INTRODUCTION

1In Europe the development of digital television is probably the most significant and complex structural innovation of recent times. The importance of digital TV is now widely acknowledged (Richeri, 1999; Pagani, 2000; Fernandez Alonso & De Moragas, 2008) as its main original advantages: multiplication of the available television channels with equal usage of the spectrum; better technical quality of audio and video transmissions; and the possibility of combining the telephone and television networks to transform the television set, using if necessary a set‐top box, into a terminal for access to Internet services. In the perspective of this chapter, these features are even more relevant: the opportunity of introducing television scheduling interactivity not just to offer viewers the possibility of taking part in real time in the programs, but also to allow them to personalize the information and, more in general, the television content; and the opportunity to make the television set mobile. The switchover from analogue to digital terrestrial television by the end of 2012, as decided by the European Commission (COM, 2005, p. 129) is now a key issue on the agenda of almost all European governments because digital signal compression technologies will free up spectrum resources and optimize spectrum use. One of the possible reuse of frequencies is mobile television: for instance in Finland a multiplex has been exclusively allocated for mobile use.

2Nowadays mobile television is a debated issue: it means the opportunity to view traditional television and interactive programs directly on the client’s own mobile handset. Besides enriching the content experience for the end-users, mobile television offers business opportunities as well: from a cost-efficient way of delivering data for mobile operators to a new way of reaching audience, while they are on the move, for broadcasters.

3A second relevant change in the television industry is the audience fragmentation: a general perception is that our society is moving towards an individual watching culture. People have also aspirations for interaction with television.

4Italian vibrant mobile market is supported by a large part of the population receptive to new technologies. The popularity of multiple-SIM use has led to a mobile penetration rate far above the European average. As a result Italian mobile market is an interesting case study.

METHOD

5Mobile television has not been studied in depth, due first of all to its novelty. The nature of this research is therefore exploratory and supported by the case study method. From the wide variety of possible research strategies, the case study approach is, on this occasion, very useful because the research question is exploratory and the questions asked concern the "how" in a context of contemporary events and behaviors that cannot be manipulated (Albarran et al., 2005, p. 556). The Italian industry and in particular the commercial broadcaster Mediaset were selected for two reasons: the first one is that Italy is one of the most developed telecommunication industry with high penetration of mobile subscribers - Italy has 90.341 million mobile subscribers in 2009 (ITU, 2010) - and the second one is that Mediaset is leader in the Italian television industry as also far-sighted company, able to fully exploit its strengths (Balbi et Prario, 2009). To analyze this case study, the authors collected primary and secondary data. Information about Mediaset Group was derived from a variety of sources like company press releases and presentations, company annual reports and research reports on industry and company developments. The case study method is therefore ideal for capturing and tracking the value chain and business models of the operators involved in the current transitional digital media landscape. Indeed, the authors have interviewed some operators involved in the launch and commercialization of mobile television in Italy with the aim of providing direct evidence or proof to underpin the discussion. It is important to note that the selected case study does not have the pretension of being used for generalization but simply present a first attempt at understanding the role of telecommunications operators and the interplay between telecommunications operators and broadcasters in the launch of mobile television services.

6The article is structured in two sections: in the first one it describes the meaning of mobile television, its opportunities and its limitations and in the second one, it examines the case study of Mediaset Group, presenting if and how the advent of mobile TV has changed its business models, its value chain and strategy.

THE MEANING OF MOBILE TELEVISION AND ITS MAIN FEATURES

7Media development can be characterised as a socio-technical phenomenon, where people, technologies and institutions together influence the development. Over the last ten years, digital technology has encouraged a rapid growth in the personal consumption of media. The advent of personal video recorders (PVRs), video on demand (VoD) and the multiplication of programs offerings have enabled viewers to personalise the content that they want to watch. What’s more interactivity allows viewers to directly express their preferences to broadcasters. As part of this trend, and alongside the growth of mobile telephony, «the place of viewing is no longer limited to the television receiver at home, or in a vehicle, but is widened to allow personalised viewing of television by individuals wherever they are located» (Digitag 2005, p. 3). Mobile television means the opportunity to view traditional television and interactive programs directly on one’s own mobile. The interactivity is an essential feature of "broadcasting on the move”, because this new TV model is closely related to the telephone, the pre-eminently interactive communication medium. Mobile television can be defined as the possibility of watching television programs on a handheld device and «on the move» – on public transport, waiting for an appointment or while at work. It includes live and time-shifted TV. It is therefore broader than broadcasting alone (European Commission, Memo 07/298). This second definition underlines the fact that through mobile TV you can access not only to linear programs (diffusive programs), but to not linear programs, that means interactive services, too.

