Research Notes

Media companies as mobile suppliers – what are the risks?

Taking on the role as a mobile provider is not without risks for a media company – risks that can have a large influence on the media company and its stakeholders, in other words it’s customers, shareholders, partners, suppliers etc. The most significant risks for a media company are the following:

·         Creating a conflict between the media companies and mobile providers
·         Cannibalising other existing business areas
·         Badwill
·         Piracy
·         Decreasing shareholder value
If a media company chooses to launch as a mobile provider, conflicting interests are often generated, as the media company will often be competing over its own customers.
For many media companies, mobile providers are major advertising customers that have massive marketing accounts and contribute a large share of the media company’s advertising revenue.
A media company’s mobile initiative could therefore result in negative reactions from mobile providers, for example by stopping using the media company’s media channels for marketing the mobile providers’ products, to thereby try to financially hurt the media company.
MTV in Germany contemplated this issue in their deliberations before launching the mobile provider Viva Mobil – a mobile provider based on the “branded reseller” business model that uses the mobile operator E-Plus’s network to sell mobile telephony to customers. Like the TV channel, Viva Mobil is targeted at the youth segment.
MTV feared that Vodafone would stop advertising via MTV, resulting in a drastic drop in advertising revenue. However Vodafone decided to continue marketing their products via MTV, so up to now, MTV’s mobile launch has not had any financial consequences on their advertising.
Much more information about media companies doing business as mobile providers is available in our latest report How to get success in the second Generation MVNO Market that analyses the media companies future role in the mobile universe and why media companies need to have a mobile strategy and which market phases the media companies will go through. Included in the report is an analysis of media companies’ assets/strengths and risks/disadvantages when doing business as mobile providers. The report examines relevant and inspiring cases that document that the media companies entrance/involvement in the mobile area is not something that may happen in the future, but is in fact a very current phenomena that will become even more dominant and visible in the mobile industry over the coming years.

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