• by Tom Ohanian , January 5, 2009

As a business traveler, I've witnessed a very interesting shift over the past two years. Business fliers, first to watch DVDs or videos on their laptops, are now watching movies and TV shows on their iPhones or iPod touch -- while laptop playback is on the decline.

Now, this certainly isn't a scientific study, but given how much I fly, it tells me that the ubiquity and ease of use of a mobile device will put more mobile media in the hands of more people faster than anything else thus far. This is worth noting since new technologies often find themselves in the hands of business travelers before they make the jump to the larger, more profitable consumer market.

So why should media professionals, Hollywood studios, wireless carriers (other than AT&T) and phone manufacturers (other than Apple) pay attention to this?

On December 28, Wal-Mart began selling Apple's iPhone -- and made sure that its customers knew about it. The cover of the retailer's 15-page Sunday flyer featured the iPhone3G (8GB) for $197. Best Buy chose to retaliate by dropping its price to $189.99. Frankly, the price difference will probably do little to sway those willing to pop for a $200 phone -- and, more significantly, the two-year contract and monthly data charges that go along with it. IPhone's move into Wal-Mart is not about the discount of a few dollars, it is all about Apple striking while the iron is hot and expanding the accessibility of this must-have product. With one fell swoop Apple (and AT&T) put the iPhone in the retail chain with more accessibility than any of the U.S.-based smart phone rivals.

So why is this product so hot? It's widely perceived that the "phone" component of the device is not the greatest in the world. So why do so many iPhone users buy the iPhone as a secondary device for video playback, mobile Web, and the applications?

alking down that airplane aisle got me thinking about the increasing need for "pervasive mobility" -- especially as it relates to Hollywood and mobile media. This deserves deeper exploration, especially when factoring in the recent iSuppli figures for Q4/08 that showed -- for the first time in history -- that notebooks outsold desktops, with an increase of almost 40% year-over-year. However even the laptop does not bring with it the advantages of the always with-you, always-connected cell phone -- which is now much more than just a phone. Manufacturers would prefer you take a closer look at the features and applicability to your lifestyle and refer to it as a "mobile device" or "smart phone." But really it's a computer, darn it, with real operating systems (that are getting better with each release), real applications, and unimaginable amounts of fast, cheap mass storage.

So what did Apple do right, and -- more importantly -- what should content providers and other wireless carriers understand in order to take advantage of this trend? What companies are best served to capitalize on getting devices and media into the hands of as many people as possible? As more of these media-ready devices are purchased, how will consumers obtain their mobile-ready content?

There are only a few ways to get video to a mobile device: stream it to the device over the carrier's voice/data network, broadcast to the device via dedicated broadcast spectrum, or sideload the video via a USB cable.

The streaming model was the first to emerge. This unicast model allows content to be delivered on demand and programs can be watched in their entirety. But even with the transition to 3G, this model is still plagued with a cost that is directly proportional to quality. Get close to the bit rate that the consumer finds acceptable and the cost of delivery to the carrier becomes a losing proposition. Delivering video to individual users quickly bogs down the network, preventing the more profitable voice, text, and data communication from getting through.

>The more recent broadcast offerings include MediaFLO via Verizon and AT&T or DVB-H in Europe. This dedicated spectrum is separate from the carrier's voice/data network, so quality is better than that of the 3G unicast model. However, these broadcast content offerings provide limited selection, usually programming that users already have access to at home "for free." But even more limiting is that mobile broadcast does not (as yet) offer time-shifting capabilities. You get what you get when you tune in . . . it's a broadcast schedule, not yours to schedule. By all reports, mobile broadcast is not profitable anywhere in the world. And, unless the event is something that users can or will tune into now, such as news or a sporting event, the broadcast model is probably a losing proposition for most tech-savvy discriminating consumers.

What Apple got right is that simply putting any video on a device is not enough. It has to be "my TV" or "my movies" for me to be willing to pay -- not content selected and programmed by someone else. Moreover, just because the device is a mobile phone does NOT mean the video on the device has to get to the device over the air. Over-the-air video delivery has not -- and will not anytime soon -- provide the choice and control consumers demand of their mobile media. It is this sideload process -- proven by Apple and accepted by consumers -- that meets most of the conditions consumers cite as important.

With intelligent pre-selection software, sideloading provides on-demand viewing of personalized content with a wide selection of programs via a PC-based portal. Content consumption is from the mass storage on the device, not streamed, so the quality (and the user experience) is excellent, as consumers don't suffer through the constrained quality and connectivity pitfalls of being tied to a network. The content is, by nature, time-shifted and place-shifted, which contribute to extending viewing (and revenue) opportunities beyond the home. Want choice? Have you seen how small (and inexpensive) those 16 GB flash memory cards are? They hold about 20 hours of high-quality widescreen video.

Unfortunately for non-Apple consumers, the only company that is really doing all this very well right now is Apple.

And now this device is available in Wal-Mart. This is ironic, since retail pundits figured that a Best Buy-type retailer, with knowledgeable sales staff, would be able to differentiate itself when selling the iPhone. Meanwhile, however, Circuit City is in Chapter 11, which led to online holiday traffic plunging by 21%. It can probably be assumed that in-store traffic also suffered. And Best Buy, citing weak December revenue, announced layoffs were looming. So you tell me -- which retailer is best positioned for retail exposure to the iPhone in 2009?

With the predicted takeover of the world by user-generated content still looking for a viable business model, studios and professional content creators must start looking more closely at the mobile media market opportunity beyond Apple. Otherwise, their whole mobile distribution play hinges on one player. At the same time, carriers who loss-lead devices to gain two-year contracts and hope to recoup cost on data charges and other services, will fall into the trap of not having a fundamental stake in quality content to maintain their customers.

For pervasive mobility and mobile media to really take off beyond Apple and the iPhone, new pricing models and new revenue-sharing models with carriers must happen. And it has not happened yet.

Until then, watch Apple and Wal-Mart rule the world.