8The idea of watching television while on the move and not at home is not new. As well illustrated by Trefzger (2005), in 1982 Sony introduced its first portable television, the Watchman, but, unlike its music peer, the Sony Walkman, it had not much success. The failure of the Watchman could be traced back to several reasons, like its dimensions (nearly 20 cm high and 9 cm wide), its screen (tiny) and its battery power (too low) (Günthör, 2005). But today the story seems to have changed. Consumers are using their mobile phones for multimedia—not just for communication, but also for entertainment (with streamed video, music and games), and for news and information services. With your mobile you can do a whole range of things: calling, sending and receiving messages and e-mails, managing appointments and addresses, taking photos, listening to music, listening to the radio, playing games and watching short video clips. Now it seems to be the turn of television. Today, television and the mobile are facilities that most people cannot imagine living without. As reported by studies on media consumption in different countries, more than any other medium television determines the daily life of many people and is the most consumed medium (Cola & Prario, 2009; CENSIS, 2008). As the mobile phone is not used solely for communication via voice or SMS anymore, but also for entertainment and information, it appears feasible to use this companion to receive TV while not at home or in front of a large TV screen as well. Hence, mobile television will extend the hours of television viewing to parts of the day when viewers are not at home.

9From the point of view of a broadcaster offering mobile television represents an opportunity and a new way to collect revenues. But, at the same time, offering mobile television services to the customer requires several different core competencies that cannot be easily provided by a single company (Pyramid Research, 2005). As suggested by the term «mobile television», two different industries are converging: the mobile industry and the broadcasting industry. The coming together of these two industries is evidence of the convergence between the telecommunications, media and information technology sectors. Convergence is not just about technology, as illustrated in the Green Paper of the European Commission (1997), but about services and new ways of doing business and interacting with society.

10To better understand who the new operators involved in the development of mobile television are, it is useful to illustrate the value chain for mobile television. According to Chan-Olmsted & Kang (2003), the concept of value chain is closely related to the issue of the business model, because the former scrutinizes the value added to a product or service in each stage of its acquisition, transformation, management, marketing and sales, and distribution. In essence, the value chain represents a systematic approach to analyzing an industry by segmenting the market activities that add different values to the final product. Media economics tries to define the value chain of this new service, but, as in other cases, nowadays there are many suggestions for possible value chains (Booz Allen & Hamilton, 2005; visiongain, 2004; Digitag 2005; Trefzger, 2005), presenting some common features but significant differences, too. Summarizing, we can say that apart from the «billing» function (see figure 1), it looks like the value chain of «a multi-channel and multi-service television platform» (Prario, 2005; Andersen Consulting, 2002).

11As illustrated by Trefzger (2005) and Prario (2007) content provisioning, the task of content providers, relates to content production and distribution. Content providers do not necessarily create all content themselves; they also buy or subcontract content from content producers and act as agents for content owners (Andersen Consulting, 2002; visiongain, 2004). Indeed, ever more involved in the production of interactive contents, they have to supply these new services to consumers.

12Packaging, the task of content aggregators, relates to the selection and packaging of content from different sources into convenient and attractive bundles and to the selling of these to service operators, directly to consumers or other third parties. As observed by Trefzger (2005, pp. 37-39), content aggregators distribute the content through various channels depending on their distribution rights. A TV broadcaster is a content aggregator in the traditional TV environment and could also perform this activity in the mobile television value chain (visiongain, 2004, p. 141).

13Transmission, the task of mobile network operators, relates to the diffusion of content. Networks transmit data across their infrastructure and are responsible for the development, the maintenance and the operations of their transmission infrastructure.

