First, we have to state that the overall tone of this press release was not a bright one, even though we wish it was. The majority of the interactions we?ve had with Qualcomm [QCOM] in regards to FLO TV have mostly been about the value that it gives carriers in regards to giving them more room on their data networks while still allowing them to effectively deliver quality video feeds to their customers for a healthy premium. The only problem is that this technology is not readily available in most of Qualcomm?s phone chipsets and only a select few phones from companies like Verizon really even have the ability to utilize FLO TV. In a way, it looked like Intel’s push behind WiMAX Service – supported in infrastructure, but not supported in end-user devices en masse.
During this year?s CES, there was the announcement of in-car entertainment systems that would utilize the technology alongside the mobile devices that has been selling since the launch of MediaFLO back in 2007. The real problem with this entire system is the simple fact that not enough devices out there have the ability to run the service and nobody wants to go out and purchase an additional device to obtain the ability to watch TV. Qualcomm has done a good job of acquiring the appropriate content and formatting it correctly. The biggest hurdle that they face is getting consumers excited about it and giving them easy access to the service at an affordable price.
Qualcomm, in the statement says that, "We have been engaging in conversations with a wide range of partners for both the network and the spectrum. We are seeing strong interest in using the FLO TV network or spectrum to capitalize on the growing imbalance between mobile data supply and demand, the growth of tablets, and consumer demand for high quality video and print content, and a richer user experience."
This is probably the only bright spot in the entire press release; everything unfortunately seems to go downhill from there. They then proceed to say, "While this process continues, we are suspending our direct to consumer sales of new devices." Indicating that they do not plan to sell directly to consumers… meaning that they expect third party device makers to continue to sell FLO TV based devices but not the handheld device. Many people seem to have misunderstood that part of the statement as saying that they will not be selling any more FLO TV devices at all. Furthermore, Qualcomm states that they expect to be delivering service into Spring 2011… at which point there is a big question mark as to the future of the service.
The most worrying bit, though, is the statement that, "In the event of a discontinuance of service, FLO TV will make appropriate refunds, the details of which will be communicated prior to discontinuation. While we are working to redeploy impacted employees, we anticipate that there will be some layoffs."
The fact that they?re already mentioning refunds and discontinuance of service signals to us that Qualcomm will kill the service if they do not find someone to either buy it from them or to help them re-deploy it in a better way. We may see Verizon or AT&T trying to snap up the service for them in order to maximize their data networks? bandwidth considering that both are ever increasingly reaching the edge of their networks? abilities. We also hope that Qualcomm doesn?t lay off too many people considering the fact that this blunder rested on the shoulders of those who positioned the service itself and sold it to handset manufacturers and carriers. Then again, AT&T introduced U-Verse TV service for smart phones, which may well be the main reason why Qualcomm is pulling the plug on the service. Not to mention the planned TV services aligned with the deployment of Long Term Evolution mobile standard.
Having personally used FLO TV a lot during Uplinq, it can be said that the service definitely had its benefits and that many people were very excited about it, including those at Qualcomm. The problem as we stated before was that Qualcomm didn?t find a way to integrate it into their smartphone offerings and target the appropriate audiences. Overall, FLO TV had a good chance but we feel like Qualcomm didn?t approach it correctly at all and needed to get more devices to be FLO TV ready. Furthermore, the $800 Million that Qualcomm spent on the venture should be fairly easily recouped. We aren?t quite ready to pin this as a failure as it could still be a financial success… but there?s still a chance that Qualcomm may end up having to eat the cost if nobody steps up to the plate to snap up the service. We have yet to see how the markets will react to the news; Qualcomm?s stock price remains unchanged in afterhours trading.