Does Exclusive Mobile Content = Revenues?
By Carlo Longino, Wed Sep 24 08:00:00 GMT 2003

Many mobile carriers are looking to lock down exclusive content deals, particularly for sports content, to bolster their consumer offerings and gain a competitive advantage over their rivals, but these companies would do well to tread carefully and learn from the mistakes that cost some traditional media companies their businesses as their technological capabilities improve.

Exclusive Internet and mobile rights haven’t yet attracted huge amounts of interest and money, but carriers can look to European TV companies for a recent, vivid, history lesson. The downfall of two companies in particular – ITV Digital in the UK and Kirch in Germany – essentially came down to an overestimation of the interest in sporting events and the amount consumers were willing to pay for them, resulting in these companies overbidding for rights with little hope of ever earning their money back.

ITV looked to emulate satellite broadcaster Sky’s success by building a franchise on exclusive soccer telecasts. But Sky, with its deep pockets, was able to protect their bread-and-butter, exclusive live Premier League broadcasts, and drive the price of the scraps they didn’t want through the roof. ITV Digital was left to pay GBP 315 million for lower-division broadcasts, something few UK consumers were willing to shell out for. ITV Digital subsequently went belly-up, jeopardizing 92 British football teams in the process.

Kirch, too, bid far more than they could ever hope to recoup for events like Formula One car racing, the World Cup, and German Bundesliga soccer. The countries may be different, but the lesson for any digital content provider is the same: offering exclusive (and expensive) content doesn’t guarantee any measure of success.

While broadcast rights prices have been driven down by the world economy and such spectacular failures as ITV Digital and Kirch, exclusive content deals in the mobile space are beginning to emerge. 3 in the UK paid GBP 35 million for a three-year exclusive mobile video content deal with the English Premier League in August 2001, but only this season – the last of the current contract – have they begun to offer video clips and highlights. Rival Vodafone signed a deal with European football governing body UEFA for rights to the Champions League for the next three years, netting them a combination of exclusive and non-exclusive rights in a dozen European countries.

Both these deals have their risks, but 3’s is clearly the riskier proposition. They essentially threw away the first two years of content just to preclude rivals from getting it, and are now banking on uptake from one season to make it worthwhile. But what happens when the rights for next season and beyond go up for auction? Like Sky against ITV Digital, it would seem that what Vodafone wants, it will get, leaving the rest of the carriers to fight over whatever’s left. So 3 could be left without any of its precious Premier League content, putting it in a position to lose all the subscribers it attracted with the service to whatever carrier picks up the rights.

3 banks not just on exclusive content, but the idea that their 3G network is capable of things other carriers’ 2.5G networks aren’t – though that gap is quickly closing. Vodafone’s Champions League content will go through its Live! GPRS portal, and its 3G service should be live within 6 to 9 months. And though 3 may offer video clips at a higher frame rate, small-screen videos over a GPRS connection are still watchable.

There’s no doubt that users are interested in this type of content, but carriers need to be wary until they can figure out how to monetize it. They may not get the chance in some cases: using the EPL again as an example, experienced TV broadcaster Sky (whose brand is basically synonymous with the league) is rumored to be mulling a bid for the mobile rights, which would possibly take the carriers out of the content loop and back solely into delivery.

This may be the best approach, after all, someone like Sky has spent the last 10 years toying with this content, figuring out exactly what the target market likes and wants, while carriers seem to struggle with most of their forays into the content business.