Mobile entertainment: Small screens and big bucks potential

The market is young and small, and revenue reports vary widely

SAN FRANCISCO -- About 15,000 attended more than 350 exhibits at the CTIA Wireless IT and Entertainment conference this week, and a visitor might have felt that the wireless handheld device has become the center of the known universe.

At least the entertainment universe.

You can't blame wireless equipment makers, application developers and service providers for wanting to pitch the latest and greatest content. There were many booths where online games could be played over wireless phones, or where you could see your favorite TV show being sent to your phone.

One booth had attendees lined up to play the newest version of the Guitar Hero game in the traditional format -- in front of a big screen TV -- but it was also available on a wireless phone. The Guitar Hero mobile version, developed by Hands-On Mobile Inc., won't be available to the public until December, but it was tested by attendees on Motorola's MotoRazr Maxx Ve wireless phone.

Guitar Hero mobile is slightly simpler than the full-size format but still engaged those who tried it. Some participants stood in place jabbing at phone buttons for five or 10 minutes at a time. The game will ship with 15 rock songs that users try to play along with by pressing three keys on the phone. Three new songs are also added monthly for under $5, representatives said.

The excitement at the CTIA show for wireless games, ring tones, text messaging, video, TV, music and video and other still images was genuine, but might have led to the impression that such entertainment content and services have taken over the wireless industry.

In fact, all content and services together still comprise only about 15% of revenues to U.S. wireless service providers, with about 85% still coming from voice traffic, said Joseph Farren, spokesman for CTIA.

Wireless entertainment content is "still at the beginning of its life," Farren said, noting that despite being fairly new, one particularly successful segment, text messaging, has already grown to 1 billion text messages each day. "That's incredible," he said.

But outside the show floor and in the CTIA educational sessions, representatives for equipment makers and service providers talked about some stark realities in selling wireless content.

Taking mobile TV by itself, a panel of six industry executives from separate companies yesterday laid out some predictions that varied from cautious optimism to complete pessimism over its future.

The most pessimistic was Roy Isacowitz, head of mobile TV marketing at NDS Technologies Israel Ltd. in Jerusalem, a company trying to provide TV content to consumers. "The business model for mobile TV is dubious, and as a stand-alone service won't be viable, either now or in the future when [wireless technology] is considerably bigger," he said. He said it won't even provide incremental revenue growth to providers unless it is bundled with an overall entertainment package where a consumer pays once for all kinds of video content and then watches it on any device he wants.

"In five years, I'm not sure we'd think about mobile TV at all, but multiple ways to reach TV," he added.

Other representatives said it is very early in the advent of mobile TV, and too early to judge it. They called for better research into audience preferences.

The grandfather of mobile TV, MobiTV Inc., has been active in the market for four years and has attracted more than 3 million customers using wireless networks provided by AT&T Inc., Sprint Nextel Corp. and others, said Ray DeRenzo, vice president at MobiTV.

While DeRenzo and others on a conference panel said there is great growth potential in the market, others noted how small the market really is. "Less than 5% of the universe [of potential customers] do this mobile TV, so it's a very, very small group of people," said Ron Lamprecht, senior vice president of new media at NBC Universal Cable. "We make it seem so much more than it is now, but it is still very nascent."

Lamprecht said NBC and other mobile TV providers have to "build an audience, or find a new audience ... if we believe the customer values having TV on a small device."

Douglas Craig, a senior vice president at Discovery Communications Inc., which has been streaming content such as its Animal Planet channel to wireless devices for about a year, said it is too soon to judge where the opportunity is headed.

"It's still early on and a lot needs to prove out," Craig said. "Mobile TV is not a substitute for watching your favorite show on your couch, but it's complementary."

Craig said many people simply don't know about Mobile TV. "We all need to raise consumer awareness of ways you can get content," he said.

The attraction of mobile TV for business

Both Craig and Lamprecht said mobile TV can reach into a business user audience. Both NBC and Discovery see a spike in PC-based viewing of their TV content during work hours. But the executives said workers in offices will be likely to rely on the larger screens on PCs, although they said small screens can be adapted to handle content for training and other communications for field workers and others.

Alan Reiter, an analyst at Wireless Internet & Mobile Computing, said there is great potential for mobile TV for consumers and workers, but the wireless industry, so far, has not marketed wireless content applications very well. The case for marketing mobile TV in the workplace has been "nonexistent," said Reiter, who has started two blog sites devoted to mobile content and mobile TV.

Overall, trends for wireless consumption of data content are up, while text messaging and music downloads to wireless smart phones and other handhelds have done the best, according to surveys and estimates. CTIA this week released its semiannual U.S. wireless industry survey results that show revenues for all kinds of wireless data services were $10.5 billion for the first half of 2007, a dramatic 65% increase over the $6.5 billion for the first half of 2006.

With nearly 29 billion text messages sent in June (nearly 1 billion per day), that is an increase of 130% over June 2006. Mobile multimedia messages, however, are much smaller, with 2.6 billion sent for the first half of 2007, almost the same amount for all of 2006, the CTIA survey said. As of June, there were 243 million wireless users, up 24 million from a year earlier.

All this content comprises only 15% of total wireless service provider revenue, and it is expected to grow at an annual rate of about 18% through 2009, according to Oliver Wyman Group, a consulting firm to the wireless industry. Mobile TV and games will still be less than 10% of all content in 2009, but music downloads could reach nearly 40% then. In 2009, the global market for all mobile content is expected to hit $32 billion, Oliver Wyman predicts.

IDC research shows that all types of mobile entertainment in 2007 in the U.S. will be $3.8 billion, a far more conservative number than CTIA has reported from the carriers. Even so, the more important finding is that there will be 20% annual growth in mobile content revenues through 2011, IDC analyst Lewis Ward said.

Ward said IDC's surveying of the market shows that consumers are willing to try mobile content as long as the price is right. "Many consumers feel the prices they pay [for mobile content] are too expensive," Ward told a group of CTIA attendees.

The wide variations expressed by industry leaders in outlook for mobile content and differences in claims about revenues indicate just one thing, CTIA's Farren said. "It shows it is a market still in its infancy," he said.

Copyright © 2007 IDG Communications, Inc.

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