BusinessWeek examines South Korea's vibrant but revenue-poor mobile TV business

BusinessWeek takes a look at South Korea’s mobile television marketplace that’s booming — in part because many of the services are free — but no operator is yet making money.

One in seven South Koreans — about seven million — now watch mobile TV two years after the country initiated the service that uses DMB (Digital Multimedia Broadcasting).  The head of mobile TV at the Ministry of Information and Communication says soon mobile TV-enabled phones will be as numerous as camera phones.

DMB receivers are available on a variety of electronic devices besides cellular phones, such as music players, handheld computers and vehicle navigation systems, although more than half of mobile TV viewers watch on phones, the article says.

Paid subscriptions vs. free

The government allocated six licenses for terrestrial DMB (T-DMB) and one license for satellite DMB (S-DMB).  It also allowed the S-DMB operator, TU Media (a division of SK Telecom), to charge $14 per month for 16 video channels and 20 audio channels.  TU Media has lowered the priced to $12 per month.

But the government required that T-DMB operators offer the service for free.

So mobile TV for T-DMB operators isn’t profitable and TU Media is losing money because consumers often prefer free mobile TV.  BusinessWeek says TU Media has 1.2 million subscribers but needs at least 2.5 million to break even, and that doesn’t count the company’s investment of $435 million.

Jump-starting the market

The Ministry believes free mobile TV was necessary to jump-start the market.  The T-DMB players, such as Korea Broadcasting System, thinks charging even a few dollars would have helped their bottom line and spurred investments.

“Government officials point out mobile TV is a nascent industry requiring massive initial investment, and new entrants would have to endure losses for the first few years.  Industry executives argue that the investment requirement is exactly why service fees are necessary, at least until they develop sufficient economies of scale to attract advertising,” BusinessWeek reports.

Mobile TV operators are receiving advertising revenues from the programs but that hasn’t yet generated sufficient income.  The article says the six T-DMB operators received a total of $1.8 billion in advertising in 2006.

Remaining optimistic

South Korea’s TV broadcasters want some sort of revenue sharing deal with cellular operators because the majority of mobile TV viewers are expected to use phones and the broadcasters are concerned it could decrease their existing video revenues, the article says.

Mobile TV just isn’t about traditional television broadcasting.  Services also include traffic and travel information and the availability of parking locations that are generating advertising.

BusinessWeek concludes, “ETRI (Electronics and Telecommunications Research Institute) expects the number of Korean mobile TV users to rise to 24 million, or half the population, by 2010, when the service will generate US$3.2 billion worth of production in handsets and other equipment.  ‘I think mobile TV will serve as a new growth engine,’ says ETRI senior researcher Byun Sang Kyu.”

Comments

[molly]

I expect TV mobile will become very popular ! Perhaps it would come instead home TV...

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