14These three activities are in common with the broadcaster’s value chain. The billing function is a new one and typical of telecommunication value chain. The payment agents are responsible for billing customers for mobile services and collecting the money.

15In some cases, as in the Italian industry, there are some vertical integrated broadcasters that manage all the activities. As we will see later Mediaset is one of these broadcasters.

Business models for mobile television services

16Before illustrating Mediaset case, it is important to look at another correlated issue: the business model. When offering a mobile television service, the companies involved – mainly the mobile operators and TV broadcasters – must evaluate and decide how to earn money from the service. First of all, they have to decide if the service should be supplied for free or if the user should pay for it. Booz Allen & Hamilton (2005) distinguish three business models for mobile television: free television, pay television and VoD (see figure 2).

17As illustrated in figure 2, the free TV model is entirely financed through advertising. All the revenues go to the TV broadcasters, but only if advertisers want to pay the content/service providers for the additional viewers generated by mobile television. Furthermore, the mobile phone as an interactive and widely used medium offers new and different forms of advertising, which can especially help to reach the younger audience. Mobile marketing campaigns include services such as quizzes, opt-in alerts, contests, voting, and customized ringtones (Gibler, 2004, p. 3). Mobile television can unify the traditional and the new medium in itself by enabling the combination of the classical TV spot with interactive elements from the mobile channel in one viewing device.

Source: Booz Allen & Hamilton, 2005.

18It is also relevant to observe that users usually watch traditional TV programs less than new content formats created ad hoc for the handheld with the attribute of short duration, which means that advertising in commercial breaks lasting many minutes will not be suitable. However, programs would be well-suited to sponsoring using an interstitial image of the sponsoring brand; it could be shown at the beginning and/or at the end of the program and optionally include further interactive elements (Trefzger, 2005, p. 53). A model suggested by Nokia and represented by Trefzger would have users pay less for their data services when they allow advertisements to be displayed on their mobile phone (visiongain, 2004, p. 162). This model could be applied to mobile television, perhaps combined with a monthly subscription. “It would then give price-sensitive users the opportunity to save on the monthly fee by accepting advertisements” (Trefzger, 2005, p. 53). Indeed, in Italy the most suitable business model is the freemium model, based on services combining free use and use fee (Osservatorio New TV & Media (2009).

19The pay-TV model includes two methods of payment: a monthly subscription or a pay per view (PPV) model, depending on time spent viewing, volume of downloaded data and type of content/services. Generally, to access specific content and services, the consumer has to subscribe, mainly on a monthly basis. Most pay-TV offers today sell their services for a monthly subscription fee, which often includes a package of channels, but also allows access to additional TV content via pay per view. The subscription model is already adopted by some mobile operators for their mobile television offerings. Often thematic programs are organized into packages (bundles) whose price is less than the sum of the single programs. “Bundling is a profitable and attractive way of offering e.g. two products to customers who were only willing to pay a smaller incremental price for the second product compared to the stand-alone price” (Trefzger, 2005, p. 50).

20Pay per view is a form of payment for consumption, linked to a single event or service directly requested by the user or transmitted in near video on demand. Often this form of payment gives access to programs and services not available free to air, the so-called premium contents (like football matches, live concerts and events).

21For mobile television this means that the user only gets charged for the actual usage of the mobile television service, either based on the time spent viewing a program, or the data-volume transferred during a TV-session or a single event, such as a football match that is watched or a news-clip that is downloaded. People consuming mobile television only occasionally, or using the new service for the first time, will incline toward the payment by consumed time because it is more economical than a monthly fee.

22The third business model applicable to mobile television is video on demand: consumers watch a program or accessing a service when they prefer. They must have access to the portal where the content is organized and this accessibility has a price. In the portal there are not only different services, like TV programs, videos or films that can be downloaded, but also interactive services. There may also be combinations of these models (e.g. a hybrid model which includes a subscription-based service with commercials).

The importance of interactivity

23Interactivity was one of the major buzzwords of the 1990s. Since then, the academic discourse has produced a large number of different theoretical definitions and concepts of «interactivity» (Kiousis, 2002; McMillan, 2002). In everyday life «interactivity» still remains a label put on all kinds of aspects of online communication and digital media. Interactive and interactivity are used to describe a wide array of different phenomena in everyday life.

