Mobile Video is Booming but No One Makes Money- How Orange Intends to Monetize the Very Small Screen

* This is a guest post by Levi Shapiro

Stephanie HospitalStephanie Hospital, EVP Digital Audience and Advertising Division at Orange, oversees all digital partnerships, services and advertising related to Orange’s 133 million subscribers. We chatted with Stephanie at last month’s DLD Tel Aviv about the future of mobile video.

1) What developments can we expect on the video on mobile market?

The video/TV on mobile market is booming and its strong growth is set to continue. We are seeing a sharp increase in the number of on-demand video views, up from 5.2 billion to 46 billion per year over 3 years in France, the United Kingdom and Spain. In addition, videos viewed on subscription rose from 104 million to 160 million annual downloads in 3 years (Strategy Analytics April 2012).

Mobile video sites have also seen a considerable increase in their audience. In France, audiences went up by 11% from February to July 2012, going up from 10.8 million to 12 million mobile video users (Médiamétrie Mobile July 2012). In the United Kingdom, the video on mobile penetration rate gained nearly 20 points from August 2011 to August 2012, going up from 19% to 38% (comScore GSMA August 2012).

2) What are the reasons for the boom in videos on mobile?

The key factor is the arrival of Smartphones, with screen size and quality generally better than traditional mobile telephones. The penetration rate for Smartphones has boomed. Whereas in 2010 only 20% of the French subscriber base had a Smartphone, we now estimate this market share to be 40% and we anticipate a penetration rate of 75% for the Orange subscriber base in 2015. Moreover, 70% of Smartphone users watch video on their mobile, 13% on a daily basis.

The arrival of tablets will further intensify this phenomenon. Launched at the beginning of 2010, the infatuation with tablets is unprecedented: sales from 2010 to 2011 wentup from 17 million to 65 million units sold, and are likely to record very strong increases in 2012 and in the years to come (Idate forecasts a total of 300 units to be sold in 2016).We estimate that viewing videos is the 3rd most popular use of tablets after Internet access and reading e-mails. Thus more than 1 out of every 2 tablet users watches videos at least once a week (against 1 out of 3 mobile

Thanks to this new equipment, watching videos on mobile devices has more than quadrupled in the space of a year: in January 2012, more than 27 million videos were viewed on these devices, against 6 million the previous year (2012 internal Orange data). We should certainly mention other development drivers, including changes in operator pricing, with data packages becoming more widespread and encouraging greater video consumption. The increase in mobile data rates, which is set to continue with the development of 4th generation (LTE) networks is also a driver.

Changes in the content offering are also playing a part, in particular the development, by television channels, of applications that give users direct access to live content or by catch-up as well as bonuses and additional services without an additional subscription.

Lastly, the development of social networking sites, community video platforms and the phenomena of viral consumption that they promote are also making a strong contribution to the development of mobile video uses.

3) What are the new developments in the mobile video market?

In general, we have never watched as much video on the move as we do today. We see in particular a steady development in multitasking uses: viewers watch video on their mobile devices at the same time as they do on the TV.

In terms of service offering, apart from general-interest video-on-demand platforms financed by advertising, we are seeing the rapid development of alternative models for watching TV or video: catch-up or live TV and payable video on demand, particularly by subscription (SVOD).

Boosted by these new services, revenues are also starting to take off. In particular, advertising revenues are likely to increase significantly for TV and mobile video services. We therefore foresee that advertising expenditure on mobile video in France will double each year over the 2011-2015 period, going up from €0.2m to more than €7m. At the European level, anticipated growth is even higher: from €2.6m to €78m (FirstPartner – Nov 2011).

4) What is Orange’s position?

Over and above the development of data service offerings, Orange is strongly supporting the development of video uses. We have two key assets for that:

– A strong content offering with services preloaded on our devices, a powerful mobile portal viewed by nearly 6 million customers every month and a very well-positioned applications offering rated in the various app stores (Orange TV, French football Ligue 1 application, etc.)

– Orange TV, boasting the 2nd largest offering of on-demand channels as an access provider, currently with more than 4.7 million subscribers in France

– Dailymotion is the 10th most popular mobile website in France and the 6th on the iPad (Médiamétrie, August 2012). The number of videos viewed from mobiles and tablets has tripled in the last year and represents an increasingly significant share of the audience. In terms of advertising revenues, the market is also beginning to take off and we are very hopeful for this year. We are also positioning ourselves in social TV. Launched in July 2011, TVcheck is a free application that offers a “gamification” of the TV experience. It allows users to interact around TV content, in a framework that offers social functionalities such as comments, recommendations or status updates. The connection between the application and the broadcast program is based on a system of visual recognition, so the user just points their Smartphone at the TV screen for the program to be identified.

We have also developed an Orange TV Program application, an interactive guide that allows subscribers to view TV schedules fora wide selection of channels, enhanced by web services and content, as well as to follow and send tweets live to the TV program of their choice.

5)In your opinion, what are the next trends to follow?

Multi-screen uses represent a major focus, whether it involves multi-tasking or methods for using the same content across devices. It will become increasingly easy to start watching a program on your tablet and continue watching it on the TV in your lounge. To enable the development of these practices, control of over-the-top assets such as Dailymotion (the YouTube rival acquired by France Telecom in June) is key.

The social experience and content recommendation represent building blocks for changes in practices and financial models. In the TV experience, content itself will remain at the heart of the Value Promise. However, the value is gradually incorporating the interactive, social and community experience that goes with their use. This is why TV/video offerings, in their mobile versions, are including more and more social functionalities: recommendations, gamification, comments, Bonus program, etc.

This content socialization gathers users in front of the screen and gives advertisers a huge potential for multi-screen campaigns. Furthermore, thanks to social networks, the collective experience around the TV is reborn. Even remotely and on the move, we still gather around the big screen as we used to do in the past.

* Levi Shapiro  is a Professor in the Media Innovation Lab at IDC and Partner at TMT Strategic Advisors He works with media and technology companies from Tokyo to Tel Aviv and is a regular columnist at the Jerusalem Post.

Eze Vidra
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Eze Vidra

Startup investor and advisor at Techbikers
Eze is startup investor and advisor. Until recently he was a General Partner at Google Ventures Europe. Before joining GV, Eze started Campus London, Google's first physical hub for startups, and led Google for Entrepreneurs in Europe. He's an experienced product manager and startup mentor. In 2012 Eze founded Techbikers, a non-for profit supporting children education in developing countries.
Eze Vidra
Follow me

Eze Vidra

Eze is startup investor and advisor. Until recently he was a General Partner at Google Ventures Europe. Before joining GV, Eze started Campus London, Google's first physical hub for startups, and led Google for Entrepreneurs in Europe. He's an experienced product manager and startup mentor. In 2012 Eze founded Techbikers, a non-for profit supporting children education in developing countries.