Will consumers watch video on tiny screens? Well, on my flight to Vegas yesterday, I watched movies and TV shows on my Creative Vision:M MP3 player that I had downloaded from an HP Windows Media Center computer (the content was recorded TiVo-style on the PC, then converted to the small screen by Creative software.) So there is at least a market of one. It was with this in mind that I attended earlier today a session here at the Consumer Electronics Show on mobile video and another on mobile music.

I downloaded video to an MP3, just as iPod users download songs. But the sessions I attended focused more on real-time streaming a la broadcast. The discussions also focused largely not on MP3-type devices but on mobile phones as the vehicle of viewing or listening. In theory my Treo 650 can display video but I've never tried to make that happen; it's an e-mail device for me largely. But panelists from Motorola and Qualcomm made clear that phones are becoming increasingly sophisticated in their ability to stream music and also video, which requires a higher bit rate. We heard a great deal about the challenges of such a service, including whether a provider of service goes "on deck" (generally an exclusive partnership with a carrier) or "off deck" (generally a separate service that bypasses wireless carriers in going directly to consumers). But I was interested in how IP concerns wer impacting the growth of this market.

It turns out there are two issues. The first is technological, the second is one of rethinking business models.

The technological challenge comes from the fact that not only are there numerous technology standards for mobile video, there are also numerous DRM standards, which exponentially increases complexity. Jason Rubenstein of Motorola said his company seeks to be compatible with all DRM, but said as the market matures this concern will lesson. He even predicted Windows DRM will run on Linux Java.

The business challenge comes content companies thinking as content companies and not motion picture makers or cable channel producers. Edward Skolarus of Fox just got Time Warner and Comcast to add a new digital cable channel, Fox Reality. (Yes, reality TV 24/7 with gems such as Temptation Island Australia; nothing against Mr. Skolarus, but I don't really want this channel at any size). Skolarus said that when you're producing original content or aggregating that content into a network, you have significant fixed costs regardless of where it is eventually distributed. So if Fox Reality can have an ancillary stream on mobile phones, there is no reason not to do that.

But Skolarus and Michael Arrieta of Sony Pictures both confirmed that there is far less "channel capacity" on wireless phone services than there is on, say, Comcast or DirecTV. There is another threat as well; as 3G advances, mobile customers might fetch their content on their phones directly from the Internet. And thus the piracy concerns of the Internet come to the world of mobile phones; the walled garden is breached and a successful business model for both content creators and wireless carriers is undermined.

Not all content creators would bemoan that fate. Frank Chindamo of Fun Little Movies -- a small company that makes very short films specifically for the mobile market -- dismissed the piracy threat. "If our content is downloaded illegally, no problem, we still get promotional value." Fun Little Movies as a rule does not market directly to consumers; it is in an "on deck" relationship with Sprint. Questioned by moderator Ken Rutkowski, Chindamo acknowledged that Sprint might not share his laissez-faire attitude.

[UPDATE: I just spoke with Frank Chindamo on the phone. He wanted to clarify that there was a specific type of content that didn't cause him much concern regarding piracy, and that was his "advertainment," such as the humorous shorts he makes to promote lovebytes.net. He said that is an exceptional situation, and that he and Sprint agree that content shouldn't be pirated. Chindamo also said he was confident that content was not being pirated from Sprint's network because it has "strict DRM."]

Left unresolved is how mobile content will most likely be used -- downloaded as I did with my Vision:M, real-time streaming, downloaded via mobile device, or obtained through a subscription model. I'm on the record as being a fan of the music subscription model -- I recently bought a Vision:M not for video but because it has a 30 GB capacity that can better hold all my Napster to Go downloads -- but many consumers don't seem to share my enthusiasm. At the mobile music panel, another Motorola panelist made an odd off-the-cuff observation.

He said consumers now get their music from lots of sources, including CDs, legal downloads, P2P, streams, radio, etc. A subscription model might be attractive, he said, if one could pay a monthly fee to avoid all those sources and move the songs wherever one pleased. I'm sure limits on movement, even for the To Go services, holds back adoption of subscription models, but it's difficult to ask a musical artist to agree to a business model where I can sign up for one month of service, download 1 million songs, and then cancel. This gentleman works in the hardware business, so I'll forgive his lack of understanding of the importance of copyright to artists.

Other than that off-the-cuff remark, I was very pleased at the level-headed dialogue I heard, with techies acknowledging that content producers need to make money, and everyone agreeing on the need to respect DRM. Given that I'm sitting here in the press room staring at a huge kiosk for the Digital Freedom initiative CEA is pushing to undermine IP rights, I think today has gone pretty well. I suspect that will continue in a few hours when a well-known philanthropist speaks. His name is Bill Gates.

posted by Patrick Ross @ 5:38 PM | Markets: Business, Investment & Innovation

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