apple’s iTunes, Amazon’s Unbox and my own company, Bitbop.
What is driving the momentum? First and foremost there are simply more smartphones. In fact, Nielsen’s Three Screen Report predicted that in 2011 smartphones would overtake the number of feature phones in usage. In October , comScore (NSDQ: SCOR) said that 60.7 million people in the U.S. owned smartphones, representing one out of every four mobile subscribers. The holiday season will only accelerate adoption, with so many gift boxes under the tree bound to contain smartphones.
And these phones keep on getting “smarter.” The HTC HD 2 Windows 7 phone has a kickstand for easier viewing and speakers that pull out with Dolby Mobile or SRS WOW HD surround sound. Couple new features like that with the promised improved connectivity of 4G and you have an even more persuasive argument for viewing on the smartphone.
The next factor is the availability of more and better content. It used to be that you could only watch short episodic webisodes or old episodes of series from seasons already past.
But we have moved beyond the “toe in the water” phase. Now you can catch full episodes of current hit TV series and live event programming such as the World Cup on mobile. While content partners had made deals with Quickplay, MobiTV and FLO TV in the past, recent negotiations have been with aggregators who might be content owners themselves. So it isn’t just tech companies making these deals, but companies that own content and understand the process of trying to market that content.
The third reason is a choice of different business models for mobile. Consumers can choose between ad-supported free video, subscription services that are commercial free or buy individual episodes.
Like Hulu Plus and Netflix, Bitbop offers a subscription-based service. We believe strongly that this is the model that will come out on top in the pricing and product dance. Watching entertainment on-the-go is about convenience and the quality of the experience.
Asking a user to pay a buck or more every time they want to watch The Daily Show seems counterintuitive. But charge a fixed price for unlimited viewing and you can take the “guilty” out of pleasure and encourage viewer enjoyment.
We are witnessing the rise of a new breed of consumer who is looking for alternatives to the traditional viewing model. Price would be the key differentiator if we were trying to market a commodity good. But the truth is that mobile video is still being rolled out to a niche constituency for whom the lowest price is not the deciding factor.
Fox Mobile Group conducted a study with OTX Research in 2009 before launching Bitbop. We found that our target audience in the U.S. skews male and has diverse tastes when it comes to TV shows. They use their phones for a variety of things, but spend around 20% of their monthly phone bill on mobile entertainment and around $200 on entertainment overall per month. They don’t always have time to watch “regular TV,” so they watch on the web or mobile devices.
The mobile consumer is not the web consumer. Their behavior will be different when content is consumed in short viewing windows throughout the day. If you think a commercial is intrusive when you are sprawled in bed, imagine how cumbersome it is if you are trying to catch up on last night’s episode of The Office during your 20-minute train commute – arguably your only “alone time” for the day.
And given all the spottiness of mobile network coverage, downloadable content is essential to satisfaction. The only thing more inconvenient than paying for commercials is paying for a service that gives you spotty or inconsistent playback, especially when we have come to expect a high-quality viewing experience in our homes.
There will be naysayers. But for every holdout who swears they will never watch TV on their phone, I’ll show you an overworked parent who craves their favorite show on demand or a busy traveler who wants to catch up watching on a plane or train. TV programming is well on its way to becoming the must-have essential on your mobile device.