Impact of Value Chain Openness of the Media Industry in the UBB Environment. Daeho Kim. (Professor, Inha University, Korea)

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1 Impact of Value Chain Openness of the Media Industry in the UBB Environment Daeho Kim (Professor, Inha University, Korea) 1

2 Open UBB Paradigm shift of Media Ecosystem Vertical/Closed Horizontal/Open Media Industry ex1) Closed structure of broadcasting industry changes to open structure 2

3 Open Media Open Opening of media industry : Users a variety of choices : Firms chaos or new business model : Regulatory body pressure of complicated rule making 3

4 Opening of Value Chain Content Distribution Platform Network Device CJ KBS MBC SBS Going Direct KT Turning aggregator SK Telecom LG PDT Samsung Electronics LG Electronics 4

5 Opening of value chain The value chain is undergoing a complex transformation: presenting threats and opportunities for all players - growth of channels - growth of contents producer s power - all kind of platforms have need all kinds of contents 5

for all players - growth of channels - growth of contents

6 Opening of Contents Digitalization Digitalization of contents various formation and usage - Distribution of contents extends unlimitedly - Multi platform -Video contents - Convergence of contents - UGC (User generated contents) - Online content marketplace 6

unlimitedly - Multi platform -Video contents - Convergence of

7 Opening of contents Opening of contents means every kind of contents are possible through every kinds of platform, channel, and distribution way - Remediation of traditional contents - Search, automatic editing, and non-linear editing affect contents programming - change of marketing and promotion method 7

Remediation of traditional contents - Search, automatic editing, and

8 New business model Cross media and cross platform - enhances contents value (1) contents format industry is emerging (2) Talent agent, Independent production Ex) SM Entertainment, IHQ Talent agent has been small enterprise 8

emerging (2) Talent agent, Independent production Ex)

9 Opening of service and platform o Bundling service - KT, SKBB (Telco) - CJHello, Tbroad, C&M (Cable) Cost of Bundling Service (2008.8) KT SKBB CJHello Tbroad C&M DPS 31,425 32,580 32,780 32,960 37,400 Internet 24,225 25,200 18,480 23,090 23,100 TV 7,200 9,900 14,300 16,500 26,400 TPS 34,830 33,460 34,980 35,160 38,500 Internet 22,950 20,160 18,480 23,090 23,100 Telephone 4,680 4,500 2,200 2,200 1,100 TV 7,200 7,200 14,300 16,500 26,400 9

8) KT SKBB CJHello Tbroad C&M DPS 31,425 32,580 32,780 32,960 37,400 Internet 24,225 25,200 18,480 23,090

10 Open platform - Platform providers open main source - Platform thinking : platform is a big melting pot for creation, distribution, and consumption of content and service ex1) Google : platform strategy huge internet ecosystem Apple : open mobile source (App store, ) ex2) Google extend Android to TV STB 10

content and service ex1) Google : platform strategy huge internet ecosystem

11 Opening of device - Opening of device technology device manufacturers produce similar devices with similar technology power - Players are experimenting with a wide array of devices with different value propositions - Difficult to non discriminate 11

power - Players are experimenting with a wide array of devices

12 New business model -Device manufacturers enter into service and platform sector - No differentiation of service/platform or device Ex1) Samsung Electronics has been device manufacturer Ex2) LG Electronics began contents business (2008.7) Ex3) Nokia s new strategy optimization of contents service 12

Electronics has been device manufacturer Ex2) LG Electronics began

13 Network Level of opening of network is low - Incumbents are reluctant (1)Wired network - LLU (2) Wireless network -MVNO 13

14 Korean characteristics in UBB 1. New business model -Attract users attention and reputation various advertising revenue - Two-sided market, freeconomics, platform play, advertising BM, profit sharing through alliance 14

15 Korean characteristics in UBB Adverting revenue TV 23,671 22,350 21,491 21,839 21, % Newspaper 19,900 17,436 16,724 17,031 17, % Radio 2,751 2,653 2,683 2,799 2, % Magazine 5,006 4,256 4,367 4,591 4, % Outdoor 7,282 7,027 7,358 7,737 6, % Cable 2,975 3,999 4,868 6,721 8, % On line 3,559 4,872 6,737 7,790 10, % 15

5% Radio 2,751 2,653 2,683 2,799 2,807 0.3% Magazine 5,006 4,256 4,367 4,591 4,841 5.

