Business Strategies of Korean TV Players in the Age of Over-The- Top (OTT) Services EUN-A PARK, Ph.D. UNIVERSITY OF NEW HAVEN

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1 Business Strategies of Korean TV Players in the Age of Over-The- Top (OTT) Services EUN-A PARK, Ph.D. UNIVERSITY OF NEW HAVEN PACIFIC TELECOMMUNICATIONS COUNCIL ANNUAL CONFERENCE, 2015

2 Defining Over The Top (OTT) video online video from services and operators that is distributed over a number of channels including fixed (e.g. to computers, connected computer equipment, tablets) and mobile (e.g. smartphones and tablets) broadband - it is not associated with a pay TV service provider subscripbon (ABI Research, 2014). Streaming video services (blip, NeOlix, Amazon Prime, vevo, hulu) All use the consumers data connecbon to bypass and replace the services provided by the ISP, MSO or mobile operator

3 Impact of OTTs video ReducBon in revenues for access providers Cord cuvng unsubscribing from pay TV due to availability of online content: MSOs saw YoY subcriber declines of 3.1% in 2Q 2013; a^er accounbng for subscriber adds for satellite and Telco video services, net declines are 0.3% AddiBonal infrastructure costs for broadband providers to maintain Quality of Service (QoS) Large shares of peak Bme downstream traffic on fixed broadband networks was abributable to NeOlix (32.2%) and YouTube (17.1%) (Spangler, 2013, Variety) As a result tradibonal MVPD business models in danger

4 Growth of Netflix and cable decline Is cord cu)ng responsible?

5 Objective of this paper comparabve analysis of business models and strategies employed by digital video firms facing compebbon from OTT video Focus on the South Korean market: why? Emergence of Korea as a leader in broadband and telecommunicabons (OECD Broadband Rankings, 2014) Highly compebbve OTT market (Olleh TV mobile, Btv Mobile, U+HDTV, POOQ, Tving, etc.) More diverse set of providers including telecom providers, mobile companies, terrestrial TV companies, cable TV systems Is this the future of OTT markets everywhere?

6 An OTT Business Model EssenBal requirements Content Delivery channel Single or mulbplaoorm strategies Business models in Korea have included tradibonal access providers (e.g., telecom companies) deploying content TradiBonal content providers (cable networks) seeking new delivery channels Terrestrial content + access providers (terrestrial broadcasters) seeking addibonal delivery channels

7 Comparison of business models KT Olleh TV SK BB Btv Mobile SK Planet Hoppin LG U+ - U+HDTV Content Channel Single or mul8pla9orm? TV programs, movies, children s programs, sports, documentaries and animabons. A variety of live broadcasbng and VoD contents terrestrial TV programs, new blockbuster movies, popular American drama, animabons, educabonal programs for children, cable TV programs, etc. TV programs, HD broadcasbng in real Bme, 20,000 VOD etc. 198 channels and 140,000 VODs 147 channels, 85,000 VODs, voice search, TV apps(youtube/ Chrome) and Web search 22,000 videos in TV Show, Movies, AnimaBon, Kids and other categories. 126 premium channels (70 real- Bme broadcasbng channels), Google services MulBplaOorm (Olleh TV skylife, Olleh TV live and Olleh TV mobile) MulBplaOorm (HD VoD on mobile & tablet PCs; full HD video streaming service using the LTE- A network; B tv real Bme, B tv smart, B tv UHD MulBplaOorm (smartphone, tablet PC, and PC, smart TV; recently to Smart DMB) MulBplaOorm - U+TV G (IPTV+Google TV), IPTV U+TV

8 Comparison of business models-- cont. Broadcasters - POOQ CJ Hellovision - TVing Hyundai HCN/ Pandora TV Everyon TV Content Channel Single or mul8pla9orm? TV programs (real Bme and replay). N- Screen service from an alliance of four TV broadcasters: MBC, SBS, KBS and EBS pay content created by terrestrial broadcasters and its cable subsidiary CJ E&M Free N- screen TV service, 50 cable TV program providers real- Bme programs 30 premium TV channels, real Bme terrestrial TV program 200 channels and 50,000 movie and drama VODs. 250 channels mostly based on cable TV program providers (PPs) MulBplaOorm (PCs, tablets and smartphones), Pooq started to collaborate with telecom IPTV providers for their real Bme TV program broadcasbng. Contents Alliance PlaOorm MulBplaOorm - Real Bme TV (linear broadcasbng) or VOD or both MulBplaOorm

9 Change of value chain Devices Value Chain Contents PlaOorms TV/Cell phone manufacturers TV Terrestrial TV/PPs Cable TV/ Satellite TV/ IPTVs TV/phone manufactur- ers PC/Mobile OTT Mobile OS providers

10 Conclusions o OTT players: Telecom companies, terrestrial TV networks, cable TV/IPTV, TV manufacturers and Web portals o OTT : the extension of a pay TV service onto the mulbple plaoorms o StarBng from OS or OTT apps to entering all CPND (Contents- PlaOorm- Network- Device) o StarBng from TV to extending to N- screens (mulbplaoorm) o Features: o Real Bme broadcasbng & catch up TV prevalent: Retransmission of current broadcasters (Terrestrial + cable networks) o Replay on the go is popular: Mobile OTT more dominant o Packages and pricing diverse and flexible o Telecom players acbvely collaborabng with contents providers (KT olleh TV + Pooq)

11 Cont. o Heightened compebbon for plaoorm leadership - compebbon and collaborabon on mulbple fronts o Growing importance of content - content differenbabon and development of exclusive content o Evolving business models - development of new value- added services and business models