3 Finds Mobile Video Pays... But Not Quite As Much As You'd Think
By Mike Masnick, Sat Feb 19 01:45:00 GMT 2005

The original believer in mobile video is back claiming success with different types of mobile videos -- but a little back of the envelope calculation suggests the success isn't quite as successful as 3 would have you believe.

When 3 launched in the UK, part of the hype was its pitch that everyone would be making video calls over the 3G network. The company quickly learned what a mistake that was. Not only did people not want to pay so much for seeing whoever they were talking to, but the high prices and ugly phones meant that it was difficult to even find someone else to take part in the other end of a video call. While the company quickly ditched that focus, it's still been pushing a variety of higher end offerings for quite some time -- and recently started talking up mobile music videos, highlighted by a live concert broadcast to subscribers.

While an entire concert may be a bit of overkill for phones, short videos seem to be somewhat more compelling filler for subscribers, leading 3 UK to proudly announce that 10 million videos had been downloaded to phones.

However, it might not be the big money maker 3 implies. Over at NetImperative, Charles Arthur tries to scratch behind the surface of the numbers. With some back-of-the-envelope calculations, along with some reasonable assumptions, he works out that 3 is probably making 60% of the face value of each downloaded video, as many of the videos were probably bought under an all-you-can-eat plan. At that price, each video is bringing in less than a standard music track downloaded via an online music store. Even worse, which Arthur implies but doesn't state explicitly, the entertainment industry has been pretty aggressive in any licensing deals it does for downloadable content. In other words, the margins on these videos are probably very, very slim. For downloadable music online, the commonly accepted number is that 67% of the list price goes back to the recording industry. If that's true in videos, 3 might even be making a loss, though, the licensing might be different in this situation.

Still, as Arthur points out, that might not be a bad thing. It obviously can drive user adoption and gets people used to accessing additional (premium) content on their phones. However, it's not likely to be a huge money maker for any carriers by itself. Also, there's some speculation that many of the video purchases may have been more for the novelty aspect than a sign that users were really planning to download mobile videos on a regular basis. At this point, it's all speculation, but it seems like a longer term look at how well mobile video downloads do would make sense before deciding that it's a real money maker for operators.