Source: Flickr user David Reber's Hammer Photography
To hear Cisco and other infrastructure analysts tell it, mobile video is booming and will keep on booming for the next several years. According to the latest version of its Visual Networking Index released last month, Cisco forecasts total mobile data traffic will increase 18-fold between 2011 and 2016, driven largely by a huge increase in mobile video traffic to tablets and smartphones.
Yet all those extra bits are no guarantee of extra bucks for media companies hoping to cash in on consumers growing appetite for premium video on mobile devices. While the demand for video on mobile devices may be there, monetizing that demand depends on being able to deliver video over wireless networks efficiently and economically enough to allow scalable business models to emerge. For now, though, and even for the medium-term future, bandwidth constraints impose limits not just on data consumption but on monetization strategies for premium video.
A hint of the trouble ahead popped up last week in a report by the Wall Street Journal on rude surprise greeting owners of the new 4G-enabled iPad when they try to take advantage of the tablet’s fast streaming and HD video capabilities. According to the Journal, 4G users find they are blowing through their entire monthly data plans in a matter of days, leaving them with the choice of having no wireless access for the rest of the month or paying steep overage fees to buy more bandwidth.
Some users may presumably switch to more expensive data plans to get more capacity, but with AT&T and Verizon Wireless putting ever-tighter caps even on their “unlimited” data plans, that option obviously has its limits. And asking users to pay more just for the capability to receive video is obviously no incentive to consumer more video.
Buried near the bottom of the Journal article was the suggestion of another option. According to the report, AT&T is “studying a plan to give app developers and content providers the option to pay for the mobile data their products use, thereby keeping those apps and videos from counting against a user’s allotment of data.” That may be good for the consumer, but turning mobile video delivery into a pay-to-play business does nothing to improve the economics of the deal for the content provider.
The costs and limits of wireless data pose another monetization challenge for mobile video providers. According to a new report by research and forecasting firm Chetan Sharma, 90 percent of tablets in use today rely solely on their Wi-Fi connections, even those that have 3G or 4G capability. Clearly, tablets owners are wary of the potential costs of mobile data use and are keeping their devices tethered to fixed Wi-Fi networks, especially when it comes to video. Tablets, in other words, are turning out to be more portable than truly mobile at this point.
For video providers, however, the real revenue upside from mobile platforms lies in their true mobility. It’s mobility that has the potential to increase the amount of time available to consumers for watching video, and the range of circumstances in which it’s available. That increased time and availability means higher potential viewership, more potential ad inventory and more targeted ad potential by leveraging location and other data that can be gleaned from personal mobile devices.
If “mobile” video streaming remains tied to fixed networks in fixed locations, that time and availability delta that is the key to long-term monetization would shrink considerably.
Unfortunately, no immediate relief from the constraints is in sight. The Federal Communications Commission last week announced the formation of a task force to study how best to move ahead on the agency’s long-delayed spectrum auctions that are expected, eventually, to make more frequencies available for wireless broadband use. But the commission warned that it will likely be “years” before additional bandwidth is actually available.
Other efforts to increase wireless bandwidth availability are also uncertain. Late last year Verizon announced a deal with a group of cable operators to buy up a sizable chunk of wireless spectrum the MSOs had licensed from the FCC but never used. Verizon says the spectrum transfer will help bolster its 4G LTE network, but the deal is currently undergoing antitrust and other regulatory scrutiny and its prospects are unclear.
Mobile platforms have huge potential upside for all types of media providers. But given the much larger data loads required to deliver high-quality video compared with music, news content or e-books, the gap between potential and realization for video providers will note easily be bridged.