MobiTV Faces Stiff Competition

Long before the likes of Hulu and Netflix hit the mobile device TV space, another player was making inroads in the segment. Founded in 2000, California-based MobiTV is a leading provider of premium end-to-end mobile media solutions. Their service offerings include a platform that not only delivers live TV and video on-demand, but also has the capability to let viewers download and store content for offline viewing to its users in the U.S. and Canada.

MobiTV’s Financials
MobiTV’s managed services help deliver media content to more than 375 different kinds of connected devices, including tablets, smartphones, and connected TVs spanning Android, iOS, BlackBerry OS, and Windows OS. They have licensing agreements with television networks such as CBS, Fox, ABC, Disney, and ESPN for content. They offer subscription services to mobile carriers are are the exclusive national providers of mobile television services for AT&T U-verse Live TV, NFL Mobile on Verizon, Sprint TV, and T-Mobile TV.

Revenue for 2010 grew 7% over the year to $67 million. For the first half of the current year, the company earned revenues of $37 million, recording 17% growth over the year. However, their increased licensing costs continued to add to their losses. MobiTV reported a loss of $8 million in the first half of the current year, compared with a loss of $15 million last year. According to their S-1 filing, the company’s minutes of content streamed over mobile devices increased from 264 million in 2007 to 1.4 billion last year.

They have received $115 million in funding from investors, which include Menlo Ventures, Redpoint Ventures, John Jarve, Jeff Brody, Oak Investment Partners, Adobe Ventures, and Hearst Ventures. The company recently filed for an IPO and expect to raise an additional $75 million.

MobiTV’s Challenges
MobiTV faces stiff competition from content providers and other Internet-based video services providers. As Dan Frommer rightly points out, “smartphone platforms like Apple’s iOS and Google Android have given content owners easy and powerful capabilities to stream live and on-demand video directly to consumers, and even charge them for it, without going through a middleman like MobiTV.”

Analysts also believe that MobiTV’s big problem lies in the heavy reliance on contracts with carriers to resell MobiTV services under their own brands. AT&T, Sprint and T-Mobile are their three biggest customers, with Sprint contributing 54% of sales last year. AT&T and T-Mobile have seen significant growth in revenue contribution this year with their share increasing from 24% last year to 42% in the first half of 2011. Contracts with these providers are also up for renewal soon. The company’s Sprint contract will be up for renewal in September 2012, when it becomes a monthly contract. Also, the T-Mobile contract, expected to automatically renew this month, will shift to a termination clause of a mere 30-day notice. Further, AT&T’s contract expires in January 2013. Analysts are worried that contract terms on renewal may not necessarily be favorable to MobiTV.

Despite the hurdles, MobiTV’s business does have growth potential. comScore data shows that while nearly 234 million U.S. residents had mobile phones this year, only a third had smartphones. Other reports by Nielsen reveal that only about 10% of U.S. mobile users 13 and older watch video on their phones and mobile video viewing grew 44% over the year. Cisco’s Visual Networking Index projects mobile data traffic to grow at a CAGR of 92% over 2010 to 2015 to 6.3 exabytes per month. Of this, nearly two thirds of the mobile data traffic will be video, more than doubling each year between 2010 and 2015.