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Column: Does Text-Message Fever Indicate Burning Desire for Mobile Video?

Could our proclivity to text message be a proxy for our budding interest in mobile video?

Cyriac Roeding thinks so. The former head of CBS Mobile and now the entrepreneur in residence at Kleiner Perkins Caulfield & Byers, one of the most prestigious venture-capital firms in the world, believes the exponential growth in the number of text messages Americans sent in the last four years isn’t just about our desire to schedule booty calls or chit-chat with friends. Our short-message fever suggests we also want to watch video on our phones, he said.

What’s the connection? Well, our love affair with text messages says we’ll use the mobile phone to do more than talk; we’ll use it to text, ergo, we’ll use it to watch video, Mr. Roeding said.

Let’s look at the text-message growth first to understand the underlying usage patterns.

According to the CTIA Wireless Association, about 263 million Americans owned cell phones in 2008, representing an 87% penetration rate into the total population. That’s an increase from 182 million in 2004, then 61% of the population. During that four-year period we’ve gone from sending 4.7 billion texts per month, or about 26 per cell phone user, to 75 billion per month, or about 285 per user.

What does that mean?

“This is a tracking point,” Mr. Roeding said. “It says people are doing more on their phones than just talking on them. The next question is, are they ready to do more than texting and talking?”
Look to the iPhone for the answer.

Apple released its cell phone in 2007 and the “app store” for the phone in 2008. The app store on the phone and in iTunes lets iPhone users buy features for the iPhone, such as a weather tracker, stock tracker or news updates. Some of the applications are free, some come with a fee.

Within the first 150 days or so of its release, the iPhone app store registered 300 million downloads of applications. “That is 100 times the number of downloads for applications per handset compared to the average cell phone,” Mr. Roeding said.

And 100 times is the kind of factor that makes venture capitalists, analysts and others take notice—because it says the iPhone is meeting a previously unmet desire.

“This is not a small increase. It’s a revolution. The iPhone is a game-changer,” Mr. Roeding said.

The interest in iPhone applications also answers the question of whether mobile users will do more than text and talk. They will because they are playing with fun, functional and affordable programs and services on their phones.

Here’s even more evidence: About 37% of iPhone users watch video on their phones, making them 10 times more likely to watch video than the average mobile consumer, Nielsen Mobile reported in 2008.

“This industry has been active for 20 years, and now you have a new entrant and only one and a half years later people are still running into stores to buy it,” Mr. Roeding said. “It tells you there are huge opportunities because consumers are longing for a better experience.”

Sure, the mobile video business faces other hurdles—it needs faster networks, better interactivity with TVs and the ability to easily shoot video from a cell phone.

But the appetite is indeed there.

Comments (4)

Just because people want to communicate with their friends via test doesn't mean they want to watch video.

Many club goers text instead of call because the music is too loud to hear. Why would anyone want to watch a video in a noisy room?

Now if Cyriac Roeding said that mobile video will pick up because text messaging due to business travel is picking up I would believe him.

I can see business travelers using mobile video in transit and in their hotel rooms where it's nice and quiet.

Julie:

I often text my husband because it's easier when we are busy. I have NO desire to watch video on my tiny Blackberry screen. The two do not correlate.

StrategyGuy:

Two important questions for me:
1. What is the business/revenue model? Are we again trading broadcast dollars for digital pennies?
2. How does the OMVC streaming video model sync with the on-demand use of video on the iPhone? Everytime I see a demo, The People's Court is always on...how bad is that?!

Mack Simmons:

Another point that Daisy forgets: The size of the market of phones capable of video viewing in the first place. Smartphones -- BlackBerrys, iPhones and the like -- account for only 10 percent of the cellphone market. Near-smartphones such as the Samsung Rant and LG Rumor account for maybe five percent of the market (if that). Although the size of the segments will grow, it won't be a large segment immediately because of the cost of data service; unless you have one of those phones, you will not pay $30-$109 (depending on a data-only plan or a Sprint-style all-in-one plan) for the privilege of watching video. Nor do most people outside of smartphone/messaging phone clientele are interested in those phones, at least not at the price points of $99 and up.

More importantly, most people currently use phones that aren't capable of 3G usage; since they are on two-year plans, it will take at least another two years before they get their hands on 3G phones. Even then, the lack of desire for full 3G service means that video is an afterthought; even when 3G is desired, the main customers for 3G (business users) aren't interested (or can't get corporate support) for video usage.

This isn't to say there isn't a mobile video market; I use my Sprint TV on my trips since getting my new phones late last year. I'm also a business traveler who spends half my time on the road, so mobile video is a lovely feature. But I also pay for it on my own dime; most consumers, at this moment, won't pay for it at current prices. Only when 3G is available on the lowest-end phones -- and the data plans fall to lower price points -- will there be an appetite for mobile video that can sustain the production costs and reap profits for the producers and distributors.

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