Commercializing Mobile Content

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By the time you read this, Sprint Nextel customers will be getting their first taste of free mobile TV, and thus also tuning in to the real future of wireless content. The young male-oriented "Fast Lane" channel will have on-demand clips of tech reviews, poker tips, stand-up comedy, and all the other usual Spike TV/Maxim oafish male fare. It will also have ads, usually tucked as mid-roll breaks of 15 seconds or so. Yup, the free, ad-supported TV model is coming to mobile, and my guess is that it will proliferate quickly and accelerate the use of ad subsidies across all handset content.

If I sound breathless, it is because the mobile content terrain I'm trekking in summer 2006 looks so different from a year before. Sometime late last year, it became apparent that mobile was not going to correct the sins of the internet. Early in the wireless tech cycle, publishers salivated over the fact that phone users actually paid for content. Unlike the web, where information commodified quickly, phone users seemed willing to spend a few extra dollars to get personalized, always-available hits of weather, stock updates, or even games. Because cellcos had a proprietary closed-garden network and a built-in micro-payment system, they got users into the "habit" of paying for extras, in the tiny increments that never proved feasible on the web. Now the little freeloaders would pay, by gum.

Well, not so much. It turns out that some consumers were willing to pay for mobile content, but not as many as the wireless industry had hoped and not across a very wide range of content categories. For instance, MobiTV claims one million paid subscribers to its wireless TV service. At the same time, the company putting out the upcoming "Fast Lane" free channel has fewer than 5,000 subscribers to its current for-pay entertainment news channel. Both Sprint and Verizon Wireless boast that their new full-song download services for mobile phones are outperforming estimates. But I know of one high-profile branded entertainment news service that has only about 30,000 subscribers to its mobile offering. 

The Sprints and the Verizons just spent billions on new high-speed 3G phone networks, but early evidence suggests that they will not soon make that money back from $2.99/month content subscriptions. Neither of the two high-profile, content-driven wireless network launches of 2006—Mobile ESPN and Amp'd—have successfully leveraged content as a lure to their services. Mobile content is simply not compelling or valued enough by consumers to merit changing media use or spending habits. 

None of which means consumers don't like or won't use mobile content; they just don't want to pay much for it. The reality is that many content categories probably will commoditize on the wireless platform just as they did on the web. Major content partners like, USA Today, and ESPN saw this coming and have ads on their mobile pages. Even the carriers seem to understand the limitations of a fee-based model; many are already exploring the prospect of feeding banner ads directly onto their own decks.

A year ago, most people argued that consumers wouldn't tolerate ads on cell phones, and now it is becoming clear that mobile content won't be able to survive without advertising. From newspapers and magazines to television and radio, history shows that advertising helps make a new platform cheap enough to achieve mass penetration and evolve a lucrative ecosystem. Video-on-demand, TiVo, and satellite radio are all good examples of cool technologies that have yet to break into large audiences, and all of them rely on fee-based models.

We are about to see how well free sells. In early 2007, Xero Mobile will launch the first ad-subsidized wireless network, specifically targeting college students. The first million subscribers get a free phone and a pay-as-you-go plan. Viewing up to four video ads a day also gives them credits toward their monthly voice and data minutes. Free, sponsored mobile games are already starting to dribble in. At least one company is aggregating branded content in order to create a Yahoo!-like free portal for phones. All these schemes will put downward pressure on existing fee-based news services and applications. 

The hard economic reality of mobile is that as a content platform it hit consumers at the tail end of an explosion in media choices. PQ Media says that in 1975 Americans had eight media platforms for news and entertainment, but in 2006 we have 21. How much content across how many access points can we afford? I say that when it comes to mobile, do the math and call your friendly neighborhood ad sales rep.