The interest is high, the revenues are low.

The future of mobile TV is being determined in places far, far away from Hollywood--like Inchon, China. Korean cellular operators installed receivers there in April, allowing users to watch mobile TV on subways. With the highest 3G penetration in the world (Japan and Korea are at 40 percent), Asia provides a roadmap to the future of mobile video. But the question remains whether or not consumers are that interested.

So far, consumers won't pay extra simply for streaming television. In Korea, since flat-rate satellite Digital Multimedia Broadcasting (DMB) mobile service began last year, it still accounts for less than 0.2 percent of top cellular operator SK Telecoms total revenue. People typically watch the news for a few minutes, then tune out.

Similarly, broadcast mobile TV launched in Japan under the name "one-seg," short for one segment. The mobile TV service is free, with carriers and broadcasters hoping to recoup costs by offering the chance to purchase products and respond to ads interactively.

In a country where nearly half of consumers play mobile games or download ring-tones on their handsets, the lesson is that customers will only pay for video that is a differentiated, personalized experience. In a 2005 survey by KPMG, 40 percent of the 3,600 Asian mobile phone users surveyed said they would not pay a premium to access multimedia services, such as music videos, television clips, news and other content. Consumers would pay for their favorite soccer star, but not for MSNBC streamed live.

In fact, sports-related programming is the most popular video service. Even though sports did not transmit well with low bit rates, the experience has improved with the advanced technology of 3G.

For example, at Starhub, a mobile operator based in Singapore, English Premier League clips are the top video category. Subscribers will gladly fork over U.S.$3 to see the latest goals from Chelsea, Arsenal or Manchester United soccer teams. Responding to this demand, Japanese advertising giant Dentsu paid $300 million for pan-Asian mobile and broadband broadcasting rights to FIFA soccer from 2007-2014.

Sports, namely the 2008 Beijing Olympics, are also spurring the Chinese government to invest in mobile video infrastructure. Many more Chinese consumers have mobile handsets than Internet access, so the government is pushing Chinese carriers to widely deploy mobile television and VoD before the Olympics. Research firm In-Stat estimates that mobile TV in China will grow to 94 million subscribers by 2009.

And now, major Hollywood studios have a choice--watch from the sidelines while cheaper, local content captures market-share, or accept lower price points. For example, in the Philippines, consumers have a relatively small disposable income and the carriers keep nearly 75 percent of revenue. That, however, is in direct contrast with Korea and Japan, where the consumer spends more and the revenue distribution is inverted. "Hollywood content is very popular in the Philippines and would have wide appeal with the local market," said Rico Camus of Philippines-based ABS Interactive. "[Short Message Service] (SMS) use in this country is estimated at around 90 percent and ring-tone use is very widespread. If video content is within an affordable price point, we could see rapid adoption."

Mario Domingo, head of Value Added Services at Globe Telecom in the Philippines, concurred: "Currently, local and 'generic' (i.e. bloopers, behind-the-scenes, etc.) are at the forefront, but only because the steep price tags of branded Hollywood-type content are deemed non-viable. Filipinos would gladly embrace more 'edited-down' or 'never been-seen-before' major studio releases or even made-for-mobile content, but first the business models should be made more affordable to the local industry players," he said. Mario cited the 24 mobisodes from Fox, which "still have no takers in the territory due to a high minimum guarantee. If this Hollywood licensing trend continues, local and generic content will continue to be the basic offering for mobile video."

And this trend seems to be running rampant throughout Asia. In India, where the average revenue per user (ARPU) is only nine dollars, consumers are not interested in expensive clips. But, they are crazy for Bollywood. And Bollywood studios and producers have been licensing their content to both domestic and overseas fans. Mumbai-based Hungama Mobile, for example, has teamed up with 37 telecom service providers in 14 countries and derives 85 percent of revenue from outside India. This year, FICCI Frames, India's largest entertainment conference, saw an increase in activity in the mobile sphere.

In Asia, consumers seem to desire local content. Although Hong Kong is a former British colony, Cantonese language clips outsell English five to one. In Singapore, MediaCorp. produced its own original mobisode series, PS ... I Luv U in Mandarin with Taiwanese talent. The series, which included 30 three-minute segments, monetized from in-content advertising, licensing in over 20 countries and packaging into a 90-minute television program.

Another price issue facing Asia is the cost of handsets. Mario Domingo at Globe Telecom in the Philippines said, "The pervasiveness of mobile video is contingent on the availability of low-priced handsets in the range of $100. Having low-priced handsets is key for video services to hit critical mass." Unlike in Europe, mobile operators in Asia are not willing to subsidize the handset cost.

As usual, no discussion is complete without addressing adult content. Porn powerhouse Vivid Entertainment Inc. is active in Asia with its "EroTrix" videogames and expects that, eventually, a full 30 percent of revenue will come from mobile adult content. Porn purveyor extraordinaire Jenna Jameson created a mobile suite of content that includes "moantones" and R-rated wallpapers and photos. Another company having success in Asia is Artificial Life, Inc. They offer virtual girlfriends (all talk, no action) that include a sexy theme but no nudity.

Professor Mike Gauba, a telecom consultant with extensive experience in Korea, said that, "Mobile video is gaining popularity among Koreans who are 40 and older. This may be attributed to the adult content and the considerable amount of time business executives spend in their cars in Seoul. I see a lot of potential for [adult content]," he said.

Benson Ong, president of Woo World and exclusive distributor of Naked News in South East Asia, has seen his business grow quickly. "The shows are shot in Canada but we adapt to the local market with subtitles in Chinese and Korean. In Korea, many of our subscribers say the program helps them to improve their English, so we are positioning the show as a fun way to learn English."

Take note Hollywood--Ong pays nothing for Naked News. Instead, he keeps a share of the revenue generated in his territories. Ong is hungry for more differentiated English-language content. "We saw this kind of growth a few years ago in mobile games." Asia still leads the U.S. in mobile gaming, with research firm Parks Associates estimating 28 percent of consumers in APAC countries play single-player mobile games on at least a weekly basis, compared to 13 percent in Europe and eight percent in North America.

So, what does all this mean for content owners looking to sell their content to Asia? Generally, due to the regulatory, linguistic and--in some countries--censorship challenges content providers face, they have to adapt content locally. And for their part, mobile operators lack content production capabilities, so they have no choice but to deal with numerous content providers and formats.

And, once again, Korea may prove to be a harbinger for future change. In fact, Korea Telecom, the largest Telco in Korea, recently bought a 51 percent stake in Korea's largest movie studio.

Having invested heavily in mobile video and 3G infrastructures, Asian mobile operators want their customers to open their wallets for video. But despite a few notable exceptions, that has not yet happened.