By Jamie Lendino

It seems only a matter of time before everyone starts watching video in the palms of their hands.

You can already get a powerful phone that plays video over a high-speed network, and in some cases, even watch broadcast TV. Meanwhile, carriers are signing dozens of media licensing deals, and studios are putting big screen films on the very small screen.

Many studios and carriers are focused on the minutes-long clips that permeate current mobile video offerings. Recently, the Sundance Institute introduced five short-form movies exclusive to cell phones. HBO chops up its shows into shorter segments to watch in your hand.

"Most of our content is short-form, such as clips and sports," said Jeff Cusson, vice president of corporate affairs for HBO. In addition to the clips, HBO licenses full half-hour episodes. Consumers can watch a show in four-minute increments, moving on to the next chapter whenever they're ready. "The ability to watch a full half-hour [on a mobile phone] is tough, so this is a better way to present it to the customer," Cusson said.

But, a few providers are pushing longer form content onto handheld devices. Apple sells feature films from three major studios -- Paramount, Disney, and Lions Gate -- that iPod users can download and play on the go. Those movies will also work on the upcoming iPhone, Apple's first cellular handset. A company called Vongo lets users play movies on Toshiba's Gigabeat line of portables.

"The people who actually rent movies from our system average two movies per customer," said Daren Tsui, the CEO of mSpot, a service that delivers music and video to mobile phones from studios such as Buena Vista VOD, Clear Channel, ESPN, Lions Gate, MarketWatch, Radio Disney, and Universal Pictures. "That's a huge stat for us. The experience is good enough that they're coming back," Tsui said.

"In addition, they'll watch each title for an average of well over 60 minutes," Tsui continued. "All the data right now shows us that even at this early stage of mobile video, the experience is good enough that a) they'll come back and rent again, and b) they're staying on the system for a really long time."

No business model, yet
Media analysts are not as enthused, even though some services have enjoyed limited early success. "The medium and content are promising, but the interface is still such a barrier that it takes too much effort to do it," said Steve Smith, a media columnist and the digital media editor for Media Industry Newsletter. "There are a lot of pieces that still need to evolve, but content is probably already the most evolved piece."

Smith argues that for all the content providers in the U.S. market, the taste for mobile content just isn't there yet. "This is still a ringtone and SMS-text-messaging world," Smith said. "That's the bulk of the money that's going into mobile data right now. All of these mobile episodes, TV, and Internet are penny ante stuff right now."

MobiTV, a service provider that streams television for Sprint, AT&T, and Verizon among other U.S. carriers, crossed the two million subscriber threshold in early 2007. But mobile advertising revenue in the US stands at just $40 million per year as of 2006, compared with $68 billion for regular television, according to the Yankee Group.

Tsui agrees. "The challenge we [at mSpot] have -- which is no different for any other mobile service, not just video -- is that we all have to market through a two-inch diagonal screen," he said.

There's more to it than just the interface, however. Would people watch more, for example, if there were more to watch? Some observers hope movie studios begin to create original, full-length films for cell phones. But, while the technology is there, the business model doesn't seem to be. Big movie studios won't commit to the format unless they can see increased cash flow -- and an attractive presentation.

"This is why [big studios] always have trouble with the gaming world. There was a tendency for their brands to really look crappy, which reflected back on the main property. One of the assurances they want from the mobile community is that the [mobile movie] experience will be good and fluid with the rest of the brand clan," Smith said.

'Experimental movies from Disney'
None of the movie studios we spoke to -- Paramount, Disney, HBO, and the Sundance Institute, all of whom have made significant inroads in the mobile space -- would go on the record about their plans.

That's to be expected, Smith said. "One of the reasons none of them talk is that they're public companies," said Smith. "Unless there is a press release attached, they're loathe to talk about it. [However], you'll start seeing companies like Disney make very public experimental movies in this direction. That will be a signal to investors that the terrain is changing, and that they're showing signs that they're keeping up."

mSpot's Tsui, though, doesn't think it's time for original cellphone video content, since producing it can cost millions, and there just isn't an audience, yet.

"If you want to do a really good show, one that's on par with Friends, Alias or Desperate Housewives, it takes millions of dollars. Just because it's on mobile doesn't mean you can create a sub-par show and get away with it," Tsui said.

Déjà vu all over again
Besides, consumers have been down this road before -- during the Internet bubble of the late 1990s. Back then, startups such as Atom Films hosted early attempts at exclusive Web videos.

"Can anyone point to a Web video series [from then] that anyone remembers now?" Smith asked. "Here was this great new short form with all this creativity. It spurred a lot of seed funding, and there are always people who will put out Macromedia Flash series. But, they never generated huge audiences or created new properties," he said.

Smith argues that consumers could see that same kind of activity on mobile. "Like Web video in the late 90's, there's lots of experimentation [on mobile], along with some funding here and there, with manufacturers trying to encourage that kind of activity," Smith said.

As a medium unto itself, Smith says the industry is probably several years away from made-for-mobile movies. In the end, it will all come down to the interface, and the consumer's willingness to sit and watch. Or possibly even remember they have it on their phones in the first place.

"I've had [mobile video] for two years," Smith said, "and unless I'm actively out having to review something, I rarely flip open the phone and say, 'Hey, what was Katie Couric's lead story last night?'"

Jamie Lendino writes mediabistro.com's Mobile Media News blog.