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Universal, MTV to Go Cellular

The two entertainment giants join the push to draw more interest in mobile media content.

September 12, 2006|Charles Duhigg | Times Staff Writer

Undeterred by a lack of consumer interest in using cellphones to access entertainment, Universal Music Group is expected Tuesday to announce a deal giving MTV Networks a blanket license to its songs, videos and other content for mobile devices.

The deal is the latest example of the entertainment industry's appetite for using cellular phones to deliver content. EMI Music and T-Mobile struck a deal Monday to offer ad-supported mobile video in Britain. In the last 16 months, according to one report, cellphone carriers have earmarked at least $1 billion to develop mobile content.

The world's largest music company, Universal Music represents such artists as Mariah Carey, Eminem, U2 and Kanye West, while MTV Networks, a unit of Viacom Inc., reaches young audiences through its collection of cable channels including MTV, Nickelodeon, Comedy Central and VH-1.

Although music companies and programmers have for years expected mobile content to revive their flagging industries, American and some European consumers have shown only tepid enthusiasm for programs airing on 3-inch screens or for cellphone music downloads that typically cost more than those available online for 99 cents.

"Probably only 1% of cellphone owners regularly consume mobile videos and songs," said Neil Strother, a wireless analyst at NPD Group, a market research firm in Port Washington, N.Y. "And it isn't growing very fast, largely because of a lack of awareness. So in that respect, deals like the Universal and MTV agreement show that major companies are aligning to push mobile content. That's an important first step, but there is still a long way to go."

Today, about 44% of the 208 million cellphones owned by Americans are capable of playing videos and songs, according to JupiterResearch. But only 20% of owners have ever downloaded anything on them. Studies show few mobile consumers say video or music capability is something they care about.

That indifference has hindered efforts by major companies to jump-start the mobile marketplace. Cable sports channel ESPN, a division of Walt Disney Co., launched a cellphone unit amid much fanfare at this year's Super Bowl, but the division has failed to live up to expectations, according to company insiders. Amp'd Mobile, a cellular content start-up, raised more than $250 million from investors including MTV and Universal Music. But fewer than 10,000 subscribers have signed up in the service's first five months, according to analysts.

Beyond awareness, the biggest deterrent to mobile content is that most of its shows and songs available for download can be purchased at lower prices through other venues, such as Apple Computer Inc.'s iTunes Music Store, or on DVD or CD.

The MTV-Universal partnership hopes to overcome that obstacle by creating content solely for cellphones.

"To build an appetite for mobile content, there have to be video clips and shows and songs that you can only get on your phone," said Rio Caraeff, a digital executive with Universal Music. "We want to spur the creation of those clips by making our entire catalog available to MTV. The industry has to push our products in front of people, instead of waiting for them to ask."

Caraeff said that Universal Music would complete similar blanket licenses with other mobile content creators and cellular carriers and that rival music companies probably would follow suit.

The terms of the deal with MTV were not revealed, but sources close to the negotiations said Universal Music would receive payment each time one of its songs or videos is used in MTV's mobile programming.

And unlike before, when MTV needed permission to use each song, the deal will allow the cable giant to offer any Universal Music video to mobile consumers, and to deliver clips of live performances and made-for-mobile programming using Universal Music's songs.

Cellular consumers typically must pay for each download, or subscribe to a video service at additional cost.

The EMI and T-Mobile agreement will let British cellular customers download music videos by EMI artists free of charge, but will require that they watch a commercial by an advertiser such as Coca-Cola Co. or General Motors Corp.

MTV, which has deals with multiple cellphone carriers, is betting that unique content will revitalize the network's relationship with young consumers. The music network, which once dominated the teen audience, has stumbled online, losing out to new companies such as YouTube and MySpace. MTV executives say producing one-of-a-kind shows for cellphones will establish a competitive advantage.

"Mobile is very important to us," said Greg Clayman, MTV Networks' vice president for wireless strategy and operations. "The more quality content that exists from brands people trust, the better the marketplace. The way to draw new mobile viewers is to create clips that have a buzz factor, and this deal gives us a free hand in creating amazing new content."

But analysts say mobile content providers will need patience.

"Even if mobile video adoption goes up fivefold by 2010, then still only 5% of mobile subscribers will be watching videos," said Julie Ask, a wireless analyst at JupiterResearch. "There has to be a reason to watch a video on a phone rather than a computer or TV screen. Why use a cellphone instead of an iPod? I'm not sure any of these deals really answer that question."


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