16 Korean characteristics in UBB Growth of Open Market on Online 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,

17 Korea s characteristics in UBB 2. Active Telco -In the UBB environment, telcos are active in change of industry structure -Ex) KT cinema production (Sidus), drama production (olive nine) -Ex) SKT Cyworld, Lycos, Empas since 2002 Hanaro Telecom (now SK Broadband) Tu Media (Satellite DMB) 17

industry structure -Ex) KT cinema production (Sidus), drama production

18 Korea s characteristics in UBB 3. Dependency on Terrestrial TV -Heavy dependency on terrestrial TV contents -Terrestrial TV contents are killer contents at present ex) MBC s popular program <Golden Fishery> was broadcast 198 times for only one month on Dec ex) MBC s another <Unlimited Challenge> 150, KBS s <Love and War> 125, <Imagination Plus> Terrestrial contents dominate on not only terrestrial broadcasters sister channel, but also independent channels. 18

at present ex) MBC s popular program <Golden Fishery> was broadcast 198 times for only one month on Dec 2007.

19 Korean characteristics in UBB Cable PP Share Top SBS Drama Plus MBC Drama Net Tooniverse KBS Drama MBC ESPN tvn SBS Sports YTN OCN MBC every1 TNS Media Korea,

20 Every players are becoming same Who will lead? - Every players is entering competition by providing similar services with devices - Consumer Electronics Consumer Electronics Service Provider - Terrestrial Broadcaster Multimedia Provider - Cable TV Provider TPS Provider - Telcos TPS (QPS) Provider - Computer Firm Multimedia Provider - Software Firm Multimedia Provider - Internet Portal Multimedia Provider 20

Electronics Consumer Electronics Service Provider - Terrestrial Broadcaster Multimedia Provider -

21 Every players are becoming same In Korea, Who will lead? - Consumer Electronics : Samsung, LG - Terrestrial Broadcaster : KBS, MBC, SBS - Cable TV Provider : CJ Hello, C&M - Telcos : KT, SKTelecom, LG -Computer Firm -Software Firm - Internet Portal : NHN, Daum 21

22 Korean characteristics in UBB Terrestrial vs Telcos Terrestrial Broadcasters vs Telco vs Cable - Not Telco vs Cable - Telco vs Terrestrial Broadcasters 22

23 Korean characteristics in UBB DTV Penetration in Korea ETRI, 2007

24 Korean characteristics in UBB MMS (Multi Mode Service) - Korean government passed special law Special Law on Development of Digital Broadcasting (2008.2) - Terrestrial Broadcasters pursue MMS (Multi Mode Service) - MMS : terrestrial DTV multicasting - MMS is a new platform that terrestrial broadcasters have not had so far - The new platform has a potential to affect whole media industry 24

25 Korean characteristics in UBB MMS (Multi Mode Service) - Digital transmission in 6MHz bandwidth - Terrestrial broadcasters can provide variety of services with interactive data broadcasting and several multi channels - They have strong content power - Open terrestrial platform + Free service + Strong contents 25

26 Korean characteristics in UBB Copyright hold KBS MBC SBS EBS Regional Broadcasters Copyrights Broadcaster IP (independent producer) Broadcaster IP Broadcaster IP Broadcaster IP Broadcaster IP number 6, , , , ,019 0 Korea Broadcasting Commission,

27 Korean characteristics in UBB Content Distribution Platform Network Device CJ NHN Daum KBS MBC SBS KT SK Telecom LG PDT Samsung Electronics LG Electronics 27

28 Korean characteristics in UBB Terrestrial vs Telcos - Different from other countries in UBB - Opening of value chain creates new media industry environment, but with incumbent players dominated - Terrestrial broadcasters compete to lead UBB environment with contents and possible platform - Telcos change to media convergence service in UBB 28

KT s Business Strategies toward the UBB Era

KT s Business Strategies toward the UBB Era Kae Soo Lee KT Management Research April, 2008 I Korean Telecom Market III Strategic Directions of KT 1. Major Players 2. Broadband and FTTH 3. IPTV 1. Customer