Driving the development of digital content are new and potentially exclusive channels, basic and premium tier channels, plus on-demand content from domestic and foreign program suppliers. The business of digital programming and content is made highly attractive by significant competition from cable, the rise in Direct To Home (DTH) services, the advent of Internet protocol television (IPTV), a projection that the digital TV universe will be almost all-pay by 2015, and major gains in consumer purchases of digital set-top-boxes (STBs). It is forecast that total subscription revenues for pay TV will grow from USD 131 million in 2004 to over USD 427 million by 2010 and will be USD 658 million by 2015.
Cable TV was launched in Korea with analog broadcasting service in 1995 featuring 24 channels (program providers) delivered by 54 cable system operators (SOs). Currently, 103 SOs are transmitting cable TV content. Digital terrestrial TV was introduced in 2001, and digital cable TV services launched in 2004. As a result, Korean cable TV SOs and program providers need to digitize most of their broadcasting facilities by 2012. After the introduction of DTH services in 2000, the Korea Digital Satellite Broadcasting consortium (KDB) acquired the necessary license and launched pay TV services in March 2002 via its DTH satellite platform SkyLife. SkyLife acquired more than 2.31 million digital DTH subscribers as of September, 2008, approximately 12 percent penetration rate of TV households in Korea.
Attracting portable TV viewers is becoming more competitive. Since December 2005, terrestrial providers have moved into digital multimedia broadcasting (DMB), which allows viewers to watch TV via a cell phone. The rapid growth of DMB has become a hot trend, drawing the attention of the media and consumers. According to industry sources, it is estimated that the number of satellite DMB subscribers will reach over ten million by 2010. The satellite DMB services enable viewers to consume different types of video content, but they are discovering that content is severely lacking. Lack of available content has forced providers to show amateur videos – to fill time, a provider broadcast the finalists of a university student video contest. According to the Korea IT Industry Promotion Agency, the market demand for digital video content is relatively small, but increasingly growing. The industry is forecast to grow to be worth several billion dollars by 2010 as new service platforms are implemented.
In 2008, market demand for TV broadcasting equipment and services reached an estimated USD 266 million. There are no major market access barriers for broadcasting equipment, and most categories of equipment enter Korea with an eight percent duty based on cost-insurance-freight (c.i.f.) value.
Spending among the multi-system operators (MSO) has driven opportunities for suppliers of digital equipment for terrestrial broadcasting. In March 2004, the National Assembly revised the broadcasting law allowing for the establishment of digital services. The law also allows increased foreign investment in Korean SOs and program providers. This investment will speed up the deployment of digital cable TV, which in turn means increased opportunities for equipment suppliers and program providers.
- Broadcasting equipment (encoding/multiplexing/modulating equipment)
- Test and measurement equipment
- Graphic equipment
- Production equipment
- Video servers and switchers
- Content related to education, children’s education, cooking, fitness etc.
The shortage of quality content to supply the growing new service platforms represents a real opportunity for U.S. content providers. The best prospects for imported content and programming are in the areas of movies, sports, animation, drama, and documentaries.
Korea maintains certain broadcasting quotas (e.g., cable companies are limited to using no more than 20 percent of their channels for foreign channel retransmissions, and local content must account for 35 percent of animation channel programming). While these are market barriers, there is a general dearth of local content, so foreign content is still in demand.
The surge of investment in new broadcasting services represents important opportunities for U.S. program providers (PPs). Korea currently has four terrestrial TV networks, 150 satellite TV channels, and approximately 70 cable TV channels. After the launch of digital satellite and digital cable TV services, the current total number of Korea’s satellite and cable channels reached approximately 200. Currently, U.S. programs accounts for approximately 70 percent of all imported programming. With the popularity of U.S. programming in Korea and the enormous projected increase in channels, U.S. PPs are well positioned to expand rapidly in Korea’s growing market. As of September 2008, there were about 200 registered PPs in Korea. Among this number, approximately 70 PPs are responsible for the majority of activity in the market, providing programming both to satellite and cable TV channels. Although digital broadcasting equipment for terrestrial TV services is forecast to remain the largest market segment through 2010, Korea’s launch of digital satellite and digital cable TV broadcasts will continue to bolster strong market demand over the next three years.
KT (Mega TV), SK Broadband (BroadnTV), and LG Dacom (myLGtv) launched and aggressively promoted digital video services (or IPTV) over ADSL, VDSL, and fiber to the home (FTTH) networks. There have been changes of media related regulation in late 2008 and it would enable the telecom operators to launch the IPTV service. The threat of the new integrated product bundle service will clearly be a challenge to cable TV industry. As a result, SOs are increasingly focusing their efforts on deploying digital set-top-boxes in volume, bundled with both Internet and, in the future, VoIP services.