Online Videos, P2P Operators Struggling
By Kim Tong-hyung
Staff Reporter
Online videos and peer-to-peer (P2P) file sharing are obviously among the most significant Internet developments ever, changing the way people consume and move data and content.
But that doesn't mean that Web sites providing those services are exactly swimming in profit, as they lack a lucrative business model and are struggling with a series of litigations.
These Internet companies are wondering whether the big payday will ever come as the government moves to strengthen copyright protection of Web content.
Earlier this week, the Seoul Central District Prosecutors' Office indicted Kim Gyeong-ik, the chief executive of Pandora TV (www.pandora.tv), a video-sharing Web site, and Son Chang-uk, the head of Freechal (www.freechal.com), an online media and file storage service, both on charges of assisting copyright infringement on their sites.
The indictments come less than two months after a Seoul court handed down a 10-month sentence and a 30 million won (about $22,000) fine for Moon Yong-sik, the CEO of Nowcom (www.nowcom.co.kr), a Web security and online storage service provider, for the company's lax control of intellectual property. Moon appealed the ruling.
According to prosecutors, Kim will be tried on charges of allowing Pandora TV users to access and share content of national television networks KBS, MBC and SBS on the Web site from 2006 to May 2008, without the consent of the broadcasters.
Son also allowed Freechal users to unlawfully share public television content from July 2005 to May 2008, investigators said.
``The companies have been profiting from the services, but made little effort to block the movement and consumption of illegal content and services,'' according to a prosecutor.
The companies claimed that they have already spent a significant amount of money to monitor copyright violations. But it's hard to filter content completely when users are uploading millions of new files per day.
The National Assembly has recently passed a bill featuring anti-file sharing provision. Under the law, the government is empowered to shut down online message boards after they receive their third warning over copyright infringement. This dealt another blow to P2P sites.
``We are companies that rely on decentralized, peer-to-peer activities to generate our revenue, but how are we supposed to know what exactly everybody is doing on our site?'' said a Nowcom spokesman.
``You can't expect us to spend all of our financial and personnel resources to monitor copyright violations. Korea is becoming a country where P2P operators find it hard to survive, and even without the increasing regulatory pressure, I think a lot of companies will close or shift to other markets soon due to poor business prospects.''
The increasing regulatory pressure is expected to further crush P2P operators already reeling from bloated costs and declining advertising revenue.
Soribada, a mid-sized Internet company, is currently considering having its online video unit, SM Online, file for bankruptcy. SM Online's video-sharing service, MN Cast (www.mncast.com), is one of the country's largest destinations for user-generated videos with more than one million subscribers.
MN Cast is likely to be one of three or four more online video sites that are in danger of folding.
The P2P operators are finding it hard to pay for operating networks and servers to support high quality videos, especially at a time when advertising revenue is dipping.