More Koreans are enjoying mobile television, but operators have yet to secure a reliable revenue model to sustain business. / Korea Times File |
By Kim Tong-hyung
Staff Reporter
More and more South Koreans are getting television from mobile handsets, but broadcasters are failing to convert the growing audience into a profit center, industry officials said.
Crushed by snow-balling debt and sluggish advertising revenue, the country's mobile television operators are considering halting their coverage on subway lines in desperation to shed costs and keep business afloat.
The country's six terrestrial mobile television companies had jointly invested to complete transmission networks in subway lines in 2006 to allow commuters to watch World Cup football games from their handsets.
Less than three years later, however, the companies now find it difficult to cough up the 350 million won (about $249,000) or more they each pay to subway operators annually, when bad business has them deep in crisis.
``Terrestrial DMB operators each spend at least 600 million won per month to operate their mobile television services, but if ad revenue remains at current levels, the companies will be threatened with bankruptcy by the end of the year from capital encroachment,'' said Lee Hui-joo, a representative from a ``special committee'' formed by terrestrial mobile television operators.
``The payment to subway operators for facilities accounts for more than half of the profit level for terrestrial DMB operators, and it's becoming apparent that it would be impossible for us to continue to provide service on subways under the current price structure,'' he said.
Korea had lavish ambitions when it became one of the first countries to launch mobile television services in late 2005. However, the fledging industry is now more of a cautionary tale, as cash-strapped operators breathe heavily on the ropes.
The number of viewers hasn't been the source of the problem.
About one-third of all Koreans have access to mobile television, dubbed digital multimedia broadcasting (DMB) here, with free terrestrial DMB services garnering around 16 million users and another 1.8 million subscribed to satellite-based DMB, a pay-T.V. service provided by TU Media.
However, finding reliable revenue streams for the services is proving to be a difficult challenge, with both the ad-supported and subscription-based models failing to come close to turning mobile television into a sustainable business.
According to Lee, the smaller three T-DMB operators ― Korea DMB, YTN DMB and U1 Media ― are losing an average of about 550 million won per month. National television networks KBS, MBC and SBS, the other three T-DMB operators, are also looking to cut spending on their money-losing operations.
Since terrestrial DMB services are free for users with television-enabled terminals, advertising revenue is the only source of income for operators.
The six T-DMB operators generated a combined 8.7 billion won in advertising revenue in 2008, far short of the Electronics and Telecommunications Research Institute (ETRI)'s projections of 60 billion won when the mobile television services were launched.
The recent economic turmoil has also been causing further erosion in advertising revenue, with Korea DMB earning merely 53 million won last month. Korea DMB began its mobile television services with 30.5 billion won in capital, but now has just 5.8 billion won left.
``The government's past optimism that advertising sales alone would be enough to keep T-DMB afloat is now proving to be a serious misjudgment,'' said Lee, who allows the government to permit more revenue models for T-DMB operators, such as getting paid by handset makers.
``The situation at Korea DMB is grave, but YTN DMB and U1 Media also have just 6 billion won and 7 billion won left, respectively. The national television stations are also likely to cut spending on their mobile television services, but this could further compromise the quality of content, which wouldn't be good for business in the long-term,'' he said.
Although T-DMB operators are struggling to stay afloat, TU Media's poor business suggests that the pay-based model wouldn't be a solution to all their problems, as Korean mobile users are found to be price-sensitive in spending on any service beyond voice.
The company, an affiliate of mobile telephony operator SK Telecom, said it needs about 2.5 million subscribers for its satellite-based mobile television services to be profitable.
However, TU Media had just 1.8 million customers at the end of last year despite the network's advantages in sports, entertainment and other popular content.
thkim@koreatimes.co.kr
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