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Made for mobile? Impact of 3G technology on rights owners and operators

June 2006 - Media, Entertainment & Sport. Legal Developments by Harbottle & Lewis LLP.

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With analysis predicting that by 2010 Europe will have a 3G handset penetration in excess of 50%, what does the future hold for rights owners and operators alike in the febrile markets of mobile TV and video?

Developing markets

On a first look at the distribution of various forms of audiovisual content over operator networks, early indications suggest a lucrative market for many of those concerned, the music industry being a particular beneficiary of quite startling initial consumer demand. For example, mobile operator 3 reported that in one six-month period it saw ten million music videos downloaded by its subscribers. With these music videos retailing at ÂŁ1.50 per download, the incremental revenue for the record labels (until a few years ago videos were, after all, merely promotional tools) is there for all to see.

Some, however, remain sceptical on the basis that the music video download is a novelty product rather than something that can support a sustainable download market. Time will tell, but if those yet to experience the product take it up with similar vigour when they move to a 3G network, the numbers should only get better.

3G mobile content

Certain rights owners have also seized the opportunity to develop their artist and talent brands by producing made-for-mobile material geared towards their artists' fans. This not only enhances the artist brand, but simultaneously provides an income stream while nurturing the community aspect of the artist fan base.

Other genres have also demonstrated varying degrees of success in the mobile download market, including sport (football content in particular gives users an opportunity to view Premiership highlights several hours before they are made available to the broadcasters), and comedy shorts, together with the ever-reliable financial banker of adult content.

User-generated content

The innovative and nascent development of services such as 3's See Me TV provides a further interesting derivative of mobile video distribution. By monetising user-generated content (UGC) operators can avoid the potentially protracted, costly and awkward negotiations with rights owners of the high-brand content referred to above. Indeed, 3 claims it has earned in excess of ÂŁ1.2m in four months since launching the channel, having to pay out only ÂŁ100,000 of that to those subscribers who submitted video content (including that of the adult variety) for inclusion on the service.

Although UGC clearly has wider applications and different distribution channels available (it does well on-line, as users of myspace.com et al will testify), it also seems to have its place in the world of made-for-mobile content. 3 effectively pays subscribers 10% on retail for non-adult and 20% on retail for adult content, so the margins are significantly higher than they are under deals with record labels and other content owners. Volume, naturally, remains lower, but it seems that UGC has a future on mobile phones.

Looking forward

So, does other made-for-mobile content, whether UGC or content developed by a polished production house, have any viable future? Those looking to establish and develop the mobile TV markets say: absolutely. In fact, they see it as imperative. If the market is to develop, then content specifically geared for viewing on small screens needs to be created in order to offer an attractive consumer proposition.

At present, this content may facilitate less painful negotiations with production companies, broadcasters and other rights owners, in that as the distribution channel is exclusively mobile, the usual windowing and tranching of rights via different channels (eg on-line and traditional broadcast) may be less complex. The flipside of this, of course, is that as the number of mobile TV channels grows, operators and channel providers will look to obtain exclusive content in order to promote their respective services, with the usual resultant slowing of the negotiation process as the various parties are played off against each other.

The current trend for branded channels is likely to see a shift towards more genre-based channels, and so aggregation will necessarily become a vital part of development. Current usability difficulties, such as a lack of electronic programme guides (akin to that found on Sky and currently only available on Vodafone Live!) will also need to be addressed. That said, results from recent pan-European trials conducted by Nokia indicate that a majority of participants were prepared to pay for the service, and that a monthly subscription for a package of channels is the preferred method of payment.

The likely winners?

Trials suggest the consumer likes it; operators have established direct relationships with their subscribers, who are now creating revenue-generating content and getting paid for doing so; rights owners are cashing in on an operator-enabled distribution channel for previously promotional assets; and there's still room for broadcasters to exploit their archives while commissioning specific made-for-mobile content both independent of, and supplementary to, current programming.

So in the short term, some are likely to benefit. But as services develop and the consumer base swells, everyone might join the party. Some time after 2010, perhaps.

3G mobile regulation

Regulatory issues may yet play a more significant role. The Independent Committee for the Supervision of Standards of the Telephone Information Service's Code of Conduct already imposes a number of restrictions on premium-rate services, such as an absolute prohibition on the use of foul language, and so service providers, production companies and content owners all need to ensure that what is created and subsequently made available does not fall foul of the Code. If these restrictions are viewed as inhibiting the market's development, will we see a lobbying campaign for amendment to the Code?

Another question that will be raised is how are operators going to police something similar to the 9pm watershed? Credit-card address verification would probably cut a large number of potential viewers from the services, and so how are those aged under 18 to be monitored? Alternatively, will the growth of channels that are difficult to regulate (for example via the internet) cause the regulation of conventional broadcasts to be relaxed?

A further issue for consideration is that if the public service broadcasters move in to establish their own channels on the operator networks, will users be required to take out a television licence, and, if so, will it be included as part of the price?

 

By Benjamin Brassington, solicitor, Harbottle & Lewis LLP.

E-mail: benjamin.brassington@harbottle.com.

For more information please visit www.harbottle.com.