Mobilizedtv

Economics of Mobile: Who’s Making Money Now

“Mobile programming is clearly a nascent industry,” said SNL Kagan analyst John Fletcher, who recently published a report on The Economics of Mobile Programming. In creating this report, Fletcher interviewed 32 major mobile programmers, writing in-depth profiles for each company. He reported to MobilizedTV that, prior to doing the study, which had been under consideration for two years, he had a number in mind regarding total revenue. “I took out texting, ringtones, wallpaper, email, gaming and music and I thought, whatever is left over is about $300 million in 2008,” he said. But, given how young and unformed mobile programming is, he also doubted that this industry could be worth that much. “After all the due diligence, lo and behold, I came back to that $300 million figure,” he said.

Yes, Virginia, people actually are making money in mobile. Who those people are, however, was an interesting discovery. “The leaders in cable TV are now the leaders in mobile programming with a few exceptions,” he said, pointing out both MobiTV and GoTV Networks which are also in the top 15 in terms of revenues. Fletcher shared the one chart from his report, showing revenue from the top 5 mobile programming earners. (See below.)

Top 5 Programmer and Aggregator Revenues from Mobile Video/TV, US, $ mil.  in  2008
ESPN                      $38.4
MobiTV*                $23.8
MTV Mobile          $22.4
CNN                       $22.0
Comedy Central   $20.0
Other                     $179.5
Total                      $306.1

Mobile video programming revenue only, excludes graphics, games, ringtones and other non-video mobile revenues.  Includes up front fees, per subscriber licensing fees, minimum guarantees and video advertising revs.  Excludes mobile banner advertising and other mobile non-video advertising.  Includes Net revenue to Programmer after splits with carriers and third party aggregators
*Excludes revenues earned which are split with programmers to prevent double counting

The genres of the top revenue earners isn’t surprising: “Sports is just so popular, on cable TV and on mobile,” said Fletcher. ” MTV focuses on the younger demographic, which is a bigger consumer of mobile entertainment. Comedy Central is up there for the same reason as MTV. CNN was a surprise to me. Disney Channel is in 6th place and Nickelodeon is in 10th place, so there’s a focus on children’s programming. We’re noticing the pass-back effect, when the parent hands the phone to the child while in a restaurant or car.”

Live events create a big spike in mobile traffic, noted Fletcher, for both mobile news programmers like CNN and sports channel ESPN. “Live content and children’s focused content is so far driving the market,” said Fletcher, who also noted the popularity–and prolific programming–of The Weather Channel.

Among the “other” worth $179.5 in total mobile programming revenues are included Disney, NBC Mobile, The Weather Channel, Fox Mobile, Nickelodeon, CBS Mobile, GoTV, ABC Mobile, Discovery, Viva Vision, Playboy, HBO, and Cartoon Network.

What’s working, in terms of business models? “Business models are all over the board depending on which company I talked to,” said Fletcher. “Some with more clout and brands people wanted to seek out had more leverage with the wireless operators. Something similar has developed in mobile video that is standard in cable TV. In the cable industry, the programmer gets t0 split subscriber revenue with the MSO.  In mobile, in the best case scenario, they get a lump sum up front and a similar revenue split.”

But not everything in the business model is similar to cable TV. “In cable TV, advertising is about 50 percent of the revenue,” said Fletcher. “In mobile video, the advertising component is very, very small. Most revenues are going to the Disneys, MTVs and others that have the clout because the demand are already there.”

Is it too early to draw a conclusion about which business model works? “I think the one people are gravitating towards is the cable TV model,” he said. “Another one I’m interested in is the ad-only supported model.  Rhythm New Media brought in about $1 million last year and their whole model is ad-supported only.”

The recession will put a hold on some of these models, said Fletcher. “I think it’s a tough sell,” he said. “You have a 2-inch screen and your user base is small.” What will change everything, he says, is the iPhone/smart phone user base. “They’re growing from 15 percent [of mobile phone users] at the end of last year,” he said. “As that user base grows, the user base for mobile TV will grow. It makes mobile entertainment more practical and more enjoyable. The smart phone user base will drive use of mobile entertainment especially at these very early stages.”

What about the on-deck versus off-deck debate? “The majority of the revenue comes from on-deck deals,” said Fletcher. “Among the  The  top 30 mobile programmers, it’s a 70-30 split between on-deck and off-deck.” Fletcher pointed out one notable exception: Playboy, which goes directly to the consumer with a subscription service.

But on-deck won’t prevail forever, believes Fletcher. “If I were a carrier, all I would care about is the monthly ARPU,” he said. “I think we’re heading towards an off-deck world. The iPhone is in the early stages of that. People don’t want a stripped-down walled garden. For now though it’s an on-deck world.” Although carriers haven’t said as much, Fletcher has a gut feeling that carriers are “less interested in being in the middle of these [mobile programming] deals and more in focusing on the network and keeping their subscribers happy.”

What are the upcoming growth areas in mobile programming?  “When I speak to the start-ups, they say comedy, music and short entertainment clips…anything that’s short content. Legacy programmers say whatever is popular on our regular TV channel is popular on mobile.” He also noted the relevance of animation for mobile. “Animation is less bandwidth intensive,” he said. “And shorter is better.” Long-form content works well with MediaFLO, said Fletcher, but he noted that, elsewhere, long-form is typically sliced into 4 to 10-minute chunks.  But a single trend? “The start-ups are going one way and the legacy players another,” he said.

For a copy of the report, contact SNLKaganSales@snl.com or call 866-296-3743

Tags: advertising, cable TV, Disney Channel, Economics of Mobile Programming, GoTV Networks, iPhone, making money in mobile, MediaFLO, mobile business model, mobile programming, mobile traffic, mobile TV, mobile video, MobilizedTV, MobiTV, MTV Mobile, off-deck, on-deck, Rhythm New Media, smart phone, SNL Kagan, walled garden

This entry was posted on Wednesday, June 24th, 2009 at 9:00 am and is filed under Advertising/Marketing, Content, Home Feature, Monetizing Mobile.