24An extensive body of literature exists about interactivity in human communication. Much of this literature grows out of a sociological tradition. For example, Jensen (1998: 188) suggested that, from the sociological perspective, interactivity is «the relationship between two or more people who, in a given situation, mutually, adapt their behavior and actions to each other». Other researchers examine interaction of human beings with computer. This literature grows out of the computer science tradition and focuses on improving the interface of computer hardware and software. Only in the past 10 to 15 years scholars in the mass communication tradition have begun to examine the nature of interactivity. Rafaeli was one of the early investigators of interactivity in the mass media context and in particular in a 1990 study he examined interactivity in the context of traditional media. However, much of this work has focused on computer-mediated environments. What is evident is that interactivity is not a monolithic concept. In the scientific literature there are numerous definitions of interactivity but very few attempts to establish interactivity as a theoretical concept. Strictly speaking in the television industry, in the era of media convergence, old and new media collide and great attention is paid to the two-way relationship between media and customers. Indeed, in the last decade most broadcasters have been transforming into multi-channel and multi-services companies whose supply is characterized by interactivity and have been diagonally integrated, for example entering in the internet industry. Interactivity may impact the relationship with viewers and it is well known that television market is characterized by the presence of two distinct sides whose benefits from interacting through a common platform (Rochet & Tirole, 2002).

25The definition of «interactive television» is not unequivocal. The term «interactivity» denotes the possibility that the subjects of a communication interact with each other. Technically speaking, interactivity implies a return channel from the user to the information source that can transmit in the form of «bits» of data the choices and the reaction of the user (input). As a rule, we can distinguish between symmetric interactivity and asymmetric interactivity: in symmetric interactive systems the flow of information is transmitted equally in both directions, as for example in videoconference and chat; in asymmetric interactive systems, the flow of information is preponderant in the direction sender-receiver, as for example television services on demand and databank consultation.

26It is possible to classify interactive services in another way, referring to their link with the television programming. In fact there are interactive services linked to the programming (enhanced TV), which allow the viewers to receive information (through the electronic programme guide) on the real time and weekly programming as well as to choose the different angles of sport events or televote, and the interactive services which are independent from the television programming (the so called transitive services, like t-commerce) that allow to shop, play, bet and administrate the own finance.

27All these aspects are valid for all new forms of television, like IPTV (Internet Protocol Television), Web TV and also Mobile TV, that can be defined as “the transmission of traditional and on-demand audiovisual content to a mobile device”.

28To conclude, we can state that the interactivity is an essential feature of «broadcasting on the move», because this new TV model is closely related to the telephone, the pre-eminently interactive communication medium. This means that broadcaster can trust on new financing sources, in this case deriving from interactive services. This paper aims to illustrate that the launch of mobile TV represents a new business issue for traditional broadcasters to diversify their activities and revenues models. With an empirical investigation of the Italian context, the ambition of the article is to point out not only the innovative aspects but the most critic characteristic that the advent of mobile television implies.

THE CASE OF MEDIASET GROUP

29In the last thirty years the television sector in general, and the Italian one in particular, has experienced a series of radical changes including the birth of commercial networks that ended the government monopoly in the mid 1970s, the advent of pay TV in the 1990s and the launch of digital terrestrial TV and mobile TV in the early years of this century. One television company that has managed to keep abreast with the times and successfully adapt to the ever changing scenario is Fininvest/Mediaset, now the indisputable leader in the Italian television and media market (Colapinto & Prario, 2009). Our interest in studying Mediaset stems from the pivotal role the company plays in the Italian television and media sector. Indeed, Mediaset is the leading Italian media enterprise with 3.882,9 millions of Euros of consolidated revenues in 2009. Its core business is commercial television but, as we will see, in recent years it has continued to branch out and expand its business, setting its sights first on the internet, then on digital terrestrial TV and, finally, on mobile TV (the so-called portfolio strategy).

