South Koreans Want Their M-TV!

Mobile TV programming on cell phones and other digital devices is hot in South Korea, though turning the mania into profits is devilishly tough

by Moon Ihlwan

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While Europe and the U.S. are trying to sort out technology standards and spectrum availability for mobile TV, a digitally advanced South Korea is watching soap operas, sitcoms, and news programs on the go. Some 7 million consumers (or one in every seven residents) regularly watch mobile TV programming just two years after Korea became the world's first country to broadcast such content to cell phones. "Pretty soon, phones doubling as TVs will be as ubiquitous as camera phones now," says Song Sang Hoon, director in charge of mobile TV at Seoul's Ministry of Information & Communication.

Indeed, the small cell-phone screen hasn't hampered mobile TV's spread in Korea. Fast technological progress has improved the quality of the video. And although more than half of mobile TV viewers use handsets, a growing number of people are watching programs through personal multimedia players, music players, handheld PCs, and increasingly, navigation systems mounted on cars.

Korean Government Took the Lead

The problem is no Korean operator is making money. Worse, they still need to pour more money into building networks to provide seamless television delivery. The case of Korea, which often serves as a test bed for new gizmos and services, could offer a few lessons to countries that are just rolling out mobile TV.

First, government initiatives played an important role. In Europe, for example, a fierce battle is still being waged over which mobile TV technology will be used to beam programming to cell phones. The European Union has already recognized three standards—DVB-H (Digital Video Broadcasting for Handheld) promoted by Finland's Nokia (NOK), MediaFLO by U.S. outfit Qualcomm (QCOM), and DMB (Digital Multimedia Broadcasting) by South Korea. Availability of spectrum could be an even bigger headache in Europe (see BusinessWeek.com, 7/31/07, "The Race for a Mobile TV Standard").

In contrast, the Korean government was quick to allocate spectrum and award licenses to six broadcasters in 2005 for terrestrial DMB, and to another for satellite-based DMB. That was shortly after the state-funded Electronics & Telecommunications Research Institute (ETRI) developed the mobile TV technology. Then Korean handset makers Samsung Electronics (SSNGY) and LG Electronics (LGEPF) lost no time in rolling out TV/cell-phone combos.

Free Service Helped Kick-Start the Craze

Then there was the controversial decision on pricing. The authorities allowed TU Media, a unit of SK Telecom (SKM), Korea's largest mobile carrier, to charge $14 a month (it was later lowered to $12) for its satellite-based service offering 16 video channels and 20 audio channels. But they required six terrestrial DMB operators to beam everything from soccer games and sitcoms to the evening news free of charge. "There's no question this free service was vital for mobile TV to take off," says Lee Jung Gu, a director at the ministry.

Operators, however, blame policymakers for their financial difficulties. "We are bleeding red ink because we have difficulty in increasing the subscriber base as we are racing against free services," says senior manager Heo Jae Young at TU Media. The company has 1.2 million paid subscribers, while TU says it needs at least 2.5 million users to break even in operation, even before recouping its $435 million investment in satellites and networks.