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McAdams On: Qualcomm’s Swan Song

The demise of FLO TV is lamentable in its own right, but it’s also a harbinger for broadcasters pinning hopes on Mobile DTV. Qualcomm’s decision to shut down FLO proves mobile video is a tricky business.

Qualcomm had arguably the best technology extant for delivering TV channels to handheld devices. MediaFLO technology could deliver 20 channels of 240i video in the space of one TV signal. It was wildly efficient compared to the unicast scheme used by wireless providers at the time. And it could change channels in two seconds rather than some days later.

MediaFLO was a breakthrough technology. Qualcomm sank $683 million into spectrum and several millions more into building a network of transmitters across the country to launch it. They may have been better off just demonstrating MediaFLO’s efficacy and licensing it to wireless carriers. Instead, they put together FLO TV, which Verizon and AT&T ended up using the for their video offerings.

Consequently the carriers had no skin in the game, and Qualcomm had all of it. Both carriers charged a fee for video service, and therein lies the rub for broadcasters. People weren’t willing to pay ten bucks to watch “American Idol” on their phones, or anything else for that matter. At least too few to support the business. comScore’s most recent count is 5.7 million subscribers, or around 2 percent of the nation’s 285 million cell phone users. That’s five years in, and not accounting for churn.

Qualcomm tried to stimulate adoption by introducing standalone receivers last year. It was too late. The Qualcomm division that includes FLO TV lost $252 million on revenues of $29 million during fiscal 2009; and $141 million on revenues of just $9 million for the first nine months of fiscal 2010. Game over.

The object lesson seems clear. There are not enough people willing to pay for mobile video to make it a viable subscription business. Surely broadcast executives have a handle on this, and aren’t sniffing glue when they carry on about the value of local programming. Mobile DTV has to be an ad-supported, free-to-air service. It’s enough to expect people to buy receivers, especially before Apple deigns to stick the chips into its ubiquitous iDevices.

If ever there was an opportunity to resurrect and reinvigorate the very model of free TV, this is it. It’s clear the broadcast industry failed miserably to fully exploit digital television. It could have been sitting on a truly robust and hypercompetitive multichannel offering instead of fending off spectrum foragers.

The only way for Mobile DTV to reach any sort of critical mass is to launch it for free. People are sick of being soaked by wireless carriers and pay TV providers for every little add-on imaginable. The idea of going to an electronics store today and buying anything new that doesn’t incur a monthly fee is mind-boggling. Demand would be tremendous.

The Mobile DTV business model should have two primary goals: Making it effortless for users and attractive to advertisers. That’s it. Nothing more. Pay-per-view and premium services can be added later. Going out, it needs to be straightforward. I go to Radio Shack. I buy a handheld. I turn it on while I’m walking out of the store.

I watch TV.