Mobile TV Via Satellite Struggling in Asia
Mobile TV is one of the hottest topics in the video arena globally, but in 2008 it seems as though the role of satellites and satellite technology in this area has come under sharper focus than ever before. In Europe, competitors SES Astra and Eutelsat formed a joint venture, Solaris Mobile, to serve the mobile services market, including video, and several companies continue to advance mobile TV trials in the United States. However, it is in Asia where some of the most interesting mobile TV developments have taken place, including a high-profile failure of a mobile TV operator in Japan as well as the continuing efforts of TU Media in Korea to develop a market for its service.
Established Players Struggling
In some ways, Asia has been a pioneer of mobile TV services via satellite, but Japan’s Mobile Broadcasting Corp. (MBC) provides a reminder that a business case still needs to be made now matter how advanced the technology may be. Toshiba Corp. announced in July that it would shut down MBC, its satellite digital multimedia broadcasting business, at the end of March. Keisuke Ohmori, group manager, international media relations group for Toshiba, says the business, which began services in October 2004, had gained only a fraction of the numbers of subscribers Toshiba had hoped for. "We had initially envisaged the subscriber base reaching 1.4 million in the first three years, but as of July 2008 the number of subscribers remained at 100,000," he says. Toshiba estimates that it will incur a loss of 25 billion yen ($254 million) for the year that will close March 31.
What lessons can be learned from the MBC experience, and despite this setback, is mobile broadcasting still a good bet in Asia? The MBC failure could be traced to the unique dynamics of the Japanese mobile market, says Peter Jackson, CEO of AsiaSat. "The recent failure of MBC can, I think, be attributed to several causes. The content was not free. The original handheld viewer was a single purpose standalone device, and the cost of delivery, because they were using both terrestrial and satellite, was high," he says. "The competitors were the cellular telephone operators who already had a connection to the customers and for delivery just added a broadcast antenna at selected existing cell sites. They added a video capability to their range of handset, and they offered free content. The only advantage of MBC was that the service had ubiquitous coverage. It is difficult to see how they thought the service would be successful unless they had stunning unique content or the cellular coverage did not cover large areas of the country."
Ohmori believes the killer blow for MBC may have happened more than two years ago. "We think one of the major factors that prevented the originally forecasted subscriber boost for MBC was the proliferation of One-Segment (One-Seg) digital terrestrial broadcast services, which were provided free of charge to mobile phone users in Japan. One-Seg services started in Japan in April 2006 and rapidly expanded nationwide as major Japanese TV broadcasters made the transition to high-definition, digital terrestrial broadcasts." For Toshiba, the loss of MBC means 10 years work in this area has pretty much gone to waste. "We do not think the fact it was beamed by satellite was relevant to the conclusion of this service," says Ohmori. "We still believe the system provided advanced, attractive mobile services for users, but as it turned out, that was not enough to garner the needed subscribers in Japan. We regret that the advanced mobile broadcasting concept, where we initiated development over 10 years ago and which garnered support from major Japanese corporations, including automobile companies and device manufacturers, did not win enough understanding and support from general consumers."
A sharp increase of market request for mobile broadcasting and communications is obvious. […] China DBSat will observe closely this tendency and respond to market demands. We have already made some preparations such as frequency filing years before, and expect to see if we can contribute something in this respect.
— Wu Jinfeng, China DBSat.
With lack of subscribers led to the demise of MBC, TU Media, which launched mobile TV services via satellite in Korea in 2005, continues to make impressive gains in this metric. Ki-Han Park, vice president, corporate relations office, TU Media, says the company has surpassed 1.5 million subscribers and hopes to reach 2 million by the end of this year. "We couldn’t reach the break-even point yet, but with attracting 2.5 million and more subscribers, we will break even in 2009. We still need to have strong financial backing to maintain a competitive advantage in mobile broadcasting services. The company offers around 40 channels to customers — 22 video and 18 audio, and admits building a successful business in this area is tough, particularly if there is a free terrestrial alternative. "TU Media has been competing against a strong free-of-charge T-DMB (terrestrial – digital multimedia broadcasting) offer, but we will get over it through uniquely developing our strategy to provide better services compare to T-DMB to increase and add to the quality and improvement of customers lives."
TU Media could also benefit from having EchoStar as one its shareholders. In 2007, EchoStar invested around $40 million to take a close to 10 percent stake in the operator. Dean Olmstead, president, EchoStar Satellite Services, is confident that TU Media can build a strong business in Korea. "On the Japan side, Toshiba gave it a try and it did not work out. If we look the Korean side, where we have investments, subscriber ramp-up has been slow for a period of time, but that was after TU Media had grown to 1.3 million mobile video subscribers. We are very excited about some changes taking place in that business and very bullish about it. Korea is a dense market and satellite has been going head to head with terrestrial. Terrestrial had significant advantages and satellite still captured 1.3 million paying subscribers. When we look at Korea and Japan, what this tells us is that there is tremendous opportunity out there for mobile video, but you have to get it right and it won’t be guaranteed."
