Much of the recent debate about the value of mobile network operators (MNOs) has centred on who provides the most influence over the user experience of mobile phone owners. From the perspective of media and content owners, many of the issues we have currently been grappling have arisen from the fact that device manufacturers are continually inventing new ways to distribute digital content. Crucially these often fall outside the realm of the network operators.
Consider the following; 3G is the only way in which the operators can control the way that consumers can access video and media content. However, device manufacturers have created a new range of content distribution mechanisms that fall outside of the realm of network operators.
- Sync-to-device: Where people can plug a device into their PC to share content across their devices. Apple’s iPod and the Sony PSP are great examples of how this functionality is gradually embedding itself into consumer behaviour.
- Bluetooth: More than 30% of UK mobile phones have Bluetooth connectivity, which allows users to download video from Bluetooth ‘nodes’ or share content virally with other people.
- Wi-Fi Connectivity: Although not a common as Bluetooth, handset manufacturers such as Nokia are building Wi-Fi connectivity into mobile phones and media players. As Wi-Fi ‘hotspots’ become more ubiquitous consumers will be able to download video over Broadband to their phone or media player.
- ‘Place-shifting’: Slingbox and Sony Location Free TV allow people to access their TV service at home from anywhere in the world via a portable media player or phone over 3G or Internet connection.
- DVB-H/DAB: A digital TV standard designed for handheld devices. Although mobile network operators will have some part to play in marketing and delivering digital TV to mobile phones, they are reliant on the handset having a digital receiver to display the TV channels and content.
Much of this appears to have seriously eroded the influence of the MNOs in the consumer experience of accessing TV and video content. We often debate about the much trumpeted promise of convergence; however one of the major barriers to it is device manufacturers incorporating Digital Rights Management (DRM) restrictions around content.
Digital Rights Management (DRM) Software
DRM software is hidden alongside downloaded media and restricts unauthorised copying and sharing. For consumers this unwittingly creates a barrier to using authorised content because they can’t enjoy content they have purchased on any device they want. The intention of the device manufacturers who advocate the use of DRM software (Apple’s iTunes is the most obvious example), is that they will own the relationship with the consumer and bypass the MNOs as a result.
This in turn creates two problems for consumers:
- Divergence: Rather than consumers easily transferring content across all their devices i.e. TV to PC to mobile they actually are subjected to a ‘fragmented’ user experience as they have to use different devices and portals, each with their own interfaces.
- Greater Audience Fragmentation: Consumers begin to use non-legitimate sources to get content as they come with no DRM restrictions. The complexity of seeking out new and unrecognised brands and technologies (e.g. BitTorrents) to access them further accentuates the divide between early adopters and the mass audience.
So what should the response from the network operators be? By observing developments in the music industry, which traditionally is the first media industry to be hit by consumer behaviour, it would seem that the music industry is taking control back from the device manufacturers by relaxing DRM restrictions.
EMI’s announcement, at the beginning of April that they will sell music trough iTunes, DRM free, appears to signal the realisation amongst media owners that DRM-restricted content is actually hurting rather than generating revenue. Consumers continue to download content from unauthorised sites and device manufacturers rely on selling DRM-restricted content at low prices to encourage sales of media players.
Will eroding the walled garden wrestle consumers back?
In a rapidly changing landscape it is always difficult to predict how market supply and consumer behaviour around digital media will change. There is no doubt that emerging distribution methods and brands are threatening mobile network operators’ revenues. However, by providing free and open portals for consumers to download content to their phone in any number of ways (whether it be by 3G, Wi-Fi, or ‘side-loading’) will provide more value to consumers and wrestle back control of the user experience.
- A standardised portal where there different content downloaded in different ways is presented to users to allow them to easily access it.
- A transactional system which will encourage media owners to create partnerships with mobile operators and significantly increase the range of content available.
- Taking advantage of the data they have on their customers to create a solid system of measurement, hence increasing the level of ad-funded (and hence free) content.