KT Transforming to Soft Power
Network Giant Turning Eyes to Entertainment, Media Business
By Cho Jin-seo
Staff Reporter
A string quartet plays a selection of familiar jazz numbers inside a spacious cafe on Sejongno street one December evening. The performers are all top class musicians, but the admission is only 1,000 won. A vacant seat is hard to find in the cafe, named KT Art Hall.
The place, which occupies about a half of KT's Seoul headquarters' ground floor, opened last year. The jazz program is the firm's social contribution, but it also shows how seriously the telephone and network giant is trying to shed its conservative corporate image and build a new identity as a young, fun brand.
KT is the dominant telephone and broadband Internet provider in Korea and has enjoyed stable profits from the two businesses over the past decade. But over the past years, it has been injecting more money into the entertainment and new media sectors as worries grow over the business' outlook. KT and its subsidiary KTF have bought majority shares in Sidus, a movie studio and Olive9e, a TV drama production.
KT also holds an annual contest for digital movie contents with 400 million won in total prize money. Recently, it established another 40-billion won fund to invest in the new media businesses. It has also set up a fund investing in computers and video games.
The newly acquired entertainment firms will work as KT's cornerstone to change into a new-media and entertainment firm, said Nam Joong-soo, the chief executive officer.
``In the future, the contents business, especially if we can use a single source for multiple platforms, will be our main growth engine together with the personalized networking services,'' he was quoted as saying by the Seoul Economic Daily last month in a speech at the Hankuk University of Foreign Studies. ``Using this, we will break free from the communications sector and be reborn as a total media and entertainment company.''
In line with the CEO's initiative, KT started fine-tuning its operations to make it more fit for the ``soft'' business. On Monday, the firm announced that it established a ``Contents Strategy'' department inside its media business division, and strengthened its Internet TV department with a larger workforce.
Though ordinary citizens are mostly unaware of such changes yet, the movie industry is already excited about KT's ambitions, expecting that its massive investment will revive the lackluster domestic movie market.
Sidus FNH, a movie production company, which became a KT subsidiary in 2005, announced that it will begin distributing movies via its own network, starting with its recent product ``Miss Shin'' next month. Until now, the movie distribution business in Korea has been dominated by a handful of multiplex cinema chains. But KT's unfathomably deep pocket gave the courage to Sidus to set up its own distribution network, the firm's officials say.
For ``Miss Shin,'' KT invested 4.1 billion won, a sizable investment for a romantic comedy genre. The firm plans to release six more films by next summer.
The expansion in the movie and TV drama businesses is in tune with the launching of Mega TV, KT's Internet-Protocol TV (IPTV) service. The movies are first released in the cinemas, but soon they will be aired on Mega TV's video-on-demand service.
IPTV is an innovation of TV broadcasting, which best suits South Korea as more than 70 percent of households are connected to the broadband Internet. KT is already gearing up to take advantage of this opportunity with its Mega TV service as the government is to approve the firm's plan to show popular terrestrial channels such as KBS, MBC, SBS and EBS on Mega TV as early as next spring.
It is viewed as a natural choice for KT to begin pondering a shift to the ``soft'' business, which deals with the contents, not hardware. The domestic telecom market has become virtually saturated as most houses and offices are connected to telephone and broadband lines. Accordingly, KT's revenue growth slowed. Over the past few years, its annual revenue has hovered around 11.8 trillion won.
``We have been trying to solve the problem of `what to provide' as well as `how to provide.' Consumers do not care what technology we use. They just want fun and entertainment,'' a public relations official said. ``KT possesses various methods of communication, so if such advantages are well mixed with good digital contents, this can be a breakthrough to invigorate the stagnant communications market.''
KT is not the only telecommunications firm interested in the entertainment business. SK Telecom, the largest mobile service provider of which the annual revenue is similar to KT, also has increased investment in the movie and music industry. The firm will also launch its own music distribution business next year. The contents then can be used in its mobile TV services as well as in IPTV service of Hanarotelecom, which is likely to be acquired by SK Telecom very soon.
Stock analysts expect that the telecom firms' entertainment business will bear a lot of fruit next year when the IPTV becomes widespread. And when KT's entertainment business goes into full swing, so will the jazz. CEO Nam plans to open several more performance halls in Songpa and Shinsa and other areas using its branch offices, which were once filled with telephone switching boards and network cables.