MobiTV’s IPO filing is not a pretty picture

Mobile video provider MobiTV became the latest in a string of companies to announce plans to go public Wednesday, filing an S-1 registration statement with the U.S. Securities and Exchange Commission. The company hopes to raise $75 million through the initial public offering of its stock.

First, the good news: MobiTV revenues are gradually growing, and its losses are gradually declining. The mobile video company reported full-year 2010 revenues of $66.8 million, which was up from $62.5 million a year before. For the first half of this year, MobiTV’s sales grew to $36.9 million, up from $31.5 million in the first six months of 2010. Meanwhile, its net loss for the first half declined to $8.1 million, compared to $9.4 million a year earlier. The company has $32 million in cash on hand, after raising $115 million over the last decade.

That said, MobiTV suffers a severe lack of diversity in its revenue streams, and faces the distinct possibility that it could lose all of its distribution partners under contract over the next 18 months. From the filing:

“We depend on three customers for most of our revenue and if any of those customers were to limit or terminate their relationship with us, or to replace our service with a competitor’s service or the customer’s own service, it could be difficult or impossible for us to replace that revenue. We depend on our key customers, AT&T, Sprint and T-Mobile, for the substantial majority of our revenue.”

How much revenue is wrapped up in those three key customers? According to MobiTV, Sprint (s S) represented 54 percent of its revenues in 2010, while the combined AT&T (s T) and T-Mobile made up 24 percent of its sales in 2010 and 42 percent in the first half of 2011.

Even worse, those contracts are all set to expire over the next 18 months. In September 2012, MobiTV’s deal with Sprint moves to a month-by-month contract. Its T-Mobile agreement will automatically renew for a one-year term in December 2011, and will be subject to T-Mobile’s right to terminate on 30 days notice after that. Meanwhile, its agreement with AT&T ends in January 2013. And as MobiTV writes:

“If any one of these Tier 1 customers chose not to continue to use our services, or limited its use of our services, or if it replaced our services with a service provided by another company or by the customer itself, it would be difficult or impossible for us to replace that revenue because there are a limited number of such Tier 1 customers. Any such development would harm our business, operating results and financial condition.”

At the same time, consumers are increasingly turning to mobile video services from alternative over-the-top providers such as Netflix (s NFLX) and Hulu Plus that aren’t dependent on striking deals with major carriers. And operators such as Time Warner Cable (s TWC) and Cablevision, (s CVC) as well as programmers like ESPN, (s DIS) are releasing mobile apps that stream live TV feeds to mobile devices like the iPad. In other words, MobiTV’s customers have more choices than ever for mobile content, at the same time carrier partners have to decide whether or not they want to continue supporting the service. All of which raises the question: Will MobiTV be able to grow — or even maintain — its revenues in an increasingly dynamic market for mobile video?

Photo courtesy of Flickr user Travis Isaacs.