@ Digital Hollywood: How smartphones define us, why video hasn't taken off

SANTA MONICA, CALIF. – Few, if any, technologies have taken off as quickly as smartphones have in the United States and it’s changing the American lifestyle in the process. At the end of 2008, the U.S. market had a smartphone penetration rate of 15%; it’s currently at 24% and The Nielsen Co. is predicting we’ll see a 49% adoption rate by the end of 2011.
Lucy Hood, a former Fox Mobile executive and now executive director at University of Southern California’s Institute for Communications, Technology and Management, said that while the devices and connection speeds have changed, usage patterns have not been disrupted. As a whole, smartphones are primarily used to communicate first, seek information second and entertain as a tertiary function, she said.
In the latest study conducted by the USC think tank, it found that mobile video consumption is still woefully underused. Even more discouraging than the level of use, according to Hood, is the reason why mobile TV and video has failed to live up to the hype: it’s still a poor experience for most users.
“My behavior has clearly changed in terms of how dependant I am. It’s like a pacifier for me,” Brandon Lucas, VP and GM of mobile at Black Entertainment Television, said referring to his device. “People are living their lives on their devices today… It’s really your lifeline for some reason.”
While those are all good signs for media consumption, there are some potentially negative side effects, he added. “It’s exacerbating this (attention deficit disorder) condition” that feeds off being inundated with multiple inputs at the same time, he continued.
Getting back to the disappointing performance of mobile video, Lucas defined distribution rights as the biggest challenge media companies still face in the mobile world. You can be sure though, if these large companies saw enough reason to secure mobile rights on their own, it would already be done. The bread-and-butter business for BET and its counterparts is still in broadcast television and cable – there’s no sign or reason to think that will change anytime soon.
The problem, however, is that most smartphone users are hungry for more content and much of that opportunity is being left on the table. According to Lucas, when BET surveyed its iPhone users and asked what content they want most, the response was clear: music videos and full episodic shows.
Taking the carrier perspective, Jennifer Byrne, director of business development at Verizon, said user behavior has remained the same, regardless of the content and exclusive deals the nation’s largest carrier has inked over the last few years. Indeed, Verizon Wireless could be pointed to as the most bullish of all the carriers on the content side of the coin. The fact that Byrne admits premium content services haven’t taken off in kind says a great deal about what the majority of Verizon’s subscribers want from their smartphones.
Data use sure isn’t declining, so what’s eating up all those bytes?
“We’ve seen a seven- or eight-times amount of data usage since we launched the Droid,” Byrne said. “It spiked at a rate we never anticipated.”
With some data to back her up, Byrne believes the top mobile video category will be self expression and user-generated content, particularly once two-way video gets its legs.
Social networking and microblogging services like Facebook, Twitter and Foursquare consistently maintain the lead positions on every app store, she added. “My hope is that companies like Facebook will innovate on mobile like they are online” so that when Verizon Wireless sells a smartphone, there’s a clear reason why a customer would buy such a device and pay for a data plan.
Lucas agreed, adding that it’s most important to focus on what has meaning to people. “Our demographic dreams about being famous,” he said. “We think the trend toward self expression on social networks is only going to grow.”
But in terms of driving revenues for the time being, Lucas said, there are three monetization models that mobile content providers can pursue: licensing deals (like VCast), premium models where customers pay directly for the content consumed and ad-supported offerings.
Until one of those paths provides a greater return on investment, most big media will view mobile as an experimental endeavor – and who can blame them?