[Mobile TV Phone -img from TFTS]

Samsung Electronics and LG Electronics can get their money back from EU. A change in EU customs policy will make a tax refunding for these Korean mobile phone manufacturers, which produce mobile TV (DMB) phones.

Since WTO Information Technology agreement in 1996, all tariffs on mobile handsets are suppressed (tax-free in most cases in EU), allowing Korean manufacturers to compete fairly on European grounds with native players.

But concerning mobile TV devices, EU considered it as TV devices instead of mobile phones since 2007. Therefore, a 14% tariff has been applied. Due to this Samsung Electronics and LG Electronics have paid € 7.5 millions tax so far. However, according to the policy change, there companies can get tax refund.

As a matter of fact, it wax expected to lower tax rate for such multifunctional mobile phone after the enforcement of EU-Korea FTA (Free Trade Agreement). But the sooner this kind of positive market change comes, the more profits Korean players can make.

By the way, European mobile TV  market is expected to reach 20 billions in 2011. Attractive prices and cash reserve will be valuable tools for Korean companies in the moment of truth.

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.

The world’s first Mobile TV, SDMB, was launched in 2004 followed by TDMB in 2005. Mobile TV was expected to make ‘Mobile Broad Casting’ popular and thus people were watching on how it went. Especially, T-DMB penetrated into Saudi Arabia, Norway and Vietnam and still in progress.

While it is globally expanding, Mobile TV in Korea seems getting unsuccessful. - Even though subscriber are increasing in Korea, players are in the red for their business.

DMB subscribers and viewers are increasing as above and ETRI forecasted that DMB viewrs in Korea will be more than 30 million by 2012. However DMB providers still cannot make money from their business since they started DMB service in 2006.

What causes this situation?

1. Weak revenue model
TDMB is soley based on Advertising revenue, and the growth is sluggish. Because of small viewer base, it is unattractive medium for the advertisers. Additionally, KOBACO, the public organization that distributed all broadcasting ads in Korea, applied the same assessment criteria for TDMB. Only for a few cases, TDMB could qulify for the stardards.

2. Poor contents
Mobile TV is a personal media, for which viewers watch only in specific situations such as in the subway etc. But the TDMB players are mostly terristrial broadcasters and thus only try to re-transmit their used contetns without producing new contents for DMB. Smaller players tried to produce contents exclusive for DMB but failed to achieve the economies of scale. This in turn failed to allure more viewers and showed vicious circle.

3. Slow advance
TDMB tried to generate additional revenue from TPEG(the convergence service with navigation) and interactive shopping service. It can’t be achieved by themselves but need partnership from other players such as telecom, homeshopping, etc. But each party pursued their own interests and thus the business advances so slowly.

Media business by its own nature cannot get into stable phase so quickly, and we should not judge so hastily.
But unless the players and regulatory make the wise solution for those problems, we may not see the ’successful mobile TV’