Monday, November 27, 2006

Hello, Cellphone? YouTube Calling

Verizon Deal Is Latest to Link Voice, Video Firms

By Yuki Noguchi
Washington Post Staff Writer
Tuesday, November 28, 2006; D01

Internet video service YouTube is going mobile for the first time, launching a television-like channel featuring its most popular videos on Verizon Wireless cellphones.

Verizon Wireless is hoping to parlay YouTube's reputation as the premiere Web site for posting and sharing homemade videos into success for its own mobile-video service by delivering YouTube clips to subscribers of its premium V Cast service starting next month.

The deal, to be announced today, is one of many initiatives in the past two years that try to make the mobile phone a more appealing entertainment device -- and to gin up excitement around mobile video services, for which carriers typically charge at least $15 a month.

The relatively expensive premium for mobile video service has limited its appeal to a small but growing minority, analysts say. Yet what began as an obscure technical experiment has become a bigger test of whether mainstream consumers want portable video enough to pay extra for it.

Three years ago, when Sprint (now Sprint Nextel) launched the first mobile television service on its phones, it looked more like a color slide show than a miniature facsimile of the tube -- and sales of the service were virtually nonexistent. Since then, carriers have sped up their networks, phonemakers have developed devices with bigger, better screens, and people are starting to watch short clips of news, sports and even TV shows on the go.

Although mobile television has made big strides in technology and quality, it remains an open question whether the service will ever become standard the way custom ring tones and text messaging have, said David Joyce, an analyst with Miller Tabak, an investment firm.

"It's not a replacement for regular television viewing; it's a convenience thing," and it's unclear how many people will care enough to pay for that, he said. As monthly bills for various entertainment and communications services stack up, many consumers might start opting out of additional premium services, he said.

The industry has already chalked up one failure. ESPN Mobile, which was launched in January as a premium service offering sports video clips and a television-like experience, announced in September that it would shut down after too few subscribers were willing to pay for the fancy phone and a monthly premium ranging from $35 to $250.

But that hasn't dampened the enthusiasm of carriers and content providers, who announced a flurry of other cellphone-video deals this year.

HBO reformatted entire episodes of shows such as "Sex and the City" and "Curb Your Enthusiasm" for cellphones, while creating made-for-mobile spinoffs of "Entourage" and other shows. Sprint Nextel launched a deal with the National Football League to rebroadcast video highlights of games, as well as a pay-per-view deal to stream full-length movies over the air. Amp'd Mobile, a cellphone service targeting a young, edgy demographic, produces sports and comedy clips, including a political cartoon called "Lil' Bush."

Now, about 2 percent of the country's 220 million cellphone subscribers pay to receive video on their phones, said Roger Entner, an analyst with the research firm Ovum.

Believers in mobile television say much of the market remains untapped.

"There's still a majority of the wireless subscriber base that is still uninformed about mobile TV service; right now, I think the biggest barrier is consumer awareness," said Ray Derenzo, vice president of business development for MobiTV, a subscription service that delivers broadcast television to subscribers of Cingular Wireless and Sprint Nextel.

In the past 18 months, carriers and major media brands have shown keen interest in experimenting with mobile formatting, in part to test the waters to make sure the technology actually works, Derenzo said.

Faster technology is also in the works.

Sprint is experimenting with a speedier transmission technology called WiMax. And Verizon Wireless plans early next year to launch mobile video technology made by Qualcomm that will broadcast video clearer and faster.

Although relatively few phone users view video on their small screens, video is contributing a large part of the $15 billion in annual revenue that carriers are collecting from data services, Entner said. The revenue is why carriers keep casting around for more video services to expand their appeal. "They're trying to fill the channel with more and more -- they need to expand the lineup," he said.

That is the goal for YouTube's mobile service, which will start in early December and create a new video channel for V Cast subscribers. Verizon Wireless launched V Cast in February 2005 with specially produced episodes of soap operas and a one-minute spinoff of the hit TV show "24." While the company does not disclose the number of V Cast subscribers, 20 million Verizon Wireless subscribers now have video-capable phones, a significant number of whom pay $15 a month to access V Cast, said Robin Chan, associate director of marketing for the carrier.

The YouTube deal is exclusive to Verizon Wireless for an unspecified length of time. Wireless phones are already important to YouTube, because many people use them to record and post videos to the site, said Steve Chen, co-founder and chief technology officer of YouTube, which was purchased last month by Google. "We don't want to be restricted to the desktop," Chen added.

Analysts say the pricing of mobile video ultimately will affect its future. Over time, carriers are likely to turn to advertising to subsidize it or will lower prices to about $10 a month to get more people to sign up, Entner said.

"In five years, it will be standard," he predicted.