Lowenstein's View: 2012 is the year mobile and content merge
This year, rather than add to the chorus of "predictions" columns, I'd like to focus on one issue that I think will be critical for mobile in 2012: content. In the digital media universe, significant progress is being made on the "content everywhere" framework for television programming, movies, and other media. This is going to force some important economic, business model, and customer experience questions for mobile in 2012.
Let's first look at how the stars are aligning. We have a vast array of mobile computing devices, from portable PCs to smartphones and tablets, that do a fantastic job of displaying video. Viewing that video, heretofore restricted to fixed broadband/Wi-Fi, is now a reasonably good experience on a good 4G connection.
Also importantly, key stakeholders in the content universe are finally sorting out licensing and rights issues for connected devices. Some signature examples:
- The TV networks paid a significant premium for "mobile rights" in the recently completed $28 billion NFL rights renewal
- Comcast is offering access to much of its on-demand library from connected devices such as the iPad, and has a larger game plan to move its DVR service to the "cloud" over the next couple of years
- The UltraViolet initiative, supported by major studios and content players, creates a "digital rights locker." Buy once, view on any device.
Don't get me wrong--the "content everywhere" universe is still a disaggregated, fragmented, wild west of a mess. For the average user, exactly what body of programming can be accessed, and on what device is still highly unpredictable--especially with respect to live TV and sports programming. But this is slowly getting sorted out. Content producers and owners are all pushing for broader access and creative business models. This is resulting in a tectonic battle for content distribution, between traditional networks such as the cable companies/Verizon/Dish and the over the top (OTT) providers such as Apple, Google/Motorola, Netflix, Hulu, and Amazon.
So far, wireless (cellular, not Wi-Fi) has largely sat on the sidelines of this rapidly changing ecosystem. Signature media devices, such as the Kindle Fire, are only equipped with Wi-Fi. And LTE pricing structures currently discourage heavy video consumption. Download more than one iTunes movie onto your iPad over cellular and you will quickly go over your 5 GB plan. But, rapidly over the next 1-2 years, all this content is going to move to the cloud--whether it's Comcast's Xcalibur project, Apple iCloud, Amazon, UltraViolet, etc. Think about how 30% of access to Pandora is via mobile networks, and port that over to video. Things start to get interesting.
So, this begs the question for mobile:
- Do we want to provide access to long form streamed video content via mobile networks?
- If yes, what is the business framework for doing so?
I am assuming that the answer to question #1 above is "yes, but." On the "yes" part, rich media is clearly a driver for the billions being spent to build 4G networks. In 2012, we will see a lot of developments toward the ability to "share" gigabytes across multiple connected devices and across groups.
The "but" part is that the economics of wireless place significant constraints on how much video wireless operators really want their subscribers consume. This provides the opportunity for some creative business models. For example, expect:
- Premium pricing for mobile access. Similar to how you pay $1 extra for the "HD" version of a TV program movie on iTunes, there might be a surcharge for access to content via cellular compared to Wi-Fi
- Ad-supported programming. Advertisers or underwriters might pay to subsidize the "mobile" version of a program. Or users might be forced to view ads, in return for free or reduced cost mobile access.
- Mobile price bundled into content. Similar to the original model for Kindle, where network access was bundled into the price of the content.
These types of scenarios will also drive some interesting business discussions between the wireless and digital media ecosystems. Network neutrality restricts network providers such as Comcast from charging 3rd party content providers such as Hulu and Netflix a differentiated price, but the door was left open a crack for wireless operators.
There will also be an interesting interplay with respect to whether content will be streamed, downloaded, or some hybrid thereof. This creates some attractive opportunities on the technology front, for example in products and services that improve the economics and efficiency with which video is delivered to, cached, or stored on the device. We will also need a more sophisticated billing and back office infrastructure, in order to deal with the myriad and significantly more flexible business model options for content delivery and consumption. For example, operators' billing systems have lagged behind the readiness of their pricing and marketing teams to offer a "family plan" for data.
At a higher level, we will see significant deal activity between major players in the mobile and content value chains. The deal between Verizon and SpectrumCo is one example. The build out of additional mobile broadband networks by firms such as Clearwire and LightSquared, which rely on a wholesale business model, will certainly invite new "brands" offering mobile services. And there will be undoubtedly be some consolidation in the OTT universe, with firms such as Hulu and Netflix likely in play.
All this signals that as we head toward 2012, the mobile and digital media/content value chains will be increasingly, permanently, and inextricably, intertwined.
Mark Lowenstein, a leading industry analyst, consultant, and commentator, is Managing Director of Mobile Ecosystem. Click here to subscribe to his free Lens on Wireless monthly newsletter, or follow him on Twitter at @marklowenstein.