|The free service is designed to demonstrate the value of the subscription service that costs $12.95 a month.
Called the Digital Music Video Network, the service will provide music videos that can be accessed and played on a cell phone's screen. The service is designed to ultimately sell $12.95-a-month subscriptions to its full offering of video content that ranges from ABC News to professional wrestling to the Gospel Music Television.
'People don't yet understand'
"It's mobile video with training wheels," said Richard E. Bennett, president-CEO of SmartVideo. He said the free network, targeted to the 12- to 25-year-old demographic, is not just an attempt to test the viability of an ad-supported mobile video model, but it's also a key element of his company's marketing strategy to draw new subscribers to his service. "People don't yet understand video on cell phones -- now they can get it in a risk-free way. It will whet their appetite for more," he said.
The company announced its plans the same day Jupitermedia Corp.'s JupiterResearch released a new study that found 44% of online consumers are interested in watching free video on their mobile phones, while only 19% were willing to pay for it, and only 4% said watching video was a priority in purchasing their next cell phone.
According to a May 15 Securities and Exchange Commission filing, SmartVideo, since its launch in January, has had about 16,000 trial users, with only 1,100 currently active. The company has only 900 paying subscribers, with 750 of those described in the documents as "active." The filing said the low subscriber numbers are a result of insufficient funding for marketing, among other issues.
Small potential audience
While those numbers appear small, overall numbers for consumers able to view video on their mobile phones are low. Mobile media experts estimate less than 1 million Americans are able to view TV on their mobile screens. Sprint and Cingular have a combined 700,000 customers, and Verizon Wireless' V Cast has from 30,000 to 40,000. None of those offerings include ad-supported networks, although some of the wireless carriers are believed to be interested in rolling in advertising as an additional revenue source in the near future, executives familiar with the industry said.
Some 11 million consumers -- owning about 200 different models of cell phones with Web access and a Windows Media Player, RealPlayer or other applications -- will be able to get the SmartVideo service without paying their wireless carriers for the content, Mr. Bennett said. The service later will be available on mobile devices running the Symbian or Palm operating systems and bundled with the current generation of media players.
Mr. Bennett said "at least 10 brands" have signed up for the Digital Music Video Network at launch, but he declined to name them.
Ads and overlays
In exchange for the free content, consumers will be required to view the streaming video programming, which will have 15-second ads between videos as well as some ad overlays displayed during the clip. Marketers that sponsor the program will pay for spots on a cost-per-thousand-viewers basis, ranging between $25 and $50 CPM, he said. He said SmartVideo also will provide sponsoring marketers with detailed information on how many subscribers saw the ads, their location by city and state, and the time and day the ads were seen.
Mr. Bennett said he plans to up the company's marketing budget to about $5 million through the end of the year. He said he is in the midst of an agency review with shops from Florida, Los Angeles and New York but declined to name the agencies.
While third-screen content that can draw paying customers is the holy grail of the mobile phone industry, a number of experts doubt mobile video can blossom into a profitable medium anytime soon. "There is little evidence the consumer wants to watch TV on a two inch by three inch mobile phone screen," said Josh Dhaliwal, director of mobile youth for the Wireless World Forum, London. "We've had pocket TVs for 20 years. It is not really a mass-market application."
Seamus McAteer senior analyst at M:Metrics, a mobile research firm, called mobile video "a technology showcase more than anything for a lot of carriers."