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Broadcasting service and Equipment- ROK

Broadcasting Service and Equipment

Republic of Korea

Overview

2004 2005 2006 (estimated)

Total Market Size 258 230 238

Total Local Production 21 24 27

Total Exports N/A N/A 10

Total Imports 237 197 201

(Unit: USD million)

[USD1= 1,200 Won (2004), 1,100 Won (2005), 950 (2006)]

(Source: Ministry of Information and Communication)

Starting with terrestrial TV in 2001, digital broadcasting service is slated for full implementation by 2010 in Korea. Driving the development of digital content are new and potentially exclusive channels, basic and premium tier channels, plus on-demand content from domestic and foreign program suppliers. The business of digital programming and content is made highly attractive by significant competition from cable, the rise in direct to home (DTH) services, the advent of internet protocol television (IPTV), a projection that the digital TV universe will be almost all-pay by 2015, and major gains in consumer purchases of digital set-top-boxes (STBs). It is forecast that total subscription revenues for pay TV will grow from USD 131 million in 2004 to over USD 427 million by 2010 and will be USD 658 million by 2015.

Cable TV was launched in Korea with analog broadcasting service in 1995 featuring 24 channels (program providers) delivered by 54 cable system operators (SOs). Currently 119 SOs are transmitting cable TV content. With the introduction of Korea’s digital terrestrial TV in 2001, Korea digital cable TV services launched in 2004. As a result, Korean cable TV SOs and program providers need to digitize most of their broadcasting facilities from 2003 to 2008. After the legalization of DTH services in 2000, the Korea Digital Satellite Broadcasting consortium (KDB) acquired the necessary license and launched pay TV services in March 2002 via its DTH satellite platform SkyLife. SkyLife acquired more than 1.9 million digital DTH subscribers in 2006, a 13.75% penetration rate of TV households in Korea.

Attracting portable TV viewers is becoming more competitive. SinceDecember 2005, terrestrial providers moved into digital multimedia broadcasting (DMB), which allows viewers to watch TV via a cell phone. The rapid growth of DMB has become a hot trend, drawing the attention of the media and consumers. According to the Ministry of Information and Communication (MIC), over 1.6 million units of DMB-capable handsets were sold between January and September 2006. They are projecting that a total of 2.5 million DMB-capable handsets will sell by the end of 2006. The number of satellite DMB subscribers reached over 700,000 as of August 2006. These new satellite DMB services enable viewers to consume different types of video content, but they are finding out that content is severely lacking. As an example, a free IPTV provider added the 30 finalists of the Jeju independent film festival to its menu. Lack of available content has forced providers to show amateur videos – to fill time, a provider broadcast the finalists of a university student video contest. According to the Korea IT Industry Promotion Agency, the market demand for digital video content is relatively small at approximately 5.5 billion Won, around USD 5.4 million, in 2005. However, the industry is forecast to grow to be worth several billion dollars by 2010 as new service platforms are implemented.

In 2005, market demand for TV broadcasting equipment and services reached an estimated USD 240 million. Although equipment is currently being procured primarily for terrestrial TV broadcasting, the market demand for digital equipment for cable and satellite TV services is forecast to be very strong over the next three to five years. There are no major market access barriers for broadcasting equipment, and most categories of equipment enter Korea with an eight percent duty based on Cost-Insurance-Freight (c.i.f.) value.

Spending among the multi-station operators (MSO) has driven opportunities for suppliers of digital equipment for terrestrial broadcasting. In March 2004, the National Assembly revised the broadcasting law allowing for the establishment of digital services. The law also allows increased foreign investment in Korean SOs and program providers. This investment will speed up the deployment of digital cable TV, which in turn means increased opportunities for equipment suppliers and program providers.

Best Products/Services

Broadcasting equipment (encoding/multiplexing/modulating equipment)

Test and measurement equipment

Graphic equipment

Production equipment

Video servers and switchers

The shortage of quality content to supply the growing new service platforms represents a real opportunity for U.S. content providers. The best prospects for imported content and programming are in the areas of movies, sports, animation, drama, and documentaries.

Opportunities

The surge of investment in new broadcasting services represents important opportunities for U.S. program providers (PPs). Korea currently has four terrestrial TV networks, 83 satellite TV channels, and approximately 70 cable TV channels. After the launch of digital satellite and digital cable TV services, the total number of Korea’s satellite and cable channels is expected to reach approximately 200 over the next three years. Also, the number of subscribers to the satellite and expanded cable TV services is projected to increase dramatically and will create great demand for foreign programming. Currently, U.S. programming accounts for approximately 70 percent of all imported programming. With the popularity of U.S. programming in Korea and the enormous projected increase in channels, U.S. PPs are well positioned to expand rapidly in Korea’s growing market. As of March 2006, there were about 200 registered PPs in Korea. Among this number, approximately 70 PPs are responsible for the majority of activity in the market, providing programming both to satellite and cable TV channels. Although digital broadcasting equipment for terrestrial TV services is forecast to remain the largest market segment through 2010, Korea’s launch of digital satellite and digital cable TV broadcasts will continue to bolster strong market demand over the next three years.

KDB, the platform operator for satellite TV in Korea, has projected purchases of USD 100 million worth of digital broadcasting systems equipment, an average of USD 14.5 million annually. However, the investment plan will be contingent upon increases in the numbers of subscribers. Also KT and Hanaro are looking to launch and aggressively promote digital video services (or IPTV) over ADSL, VDSL, and Fiber to the Home (FTTH) networks. This may take longer to execute due to regulatory restrictions, but the threat of an integrated product bundle will clearly be a challenge to cable. As a result, SOs are increasingly focusing their efforts on deploying digital set-top-boxes in volume, bundled with both Internet and, in the future, VoIP services.

Resources

Trade Shows

Korea Electronics Show

http://kes.org/kes2006/eng/main/index.html

Korea International Broadcast, Audio and Lighting Equipment Show (KOBA)

http://www.koba.or.kr/eng/main.asp

Digital Multimedia Broadcasting Expo

http://www.dmbexpo.com/

Key Contacts

Ministry of Information and Communication (MIC)

http://www.mic.go.kr/index.jsp

Korea Broadcasting Commission