Want To Know More About the Future of Internet TV?: Let’s Look to Korea

Posted on September 29, 2009. Filed under: Internet, online video, Uncategorized, video, Web/Tech | Tags: , , , , |


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We are clearly at a very important point in time when it comes to Internet video, especially video that is served to your television, but over the Internet (also known as “over-the-top” Internet video). Christmas of 2009 and Christmas of 2010 will mark the point in time that Internet menus began to show up in-mass on televisions, DVD players, and game machines. That said, one would be hard pressed to predict exactly how this market will evolve.  There are simply way more questions than answers. For example:

  • Who will own the operating system layer?
  • Who will own the menu “stack” which dictates discovery?
  • What will be the key features of this menu system, and which applications will be most useful and successful?
  • What type of programs are most popular in this format?
  • What are the typical pricing/product offerings?
  • Will this product live inside the carrier set-top box or outside?
  • Will the carriers that control the pipe also control this interface (either directly or indirectly)?
  • Are these systems selling at rates that are above or below expectation?  Why or why not?
  • Is it considered a viable alternative to cable or satellite?

One way to have an advantage in “predicting” what will happen is to look at other countries that are further evolved in terms of broadband. The most obvious of these, with over 90% broadband penetration, is South Korea. Three providers in Korea offer an over-the-top Internet set-top box, and recent press suggests that there are now just over 800,000 subscribers of these services (out of roughly 16-17mm South Korean HHs).  The leader is KT with their Mega TV offering, followed by  LG Dacom, and then SK Broadband.  While these numbers are certainly impressive, if memory serves, the estimates from a few years back were for multiple-millions at this point, so for some reason the roll out has not gone exactly as planned.

According to this article from January, MegaTV has 38 live channels and 85,000 episodes in VOD format.  Also, the video included immediately after this paragraph shows an integration of the Mega TV service on the Playstation 3 (unfortunately its not in English).  This highlights the complexity of the “who owns the menu” question. Mega TV is a set-top box as well as service offering on other boxes.

Unfortunately, outside of what is shared here, I do not have much detail on exactly how this market is evolving. If any readers have more data, or have perspectives or answers to any of the questions listed above, add them to the comments or send them to me at bgurley@benchmark.com with “Korea IPTV” in the subject, and I will incorporate the responses into this post. In other words, I will try to make it a living blog post with the latest and greatest on the Korean “over-the-top” video market.  Thanks a ton – I look forward to hearing from you!

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10 Responses to “Want To Know More About the Future of Internet TV?: Let’s Look to Korea”

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Web TV is dead for now. Apple, Google and MS scare the dickens out of the networks. They don’t want to end up with their content on some DVD being sold in downtown Beijing. Their IP needs protection from dupe. the economics need to make sense. Jobs tried negotiating download prices. networks said, bye-bye. web tv leaves too many questions. how bout censorship issues. internet content is mostly user-generated. junk at best. quality content will drive demand for Web tv. i say its at least two, maybe three years away before anybody makes real money.

I recently bought a new TV and Blu-Ray, and one of the features on both that enticed me to get the specific models was that they were both net-capable. My first reaction was that it would be great for future development, but I was pleasantly surprised with the amount of current offerings.

I have a Sony Bravia W-Series that has a ton of content including full screen (fast and good quality) YouTube video, Amazon on-demand, Slacker Radio and many more options. As well as features like yahoo weather and twitter widgets, which are a bit cumbersome to use, but it seems like there are many features being added.

I also have a Samsung Blu-Ray which offers streaming Netflix, Pandora, Blockbuster, and a few more options. The Netflix is very quick and high-quality (yet limited in content), and the Pandora is fantastic. I probably would have purchased a PS3 over this at the time if PS3 had offered the netflix option at the time, which it now does (Sony TV promises this feature direct within the next few months as well).

From what I can tell on the TV Sony and Yahoo are the major players for both content and control.

There are some great

My parents live in a small town where the Internet is pretty slow (well not slow but someone coming from a bigger city could easily notice the difference)and the Internet is actually too slow to handle TV, even though they’re paying for this service.

