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Vodafone UK launched its UMTS network in November 2004 with a corresponding consumer media package called Vodafone Live! The package offers picture messaging along with ringtones, games, e-mail, messaging and a variety of multimedia services including video clips. In November 2005, Vodafone UK bolstered its 3G service portfolio with the launch of mobile TV. The mobile TV offering, Sky Mobile TV, is offered in conjunction with BSkyB (the British satellite television broadcaster), and has numerous strengths, yet Vodafone must avoid becoming complacent given the growing interest in mobile TV from its rivals.
The Sky Mobile TV service consists of three packages; two are based around Sky TV offerings and a third Vodafone Live! variety pack. All programming is streamed to handsets, but subscribers require a UMTS-compatible device, 3G coverage and a subscription to a 3G tariff. Pricing for each Sky Mobile TV package is £5 per month (US$8.75) and £3 per month (US$5.25) for the Vodafone Live! Variety Pack. Subscribers can also choose all three packages for £10 per month (US$17.50). Subscription to the first month of the Sky Mobile TV package is free, with tariffs introduced in the second month. No “ala carte” options are available.
We consider these packages to be affordable, considering the quality of content that is being delivered. Both Orange and 3UK provide access to TV programming via MobiTV’s WAP interface, with content packages ranging from £5–£10 per month depending on the subscriber’s existing voice plan. However, only three Nokia handsets are capable of using this service in the UK and the operators have no control over the content available. In fact, Orange and 3UK subscribers have identical channel lineups. T-Mobile and O2 have video download services that cannot be directly compared with Mobile Sky TV, but are known to be working on Mobile TV deployments. O2 is known to be trialing DVB-H for a prospective launch in late 2006.
In a fiercely competitive market such as the UK, Vodafone has managed to secure a window of competitive advantage with access to BSkyB content. This is strategically important because, unlike other markets, this is the only regional provider of subscription paid programming. Other alternatives are the national British Broadcasting Company (BBC) or Independent Television (ITV), which rely on annual license fees and advertising for revenues, respectively. Consumers are already accustomed to paying for access to satellite TV and are familiar with the content they will be able to receive over their handsets.
Key Lessons
The introduction of free content for the first month is a good way of hooking potential subscribers into using the service, although possibly a longer honeymoon period of three months could make usage patterns more ingrained, rendering the service indispensable. Packages mimic existing satellite TV offerings. BSkyB subscribers will be familiar with packages based around a particular viewing preference. Sky Mobile TV replicates this, further reducing the learning curve that a new subscriber is subjected to. Moreover, unlike terrestrial TV channels (BBC and ITV), viewers will be accustomed to paying a subscription on a monthly basis.
Content pricing is low, possibly to drive uptake levels, and as an incentive to sell 3G handsets and services. With TV content driving 3G adoption, there are likely to be other products and services that users will be introduced to once they upgrade to a 3G handset and service. The net effect is an overall increase in ARPUs as subscribers become accustomed to mobile data services.
Quality of Service will need to improve alongside content provision. With O2 potentially deploying a DVB-H network in the UK and with BT likely looking to launch a DMB service in conjunction with Virgin Mobile UK, Vodafone UK will need to keep up with the developments of their peers. Being first to market a Mobile TV product is a good way of grooming subscribers for future offerings, but quality needs to match expectations. TV is not new and there is a double-edged sword: subscribers don’t need to be taught to like Mobile TV, but they already have well-formed expectations of both content and delivery. With patchy 3G coverage, Vodafone runs the risk of alienating subscribers with a service that may not be market-ready. With churn approaching 27 percent in the UK, Vodafone’s Sky Mobile TV is a gamble.
Related Research:
Rescuing 3G With Mobile TV: Business Models and Monetizing 3G
UK Mobile Data Forecast
UK Mobile Data Adoption Study
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