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Pace Quickens on Mobile Entertainment

29 Dec, 2005 By: Erik Gruenwedel

Increasingly, consumers like their entertainment to go. They're migrating from the living room, bedroom and family room to the open road and the friendly skies.

They're watching movies, listening to music and playing games on cell phones, laptops and portable digital media players such as Apple Computer's iPod and Sony's PlayStation Portable (PSP).

A recent Nielsen Entertainment study found 52 percent of mobile phone users said they intended to buy a new phone within the next year, with 37 percent saying extra features, including the ability to watch video and listen to music, will figure prominently in their decisions to buy.

Sales of portable MP3 media players soared in 2005. Consumers spent $2.1 billion on more than 11.2 million units through November, compared to $854 million and 3.8 million units in 2004, according to The NPD Group.

The Consumer Electronics Association, the CE trade group, is more bullish, maintaining 4.6 million units shipped in October alone. That's nearly half 2004's total shipments.

“We had originally expected to ship 15 million MP3 player units in 2005, and now it is looking closer to 20 to 22 million units because of the breakaway success of iPod,” said Sean Wargo, director of industry analysis with the CEA.

Wargo said growth of portable MP3 players in 2006 would cool a bit but still increase at least 50 percent to 30 million units.

Direct to Mobile

Portability could be the most transformative development in entertainment, according to the Nielsen study. This includes the emergence of a new form of media tailored to the mobile audience.

Advertisers and content providers increasingly are focusing on the mobile consumer by offering pay-per-view and ad-supported content on cell phones and portable media devices.

Success of the iPod has many content holders scrambling to monetize but not cannibalize other distribution efforts, including DVD and pay-per-view. It could be argued that portable video is an extension of the digital video recorder (DVR). Product is emerging that will allow consumers to import digital content from their DVR to a portable device.

EchoStar Communications, which owns the satellite TV Dish Network, announced an initiative to deliver direct-to-portable content in 2006 through a proprietary mobile media device. Other cable companies are looking to offer downloads from a cable box to a portable player without having to go through a PC.

Digital video recording pioneer TiVo began offering select subscribers the ability to import recorded content to a PC, DVD or iPod.

And that's for starters, said Ross Rubin, director of industry analysis at The NPD Group. “This is an easy market for TV networks to participate in,” he said. “It is one where they clearly can get incremental revenue easily. It doesn't cannibalize TV viewership significantly or sales of DVD box sets.”

Chrysler Group's Jeep brand with MobiTV Inc. recently unveiled a mobile phone channel that will broadcast ad-supported original programming.

The two-month trial program will incorporate four live-action episodes of “The Mudds,” a fictional family of five that engages in several comedic activities in Jeep's new Commander vehicle. The Jeep channel is part of MobiTV's subscriber-based cell phone channel network and is available on Sprint, Cingular and Alltel.

Emeryville, Calif.-based MobiTV offers repurposed TV news and sports programming from several providers, including ABC News, CNN, Fox News, Fox Sports, ESPN, MSNBC, CNBC, TLC, The Discovery Channel and The Weather Channel.

The Weather Channel is reportedly considering launching its own cell phone channel with original and licensed content.

“Consumers want to see information and entertainment when they feel like seeing it, in a format they feel comfortable with,” said Jeep spokesperson Suraya Desante. “There are all sorts of new mediums coming up that allow consumers to get their content on demand. We like to stay ahead of the pack with understanding our consumers and trying new mediums as they become available.”

Apple Driver

Apple's announcement that it sold 1 million video downloads based on only five TV shows and just days after launching the MPEG-4 video iPod underscored the demand of a heretofore-unseen market: pay-per-view episodic television.

Analysts believe Apple is offering video as a Trojan horse to push sales of its larger-capacity iPod models. They also say the device and others expose revenue possibilities telecommunication networks have quietly seized upon by slowly offering cell phones with larger screens to make viewing of video content more practical.

“For the video market, there is an opportunity to sell individual TV episodes compared to the TV network business model, which is built upon watching an entire season,” Rubin said.

Warner Bros.' recent announcement that it would offer catalog TV downloads on America Online was a wake-up call to other studios seeking to mine incremental revenue from vintage programming, according to Phil Leigh, media analyst with Inside Digital Media in Tampa, Fla.

“Any revenue generated from that programming will be almost pure profit, since all of the development costs associated with that product have long since past,” Leigh said.

Last week, Internet portal Yahoo began offering 30-minute video streams of CBS comedies “Two and a Half Men” and “How I Met Your Mother” without commercials.

The NPD's Rubin counters that advertising supported content vs. pay-per-view on portable media players would directly challenge network TV.

“Now you are essentially splitting the market for advertisers,” Rubin said.

Leigh doesn't believe portable media devices will capture all the sizzle at CES compared to players that enable video portability within the home. Leigh said devices that transport video from a PC to a TV would be popular. He said Apple's pending new Mac computer is “essentially a DVR.”

“If you watch WB's In2TV [on AOL], it won't be long before you would like to watch the programming on your TV,” Leigh said. “Devices that allow consumers to easily connect the TV to a home entertainment network will become popular. We will see more of that in 2006.”

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