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Thursday, July 13, 2006

The Sky going Mobile

Phillip Alvelda, MobiTV’s CEO, was having a great day yesterday sealing a US$70m fund to finance his expansion plans. Meanwhile over the pond, BSkyB won the mobile TV rights to Premiership Football. I think if Mr Alvelda is not careful he is going to learn the same painful lesson that many of the Sky’s competitors have learnt over the years: The power of the Football Bundle.

To recap: Back in the Bubble Days, BSkyB, H3G UK, Vodafone and Sky together bid £100m for both the on-line and mobile rights for the Premiership for 3 seasons. BSkyB got the online rights and Vodafone and 3 got the mobile rights. Vodafone and 3 employed a company called TWI to package the live feeds into small clips (such as goals) which can then be downloaded. 3 published that between 5pm & 7pm on a typical Saturday evening they get around 500k downloads, which I don’t think is bad on their base of 3m customers. The rights package finishes at the end of this season just as the 3G services are going mass market.

This time around, the Premiership auctioned the rights separately for on-line (which BSkyB won anyway) and mobile. The value of the mobile rights has not been announced which to me says it is significantly lower than the previous amount - rumoured by the Guardian to be less than £10m. The main problem that the Premiership faced is that only two parties turned up for the auction: one a consortium of all 5 mobile companies and the production company TWI; and the second BSkyB. Basically, the premiership was always going to get stuffed with such low participation. Although, I am not saying there was collusion in the bidding, but the temptation would have been huge since the mobile operators are the only retailers of the service and really do they care who does the production?

All that is happening is that three groups are arguing how the value chain is broken up. The Content Owner, the Premiership: The Producer and Distributor, BSkyB or TWI, and the Retailer, the Mobile Operators. Obviously, the content company was the huge winner last time (to the tune £100m), now it is someone else’s turn to reap the benefits.

Now it will be interesting to see how Sky plays its’ distribution hand. Importantly, Sky know the potential value of MobileTV because they currently have a heavily promoted service which is taken by Vodafone which packages together several channels, including music + sports. Orange + 3 have taken a different route and have signed up to the MobiTV package. As far as I aware, T-Mobile and O2 have not committed.

What are the chances of o2 + T-Mobile signing up to MobiTV when BSkyB now own all the premiership rights? What do you think Orange + 3 would say if BSkyB insisted that the only way to get premiership action is if they take the full SkyMobile service? Would they drop MobiTV – I think so. The future starts to look a little bleak for MobiTV in the UK Market.

The bundle could get even worse for the mobile operators: what if BSkyB refuse to sell to O2 and Orange because they compete against BSkyB in the broadband market? What if Vodafone decides the route to broadband nirvana is via an exclusive partnership with BSkyB for the consumer sector and in the process gets exclusivity for Sky MobileTV.

Even worse going forward for the other operators – what if BSkyB and Vodafone get together to bid for the spectrum for multicast TV and develop an exclusive service for Vodafone customers?

Things are going to get very interesting in the UK Mobile TV Market.

I also think MobiTV might be best bulking up its’ production capabilities and ties with the content owners, before perhaps a graceful exit to Qualcomm when Qualcomm needs these skills for its’ MediaFlo service in the States. This is something that the GigaOm interview hints at is the end game, which to me means that MobiTV don't really care a lot about the UK market.