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South Korean Multichannel Industry To Survive With Right Strategies

As the cable subscriber base continues to contract in South Korea, panelists at the 2019 Korean Cable Television Association Conference held Nov. 7 in Seoul, South Korea, discussed if the local cable and multichannel industry will survive and opportunities to drive growth.

The South Korean multichannel market is highly saturated with an expected 34 million subscribers by year-end 2019, which translates to penetration of 170%. Driving this high penetration is the fact that many households subscribe to more than one multichannel service, mainly cable and IPTV. As cable subscriptions remain low-cost, most subscribers do not cut their cable cord even if they get an additional multichannel service that is likely bundled with their broadband and/or mobile subscriptions. That said, Kagan estimates IPTV will overtake cable as the dominant multichannel platform with an approximately 46% subscriber share by year-end 2019.

With the announced merger of SK Broadband and t-broad Holdings Co.Ltd. as well as LG U+'s acquisition of CJ Hello being conditionally approved by the Korea Fair Trade Commission, cable could be seen as a sunset industry. Apart from looking for a potential buyer, most cable MSOs in South Korea are not actively seeking opportunities to turn around their declining businesses.

However, panelists agreed that the cable industry — and the multichannel industry, in general — can still survive as long as they adopt the right strategies at this critical time. Over-the-top is a threat yet can present opportunities to multichannel operators via partnerships. In these partnerships, OTT service providers gain access to multichannel operators' established subscriber bases while multichannel operators can leverage the content libraries of their OTT partners. Multichannel operators in many parts of the Asia-Pacific region are exploring new partners and partnership models. Astro Malaysia Holdings Bhd., for example, acquired exclusive rights to deliver iQIYI Inc.'s content in Malaysia, while iQiyi launched its first branded linear channel on Astro. In Taiwan, cable MSO Taiwan Optical Platform Co. Ltd., or TOP, has partnered to offer access to LINE Corp.'s OTT service Line TV through its set-top box. In return, news content produced by TOP's four local channels is broadcast live on dedicated channels on Line TV.

Dr. Jong-Kwan Lee, an expert advisor at law firm Shin & Kim, predicted that the role of multichannel operators will evolve and become a platform of platforms, including TV and related services. In South Korea, where consumers are willing to try and pay for the latest technologies, telcos see opportunities to develop new revenue streams from the rising artificial intelligence and internet-of-things-related technologies. KT Corp. recently announced it had upgraded its IPTV service by adding AI and virtual reality technologies. It was the second to do so, following SK Broadband. Telcos benefit from deep learning analytics to understand their customers better to provide optimized services and targeted advertising. These tailored services enhance the TV viewing experience while the latest technologies can be used to provide health and education-related services currently offered as value-added services by the telcos and a few cable MSOs.

Panelists agreed that the government's role in regulating the OTT industry is crucial for the survival of the multichannel business. A digital tax — similar to the tax on digital imported services that will be launched in Malaysia — has been discussed in South Korea for some time, but no concrete plan has been confirmed. To defend the industry against foreign OTT players such as Netflix Inc., a higher tax on video consumption imposed on foreign players is preferred by the industry. By regulating OTT platforms, traditional pay TV service providers could compete on a more level playing field.

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