Adrian Tong, an analyst at Media Partners Asia Ltd, is not so sure that TU Media can avoid the same fate as MBC, as slow advertising growth and subscriber additions have led to losses of $220 million and layoffs of one-third of its workforce. "Feeling pressure from a worsening cash crunch, the company has been demanding more investment from its shareholders, notably SK Telecom and EchoStar," he says. "… To be frank, it won’t be surprising to see similar fate happen to TU, but then, I think the company is quick enough to seek attention from the government and is now engaged in some cooperative efforts with the free T-DMB services…. In Korea, surveys show that most South Koreans interested in mobile TV are ready to pay for it, but users are typically not willing to pay for TV channels available free elsewhere. In the current environment, a combined FTA and subscription-based business model will probably be the key to maintain a balance between subscription growth and profits."
New Entrants
The struggles of established players does not seem to be keeping others from moving into the mobile broadcast arena. Jackson has high hopes for AsiaSat’s wholly owned subsidiary, SpeedCast, which is operating MobiCast, a mobile TV platform available across Asia. Via AsiaSat satellites, SpeedCast delivers video content to 3G mobile phone subscribers. "With this turnkey mobile TV service, mobile operators can generate additional revenues from video content services, and subscribers of these operators can access on their handsets made-for-mobile content as well as their favorite live TV channels anywhere anytime."
By the end of 2008, SpeedCast plans launch and operate, in partnership with Alcatel Lucent, the first hosted DVB-H (digital video broadcasting-handheld) platform in Asia. DVB-H service providers will be able to receive more than 20 local and international channels in DVB-H format, directly delivered via the AsiaSat 4 satellite to their multiple DVB-H transmission towers for broadcasting to handsets, says Jackson. "This managed service includes all the components required to provide end customers with an innovative and high quality Mobile TV experience: conditional access, content management system, rich media interface and world-class content," he says. "This satellite-based service will allow operators to significantly reduce both capital expenditure and operating expenditure associated with building and operating a DVB-H network, leveraging economies of scale thanks to SpeedCast’s centrally hosted head-end in Hong Kong."
China also is seen as a potentially strong market for mobile broadcasting. "This year China suffered unprecedented natural catastrophes and enjoyed the unprecedented great event the Olympic Games. A sharp increase of market request for mobile broadcasting and communications is obvious," says Wu Jinfeng, general manager, China DBSat. "China DBSat will observe closely this tendency and respond to market demands. We have already made some preparations such as frequency filing years before, and expect to see if we can contribute something in this respect…. Satellite will be a good option in China, especially for servicing areas where terrestrial signals do not have a reach."
Jackson believes technology development means satellite players are well primed to have a strong influence in the mobile TV arena, as the demand for video content anytime, anywhere seems set to increase. "As phased array, receive-only antennas become smaller, more efficient and less expensive, it is expected that they will become the normal antenna for vehicles and planes that wish to receive television where the antenna can be fitted into or onto the roof," he says. "They will be able to receive normal Ku-band DTH signals from the same operators that are selling the services to homes." Jackson also sees benefits in S-band satellites. "If television is required to be received on a handheld device, we need to be able to use an omnidirectional antenna in a suitable frequency range that has no interference. That is relatively simple for a terrestrial service but a bit more of a challenge for a satellite service. Part of the S-band frequency range has been chosen for this service when using a satellite. A satellite has the unique ability to serve the whole of the area within its footprint from day one with the only limitation being that the handheld device must have a direct line of sight to the satellite…. For geographically large countries, an S-band satellite can provide the advantage of having an instant, country-wide service on day one."
Some executives see satellite operators and cellular companies entering partnerships to serve the market. "The satellite operator can provide the S-band and Ku-band feeds, and the cellular operator can provide an existing relationship with mobile users," says Jackson. Tong also sees this model becoming common. "I think we’ll be seeing a convergence of technology platforms over the next years. In Korea, Samsung and LG have launched hybrid phones that can receive both free T-DMB and paid S-DMB services. In the long run, single-chip solutions could allow seamless technology convergence at the consumer level. I see mobile satellite service not so much as a competing service to terrestrial but as an eventual complement in enhancing user experience."
Bottom Line
The failure of MBC is evidence that the mobile TV road is not necessarily paved with gold, however, the demand for mobile TV services appears strong in the region. Free terrestrial alternatives will put pressure on operators using subscription- or advertising-based models, but satellites and mobility go hand-in-hand, so opportunities should be strong as the market develops.