South Koreans May Lose Subway Mobile TV As Broadcasters Face Cash Crisis

South Korean mobile TV broadcasters are considering eliminating the service from the nation’s subways as mounting debt and falling ad revenue force them to look for ways to cut costs. The issue is a lack of advertising revenue for the free T-DMB services, and subway viewing is on the chopping block because the broadcasters have to put in extra relays to get the signal underground — and the subway companies charge 350 million won (currently about US$228,000) a year for the privilege reports the LA Times. The articles states that “nearly 10 million cellular users are watching soap operas, sports and sitcoms on a special frequency dedicated to portable viewing”. Back in August last year it was reported that some 13.7 million DMB devices had been sold, of which just under half were mobile phones. In 2007 the expectation was to have 25 million users by the end of 2008. More distressingly, local research firm TNS Media estimated overall viewer rating for the day was just 1.172 percent, peaking at 3.585 percent during the commuting hours of 6 to 7 p.m. in the survey — which indicates that the times people are really using the service is when they commute…in the subway.

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However, the companies are bleeding cash: Lee Hui-joo, a representative from a “special committee” formed by terrestrial mobile television operators, told the The Korea Times that T-DMB operators need to spend at least 600 million won (US$391,000) each month to provide the service, but “if ad revenue remains at current levels, the companies will be threatened with bankruptcy by the end of the year from capital encroachment”. This article pegs the free T-DMB services as having 16 million users, and the for-pay S-DMB service 1.8 million. The combined ad revenue for the six T-DMB operators in 2008 was 8.7 billion won (a mere 120 million won per broadcaster per month), far short of the projections by the Electronics and Telecommunications Research Institute (ETRI) of 60 billion won when the services were launched. The smaller 3 players are losing 550 million won per month. As an example, Korea DMB earned 53 million won last month, and it has seen its 30.5 billion won capital that it had when it started whittled away to just 5.8 billion won.

So unless something drastic happens mobile TV will disappear from the subways in Sth Korea — and possibly from everywhere, since avoiding the license fees to the subway operators won’t cut costs nearly enough for the broadcasters to stay in business. The LA Times quotes an unnamed official for the union that represents TV content providers as saying that the government should step in with some form of bail-out: “Service on the subway is a public issue.” Possibly not the most effective way to save the industry, considering the sheer difference between income and expenditure. For the same reason I can’t see the capital markets stepping in. Another suggestion is for the government to loosen restrictions on the industry and let it obtain revenue from sources other than advertising, such as fees from device manufacturers. This sort of suggestion makes a lot more sense — if the government has put an artificial restriction on the business model removing it is probably the best way to let the industry work.

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