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Mobile TV is No Threat to Current Value-Chain

"Telecom carriers around the world are now making significant investments in their networks, not only to deliver digital video content to subscribers, but also to stake their claim as key players in the digital media industry," says Aditya Kishore, Senior Analyst with Heavy Reading and author of a new report entitled "Telecom in TV Land: A Roadmap to the New Digital Media Ecosystem."

"But even as they try to navigate this new terrain, telcos are finding that the media ecosystem itself is undergoing some fundamental changes, due in no small part to new technologies that telcos and their competitors are introducing into the mix. As a result, long-established relationships between content producers and distributors are shifting, leaving the digital media ecosystem in a state of flux, if not downright upheaval."

Telecom operators are likely to find that the technology challenges involved with IPTV deployments are minor compared with the business challenges they face in adapting to the digital media ecosystem, Kishore cautions. "The TV value-chain employs a bewildering array of revenue models, and many of the shares, splits, rates, and commissions are renegotiated on a regular basis," he explains.

"Owners of content are simultaneously trying to adapt to new business opportunities created by new technologies, including those being introduced by network operators themselves. Telecom is merging with media at a time of dramatic change, so many of the old rules are up in the air."

That said, I believe this scenario offers an even greater challenge for telcos that hired people away from the traditional big media companies -- expecting them to provide strategic guidance about success in the content business. Unfortunately, much of what the legacy media people know as conventional wisdom is now actually being called into question.

Other key findings of the report include the following:

New technologies, such as IPTV, will drive even more fragmentation of the consumer video market over the next five years. While traditional free-to-air (analog, DTT) and pay-TV (cable, satellite) providers will remain the dominant platforms for video access, IPTV is likely to have a disruptive effect on the pay-TV market in many countries.

On-demand technologies such as VoD and DVRs will alter program viewership, while Internet video will grow steadily. User-generated content and video communication will gain wider adoption, along with video consumption on mobile and portable devices, making the TV business even more complex than it already is.

IPTV network operators in the U.S. face tougher challenges than telcos in other regions because the American TV content business is larger and more complex. Traditional ways of doing business and bottom-line requirements for broadcast networks will constrain the pace of change in the U.S. compared with other markets, where content and distribution channels tend to be less complicated.

Internet video will remain a niche application -- though still a rapidly growing one -- until it can be delivered to the TV in an inexpensive, simple, and quality-conscious manner. New technologies and standards -- ranging from a new version of WiFi to proprietary wireless technologies to consortium approaches such as the Home Phoneline Networking Alliance and Multimedia Over Coax Alliance -- are being deployed today that eliminate the PC/TV divide.

Eventually, the Internet will have a significantly disruptive effect on the pay-TV value chain, though that is unlikely to occur within the next five years, according to Heavy Reading's assessment. In contrast, I think that the potential for an unanticipated over-the-top video delivery player (Joost, or whatever) could have a major impact in as few as two years from now.

Mobile TV will have some appeal but will not threaten traditional pay-TV revenues. For video, size does matter. Given the trend toward ever-larger TV screens, high-definition video, and high-quality surround-sound systems, the mobile phone is hardly the device that springs to mind when consumers think of video.

Add to that the relatively high cost of wireless data services -- plus the bandwidth requirements and quality constraints of mobile video -- and it's clear to Heavy Reading that the current TV value chain need not fear mobile TV.

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