30It is worth mentioning that Mediaset Group controls="true" also Telecinco, which plays a fundamental role in relation to Mobile television in Spain, thanks to its ongoing experimentation accomplished and still in progress with the leading mobile telephone operators in the main Spanish cities. Mobile television is a niche strategy adopted by the group as a whole. In this paper we focus only on the Italian activities. As a result, before analyzing the strategies adopted by Mediaset and consider in which way mobile television represents an opportunity, it is opportune to describe the Italian television market.

Italian television industry

31As recently illustrated by Colapinto and Prario (2009), Italy shows the same dynamics that characterize the evolution of the audiovisual sector in Europe and worldwide: the past year has seen a further consolidation of the weight of pay TV vs. the total amount of sector resources, a strengthening of the new digital platforms (satellite and terrestrial) to the detriment of analogue TV1^, and an increase in the competitive pressure determined by a transflow process by which traditionally free television channels enter the pay TV sector and growing shares of advertising market are acquired by pay TV operators. Since 2007 advertising revenues were below the threshold of 50 % of the total TV sector revenues, while the growth of pay TV continues (+ 7.2 %). The overall revenues of the television industry were a little more than 8.6 billion Euros (AGCOM, 2010). The Italian television industry structure has different features from the other main European countries. The first one refers to the concentration of the industry. More than 90 % of the industry is controlled by three broadcasters, namely the public broadcaster RAI (31.7 %), the commercial one, Mediaset (RTI) (29.2 %) and Sky Italia (31.5 %). The second one is that television frequencies are occupied mainly by RAI and RTI-Mediaset with respectively 29 % and 22 %, followed by Telecom Italia Media (5 %) and hundreds of local broadcasters (Richeri, 2008: 193). If we consider the audience of the Italian television industry we can see that nowadays RAI and Mediaset are still watched by respectively 41.4 % and 39.2 (AGCOM, 2010). Cause the characteristic of the television industry Mediaset adopted in recent years a strategy of diversification and integration, mainly vertical integration. Apart from economic issues, the firm extends its activities along all the value chain to have a major control on the television industry. At least, because of the demand and the audience fragmentation and the saturation of the advertising as financing source, it decided to enter into new business market, in particular into the mobile television. Mediaset is exploiting multi-channelling and its dynamic capabilities to answer at the changing and competitive environment.

32In the Italian mobile television market, mobile telephone operators offer 3G television services (H3G, Telecom Italia and Vodafone Omnitel). H3G and Vodafone also offer personal mobile television services (using the DVB-H technology). While the Vodafone Sky TV Pass service provides access to some Sky package channels, H3G provides Sky channels as well as the Soccer Premium channels of the Mediaset package.

33In 2009 Italian mobile media market accounted for 290 million of Euros: 90 % of revenues derive from premium content, whilst advertising has a negligible role by now. In details, the most required services are infotainment (72 %) and television content/VoD (24 %) according to Osservatorio New TV & Media (2009).

Mediaset Group and mobile television

34In 2006 Mediaset launched Europe’s first Mobile TV service, the first commercial digital terrestrial TV in the world using DVB-H technology (Digital Video Broadcast Handheld). In particular, an agreement was reached with TIM (Telecom Italia Mobile) – the leading Italian mobile telecom operator -for the transport of content in TIM’s package over the DVB-H network run by Elettronica Industriale (controlled by Mediaset Group), the supply of the schedules of RTI (Canale 5, Italia 1 and Retequattro), the supply of PPV sports content from Mediaset Premium’s offer (Serie A and the Champions League).

35A second agreement was reached with the telecom operator 3 Italia/H3G, concerning the simulcast supply of ‘best of’from the generalist channels (Canale 5, Italia 1 and Retequattro), the soccer matches form the Serie A championship and the free digital terrestrial children’s channel, Boing.

36All these agreements are not exclusive and the new mobile digital platform offered by Mediaset is open to all operators in the system. Mediaset signed a third deal with Vodafone Italia concerning the use of Mediaset's multiplex DVB-H capacity for a period of five years, with an option on a further five years; in exchange, Vodafone Italia will make its technology and broadcast infrastructure available in order to complete the network. From the content side, once again in 2006, Vodafone Italia and SKY (the Italian satellite operator) launched Vodafone SKY TV, the mobile digital television (DVB-H) created to offer the best SKY programmes on Vodafone handsets.

