Mobile TV Value chain

Few Telcoflash issue back, I wrote that operators should remain away from the content market. It was a wise advice to companies that are not in the content production and distribution, with no expertise at all in this highly sophisticated market. I think it is useful to report here also another point of view provided by Pyramid Research. Starting from a basic point that consumers could be potentially willing to pay $10 per month for mobile TV subscription, and assessing the content itself costs about $5-$6 per subscriber, it remains $4-$5 per month and per subscriber to pay distribution expenses, network expenses and any other related costs, as well as margins for any intermediary company. So the idea is the less they are in the value chain, the best for players. We can easily understand that any additional player would have a significant impact on other players' margin, given the tiny amount of money to share.

The typical mobile TV value chain include five functions: creator, producer, aggregator, broadcaster and mobile operator. It is attractive for a mobile operator to overtake one or several functions upstream. KPN has recently purchased Nozema Services, a company that specializes in providing technical services to broadcasters. 3Italy has also bought a regional Italian TV broadcaster; Canale 7, expecting to develop their own TV programming, driving down their content costs and allowing their content to be resold to other operators. Is such tactical move risky? It is difficult to say now. But it is difficult to gain experience on a market. Everything will depend on speed on moving on the experience curve, the competition aggressiveness (promised to be fierce everywhere) and a solid cash pile.