Finding the Bottom Line in Mobile Video

Monday September 20, 2010 – Antonette Goroch

There’s no question that usage of mobile video has sky rocketed over the past two years, fueled by increasingly advanced smartphones, more robust mobile networks and growing content availability. While this has been great news for content providers who have seen their overall audience reach blossom across mobile, pay TV and Internet platforms, for operators it has been a more challenging proposition in terms of the bottom line.

Operators hoped to capitalize on mobile video through per use /view and subscription charges, a la the billion dollar ring tone business. Though some have achieved varying degrees of success in this regard, the majority of mobile video usage occurs when users access Internet content via “mobile broadband services.” Consumers are essentially using the mobile network as a big dumb pipe for a variety of content and apps. The iPhone is a good example, as content purchases take place mostly through apps and the online store via the Internet, not from the carrier.

This has made mobile content a double edged sword for operators. On the one hand they are enjoying advanced subscriber and ARPU growth. But broadband usage under unlimited access plans has put tremendous strain, and great expense, on operators, with no mechanism for recouping those costs under “all you can eat” broadband plans.

This summer AT&T instituted changes in their data pricing plans (including for iPhones), now charging for various increments of data, and reflecting the changing landscape for mobile content. The strategy makes sense in that it allows AT&T to stick to its core business—providing the network—while still partaking in the revenues generated from that pipe.

The mobile content market remains in its infancy still, and business models are still likely to be fluid for some time with operators experimenting to find a sweet spot. Still, AT&T’s will likely be only the first of many such plans tying data usage to tiered pricing levels.