Internet and Software companies know it well: mass adoption comes first, revenues will come later. It is what Chris Anderson calls Freeconomics. When the marginal cost of every new subscriber is close to zero, free is the way to go: Freemium, Ads or Cross-subsidize models can later monetize a massive audience base.
Mobile Operators are not familiar with the economics of “free”, but for Broadcast Mobile TV, Free To Air is a wise first step to create awareness and push for mass adoption. The Korean authorities forced T-DMB spectrum licensees on a free-to-air business model. T-DMB had 5 million users by year end 2007, compared to 1 million users of the S-DMB satellite pay-TV model launched earlier.
DVB-H service providers, like 3 Italy, are now switching to offer free-to-air channels, as well as different packages to access premium content, such as Pay-TV subscriptions and pay-as-you-go:
- MOBILE TV TARIFFS OF 3 ITALIA: Daily, weekly or monthly packages, with or without other services included. Pay-as-you-go users can access the mobile TV service at €4 per day, €9 per week, €19 per month or 29€ for 3 months. Alternatively, subscribers can pay €29 per month getting free access to all digital mobile TV services, access to 3 Club on 3 Mobile Portal, free national calls and one GB/month of mobile broadband Internet. As of June 2008, RAI 1, RAI 2, Mediaset, Sky Meteo 24, Current TV and La3 are made available free-to-air to those with DVB-H receivers. La3 is an in-house channel, showing sports, music and entertainment programming.
The bigger the base of Mobile TV handsets and users, the bigger the market to up-sell premium content (including pay-per-view), or to get advertisement revenues for zapping ad insertion, as an example.
In broadcast television, Pay-TV models (like Canal +, or cable TV) only came decades after free-to-air television was watched by millions, sponsored by advertisement. Once every house has at least one TV-set , today Pay-TV is a popular model and a (very) profitable business.
The adoption of new technologies takes some time, specially when handset renovation is required. “Free” is an excellent choice for Mobile TV providers to create a mass audience first. Premium content will come soon after. The good news is that being a broadcast technology, it is the same investment to build nation coverage for one user that for ten million.
Mobile TV related links:
Faultline: “Free to air mobile TV has won – the war is over” — MobiTV
Searching for a Mobile TV Business Model
Mobile TV must be free-to-air-service
3 Italia – TV Digitale Mobile DVB-H