• by Steve Smith  @popeyesm, December 1, 2005

After months of mobile TV and video hype, market researchers hit the pause button this summer. Only 1 in 8 mobile customers are even interested in video on handsets, according to In-Stat research, while in a similar survey, Parks Associates found that only 12 to 13 percent of consumers say video/TV functions are important on any mobile device. Oops. Is this another medium in search of an audience? Think video phones, circa 1995.

"We don't need any reports to know the interest level," counters Paul Scanlan, chief operating officer and co-founder of Mobitv. "We are seeing it and living it." The company recently claimed 500,000 paid subscribers to its live streaming and on-demand video application, predominantly via Sprint.

But Verizon Wireless' VCast, a service providing downloadable video clips and content, doesn't even call its service mobile TV--because, as a company spokesman put it, TV on a handset "over-promises and under-delivers." Still, the six-month-old offering is performing ahead of expectations, according to the spokesman.

In the even tinier Smartphone market, mobile video provider SmartVideo has lured about 25,000 subscribers to its 30 channels of mobile content. Meanwhile, the release of a new generation of iPods equipped to play video downloads, à la podcasts, may help acclimate consumers to small-screen viewing but not to the wireless delivery model.

Still, even the most tepid market researchers project that mobile video could grow to attract as many as 30 million subscribers by 2010. "There is enough interest for it to generate some significant revenue for carriers in the near term," says David Chamberlain, senior analyst, In-Stat.

Media giants including CNN, Fox, ABC, and E! are already providing content to mobile video services, in part because it gets their brands into otherwise unreachable at-work dayparts, which is actually prime time for mobile. "It's snacking on TV," says Mobitv's Scanlan. "It's about 10 minutes per session, but people watch frequently throughout the day."

For VCast, the early evening commute and afterwork bar time appear to be the daily peak, says Alex Bloom, VCast product director. Beyond news and weather updates, standup comedy has been a surprising hit for VCast. Verizon has also discovered users' insatiable taste for movie trailers. "And any clip that has Paris Hilton in it," Bloom says, adding: "Even our news providers have observed the same thing."

Major media companies are already thinking hard about how to make content play on tiny screens and during short spurts of time. For a cable and Web megabrand like The Weather Channel, TV-to-go looks like a welcome antidote to a fragmented future, "especially when you consider how personal a mobile device this is and how frequently we use [it] as days get busier and time more scarce," says Cameron Clayton, director of business development, Weather.com.

If the eyeballs do eventually come, and stick, most mobile video providers are likely to use a hybrid revenue model--although for now, Verizon Wireless says an ad-free, fee-based model works for VCast.

"There will be some ad inserts, and target marketing is something we are very passionate about," says SmartVideo CEO Richard Bennett. Mobitv is reserving the local slots on its live TV feeds for resale. MobiTV and SmartVideo both plan to pitch agencies on their ad plans. With no spectrum or bandwidth constraints on channel depth, they say it's relatively easy to launch bundles of highly specialized content and even brand-sponsored channels. Most mobile TV interfaces integrate with wireless handset functions that can handle TV ads with click-to-call options.

But before agencies get busy retooling ads for wireless handsets and other portable devices, mobile video providers need to answer a few questions. Can the medium grow beyond the bubble of early adopters? Even Scanlan concedes that males ages 18 to 39 are the current target demographic. No one really knows whether soccer moms will want to snack on Dr. Phil while they're in doctors' office waiting rooms or standing in line at retail checkouts.

The transport and format models for mobile content remain unsettled, and are likely to vary across carriers. MobiTV sees more appeal in live video streams, while Verizon's VCast sees downloadable video clips as the key to extended use. Next-generation, or so-called 3G high-speed wireless networks that make mobile TV run, are rolling out in fits and starts. Meanwhile, mobile powerhouse Qualcomm is developing a rival technology dubbed Mediaflo, which bypasses wireless bandwidth and airtime by transmitting TV to handsets via a separate network of local towers.

Media buyers and planners will have plenty of practical questions. Will there be enough viewer loyalty for mobile content? When will the audiences be big enough to package for advertisers? What best practices will emerge to standardize the buy-in process, and who controls the ad inventory?

"Who do I buy from--the carrier, ESPN, or a third party?" asks Courtney Acuff, a wireless marketing specialist with Starcom IP's Digits practice. She says the theoretical potential is tremendous: "It's the ultimate intersection of sight, sound, and motion" in a personal package. But until the technology and audience scale, mobile TV is a big bet on a hunch.

Unless, that is, Paris Hilton steps in to validate mobile programming with her own mobile network.