November 29, 2006 4:00 AM PST
Verizon Wireless revs up mobile video
The telecommunications giant announced Wednesday that starting in early December it will offer content from the video-sharing Web site Revver, a YouTube competitor that allows users to upload and share videos, as part of its V Cast video service. The deal came a day after the wireless operator, jointly owned by Verizon Communications and the European giant Vodafone, announced that it would offer clips from video heavyweight YouTube.
At the heart of Verizon Wireless' newfound enthusiasm for hip video-sharing sites is a big need to entice its 57 million subscribers into spending an additional $15 per month for its mobile-video services, which would help make big investments in so-called next-generation high-speed networks (also known as 3G networks) pay off.
Verizon Wireless and other big mobile operators like Sprint Nextel have spent billions of dollars building these networks, and now they need to generate revenue through new services such as paid video. Certainly, these 3G networks are also ideal for carrying other data services such as mobile e-mail. But using them to deliver music and video wirelessly is a much sexier concept to sell to consumers. The hope, of course, is that user-generated videos will help goose what has so far been lackluster demand.
"Watching video on a mobile phone is still a niche application," said Jill Aldort, a senior analyst with Yankee Group. "It's still too expensive. I don't think we are at a point in the market right now where users find it compelling enough to spend $15 more a month on 24/7 video."
According to IDC, only 6.9 million, or 3 percent, out of 230 million mobile-phone subscribers in the U.S. are expected to view video on a mobile device by the end of 2006. And even though that number is expected to grow, analysts don't believe mobile TV watching will hit the mainstream anytime soon. By 2010, IDC predicts that only 9 percent of cell phone subscribers in the U.S. will tune in to TV on their mobile phones.
By contrast, roughly 46 percent of subscribers sent or received a text message via SMS in the past three months, according to IDC. That figure has nearly doubled in the past two years.
Like the deal with YouTube announced on Tuesday, Verizon Wireless doesn't plan to make the entire catalog of videos on Revver available to its V Cast customers. Instead, only a subset of Revver's videos will be available. Revver editors will select video clips each week to be used on the V Cast service. As it does with YouTube, Verizon Wireless will have a period of exclusivity as the U.S. mobile distribution partner for Revver.
Revver differs from YouTube and other video Web sites because it actually allows content creators to share in the revenue generated by airing advertisements along with the videos. The company plans to extend its revenue-sharing relationship with content creators on the mobile platform, too. But because V Cast does not include advertising, Revver will share the fees Verizon Wireless pays for access to the content with the video creators.
When the new V Cast YouTube and Revver channels are launched in December, they will initially allow subscribers to view video clips. Down the road, the company expects to let users upload videos directly from their phones to the YouTube and Revver sites.
The addition of the YouTube and Revver content to V Cast adds another dimension to the service that launched in the spring of 2005. Initially, Verizon offered video clips from major TV networks such as NBC. Then it added video clips from cable stations such as Comedy Central. Now it is offering content from popular Web sites.
"Short-form video suits mobile," said Robin Chan, associate director of entertainment programming for Verizon Wireless. "There is also synergy between broadband consumption and watching video on mobile phones. And we view this as a new form of entertainment that we can make available to our subscribers."