Source: own elaboration on Mediaset and other Tlc and TV market data

37Mediaset operates as both content provider and network operator, thanks to the development of its own DVB-H transmission network, used by the leading mobile phone operators. Mediaset Group has indeed obtained from the competent authorities the licence of network operator for digital multiplexes on terrestrial frequencies and has stipulated agreements in relation to the DVB-H technology-based broadcasting capacity offering2. As a result, it is not only a content provider -Mediaset channels are available to all mobile network operators (TIM, Vodafone and 3 Italia) -, but it managed the transmission, too. More precisely, Mediaset owns the frequency and operates the network: for example, referring to TIM, DVB-H gap fillers hosted on TIM towers, covered 75 % of the population by the end of 2006. As Marco Bosetti, Business Affairs manager of Mediaset, said, «the role of Mediaset in the launch of mobile television services was increasingly significant …. It had come to an agreement with TIM and Vodafone for using our network…»

38Mobile TV should be seen as an additional platform for the distribution of television content in innovative media environment and allows Mediaset to exploit economies of scales. Mediaset Premium, its pay TV service, is available on different platforms: it can be received on D-VBH mobile phones as part of the packages offered by TIM and H3G.

39Launched on the digital terrestrial platform by Mediaset in 2005, Mediaset Premium is a pay-TV service that is accessed by a pre-paid card. The model works, like the pre-paid offer of mobile phone operators, with a card equipped with a microchip (the so-called «smart card») that holds in its memory the credit available with which the viewers can select what they want to watch. In order to ensure the maximum flexibility for users, cards can be recharged with any of a range of six amounts, from €10 to €100. This new approach has allowed Mediaset Premium to combine in the same package the advantages of both the pay-per-view model and the pre-paid formula.

40The Italian mobile television market is characterized by the pay TV business model (see table 1), and uses as a driver premium content (PPV offer). Mediaset has no direct contact with end users.

41If we consider the revenues of Mediaset we can highlight (see figure 4) that in the last years advertising revenues declined in favour of other revenues and in particular of interactive revenues and payments, like for mobile television services.

Source: Mediaset Group, 2009.

42This trend is also evident if we consider the four Italian operating segments: free to air TV, Pay per view (Mediaset Premium), Network Operator (Elettronica Industriale) and other operations (this segment includes service selling and content providing to mobile telephone companies). PPV experiences a good performance and the last segment shows a positive trend for Mobile TV.

CONCLUSIONS

43In the last decade new models for content consumption (e.g. on-demand services and catch up TV) emerged, as a result some TV players are proactive in creating cross-platform synergies, in order to exploit their expertise and brand across a multitude of platforms, thus increasing their profits. Indeed, mobile TV represents an additional platform for the diffusion of television content in a context characterized by an increasingly requests TV access at anytime and anywhere. Mediaset Group is in the forefront in a sector that is eliciting great interest, showing that Mobile TV tends to complement traditional television in terms of the way in which it is consumed (on the move, during leisure time, before or after work).

44Mediaset is a fully integrated media company and thanks to its broadcasting capacity, it also transports third party channels, offers premium content in pay-per-view format and has begun DVB-H technology based broadcasting for Mobile TV.

45Innovation has modified Mediaset business model. In the last years, from its core business (free to air television) Mediaset Group indeed developed its activity in the pay TV offer, both digital terrestrial television and mobile television,

46From the technological point of view, the choice of adopting the DVB-H technology (and not the other mobile communication technologies, 3G or UMTS) to support Mobile TV depends on two features:

• the capacity of transmitting high-quality broadcast video content at a reasonable price for the user, regardless of the number of simultaneous users

• the availability of a return channel.

47From a strategic point of view, thanks to long-term agreements, Mediaset has strongly focused on this sector in order to offer broadcasting capacity and contents to Italy’s leading mobile phone operators (H3G, Vodafone and TIM). The setting of this industry will be further modified by the 2012 expected switch-off and the consequent assignment (based on beauty contest method) of multiplexes for DVB-H services.