First of all, the assumption that the network operators help drive usage is not necessarily accurate. For example, Korean mobile networks are some of the most advanced in the world. However, mobile services lag behind many other markets because the carriers maintain high data charges and only allow users to operate in a walled garden environment. Similarly, the landline telcos have not not come up with compelling applications that can draw users away from either (1) PC interactivity (which Koreans are congenitally comfortable with), and (2) cable TV (which has almost full penetration). The limited market share that IPTV providers have taken away from the cable companies has been mainly through service bundling and pricing. This strategy only leads to cannabilization. But then again, these are telcos, not media companies, that we are talking about. They mainly care about churn and ARPU. What is needed is an innovative company that creates a reason for consumers to want to use lean-forward services on a lean back platform. Maybe it’s an Apple-like company that will emerge that combines cool hardware, a solid operating system and an open Application environment that will change the way that TV is used.

The real challenge is on the content licensing part, as IPTV distribution competes terrestrial and satellite broadcasts. Similar issues took place with mobile TV in South Korea (S-DMB and T-DMB). This is a moment for innovation on content offering and business models. A lot is still in the making.

Here are some info on the recent evolutions on the content side of the IPTV offering in South Korea:

– Sale of various digital products related to TV programs by Qook TV(KT’s IPTV brand) such as characters, ringback tones and animation songs for its animation channel

– Satellite TV channels offer combined with KT’s Qook TV (170 Skylife channels + 65,000 VOD programs of Qook TV for 15 USD/month)

– Creation of ISPN, an IPTV sports channel jointly produced by the 3 IPTV operators

I’m an Korean-American living in Seoul, South Korea.

My family has Cable and More (C&M) a smaller company, but they also provide VOD, which feels similar to IPTV.

On a side note, I believe KT renamed their Mega TV to Qook and then combined their other telecommunications features (home phone, mobile phone, internet, internet phone) to KT Olleh (http://www.kt.com/ollehkt/ – site in Korean), but I could be wrong.

Who will own the operating system layer?
Currently its the companies providing the service, KT, Dacom, etc…

Who will own the menu “stack” which dictates discovery?
I think by default its the IPTV companies, but it would be smart to let the users have the image of control- e.g. customization.

What will be the key features of this menu system, and which applications will be most useful and successful?
Personally, I don’t use the menu system and I typically just channel surf the live channels. However, there are random mini games, read comics, and of course movies.

What type of programs are most popular in this format?
I don’t have this data, but my guess would be Korean dramas and sporting events – kind of like a Tivo- but records all of your shows.

What are the typical pricing/product offerings?
Monthly figures seem to hover around 30,000won about $30 a month. There are always sales going on and if you sign a 3-4 year contract you can get it even cheaper.

Will this product live inside the carrier set-top box or outside?
Not sure how to answer this question. My best guess is that we will have computers with screens that merge all of these worlds.

Will the carriers that control the pipe also control this interface (either directly or indirectly)?
I hope not.

Are these systems selling at rates that are above or below expectation? Why or why not?
Is it considered a viable alternative to cable or satellite?
Being in the highest average work week in the OECD nations. I don’t visit many Korean homes. However, they are always outside my apartment complex marketing to everyone who walks by with free “premium” coffee. It is an alternative to cable and satellite, but I see less and less satellite dishes outside of people’s apartments.

Here are a few personal observations:

Compared to the fast Korean internet, IPTV requires load time, which is a few seconds- but feels like an eternity. They use these load times to show commercials.

Some episodes require additional micro payments – personally its annoying.

User interface is slow, moving around with a D-Pad control feels archaic. Thus, making it difficult to find shows. It would be nice to have a “suggestions” feature.

The library is still too small and sometimes they do parts of a series, instead of having the whole series on there.

It seems like I’m complaining, but that’s not my intention. I just want better services.

Let me know if I can help, but I request people ask specific questions.

Very, very helpful. Thank you.

Can’t comment on the Korean Internet TV market, but I did just finish a lengthy post on my thoughts of the U.S. market this evening: http://alexcalic.com/2009/09/29/the-future-of-television-programming-will-require-better-discovery/

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    …focusing on the evolution and economics of high technology business and strategy. By day, I am a venture capitalist at Benchmark Capital.


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