Korean Mobile TV operators are struggling to survive

Korean Mobile TV operators are facing the biggest challenge never expected to happen at that time they decided to enter the terrestrial Mobile TV business, also known as T-DMB(Digital Multimedia Broadcasting) in South Korea, in which they eyed “Cash Cow”.

T-DMB service was started with a revenue model that relies solely on advertising, which was expected by the Korean government to keep T-DMB afloat. It, however, turned out to be wrong, and now T-DMB operators call on the government to allow them to create new revenue streams such as activation fees.

T-DMB operators have long suffered from sluggish advertising revenue regardless of a skyrocketing growth in the number of T-DMB viewers, which account for about a one-third of the nation’s total population almost getting closer to the number of cable TV subscribers. As we can see the table above, T-DMB’s ads revenue is only about 1.2% of cable TV’s revenue, which is too low, even considering average overall viewing rates of about one-tenth of cable TV’s. But, it doesn’t seem that the ads revenue will be increased by that reason because DMB advertisers are more concerned with the advertising exposure rate, rather than the viewing rate or time.

Advertisers understand that DMB users watch TV programs while on the move, and if ads come up, they usually avoid watching them. But, 2007 consumer behavior research report by KOBACO, Korea Broadcast Advertising Corporation, indicate that T-DMB viewers who watch the ads in which they are interested accounts for 33.7% of total responders, which is higher than 17.4% of terrestrial TV viewers.

This is a positive sign to DMB operators and certainly helpful for them to promote their advertisng effectiveness to the advertisers. However, Korean Mobile TV operators doesn’t have enough capital left to maintain their business so they may discontinue DMB service on subways, which costs them more than half of their current profits. It will be so hard for DMB operators to decide whether to stop service on subways since it may create vicious cycle in that most DMB users watch TV programs on the subway. So, it is seen that DMB operators need to find a wise way to overcome revenue shortfall.