while channel providers are celebrating regulatory changes that finally permit Korea’s telco giants to offer linear channels in real time, it’s not quite such good news for content distributors that Internet Protocol (IP) TV providers will only be allowed to carry existing channels – and not programme their own. With big content budgets, and competition driving up content prices, Korean telcos have been good customers to the content providers – licensing a variety of mainstream and niche content for their VOD (video on demand) and SVOD (subscription VOD) services. But all is not plain sailing for the two dominant Internet TV players, with a senior KT executive saying that the launch of internet-based TV may need to be delayed until November, due to continued content negotiations (with Korean channels). KT vice president Yoon Jong-lok said that the company still expects its IPTV business to break even in 2011. The company has invested over 1 trillion won (US$866 billion) on the new business since 2007 and plans to invest US$1.5 trillion more over the next five years. Yoon said that although IPTV may be able to begin a commercial service in October, its official launch may be conducted in November. The company aims to double its number of IPTV subscribers to 1.5 million by the end of 2008. KT also expects IPTV subscribers to represent one third of its 6.7 million broadband subscribers after 2011. As of end July 2008, IPTV had 1.53 million subscribers – SK Broadband (formerly Hanarotelecom) leading with 776,000 customers, followed by KT with 720,000 IPTV subscribers; LG had 40,000 as of end-August. Following its acquisition six months ago by SK Telecom, Hanarotelecom has been rebranded as SK Broadband. A major marketing push is expected as the company aims to dominate not just in internet protocol (IP) TV, but in high-speed internet, voice-over IP and home-networking services. Its Hana TV service, which has in excess of 760,000 subscribers, is now called broad&tv – other related products and services are variations of the broad& branding. The company has committed a reported US$84 million into video on demand content funds this year, with $502 million to be spent on content by 2012. Content providers including Disney-ABC International TV, Sony Pictures Television International (SPTI) and CJ Entertainment are among the some 270 whose content is or will become available. Christine Fellowes, managing director Asia, Comcast International Media Group (CIMG) says that in previous years Korea has been the only serious VOD/SVOD market, “Although recently here too there’s been a noticeable shift in the telco’s focus from VOD to linear channel carriage with frequent personnel shifts and a focus on full channels.” She says there’s already been a drop in content demand for VOD , now that Korean telcos are allowed to offer linear channels, “(But) we expect that there will still be interest in VOD, particularly for content drivers such as terrestrial dramas, feature films, adult and children’s programming.” Asked about SPTI’s VOD deals in the region, Ross Pollack, SPTI’s senior vice president, distribution, Asia says that per corporate policy, they generally do not disclose deals done, but clients can publicize deals under certain conditions. “Our ‘day and date’ VOD deals with SingTel (mioTV) and Hanarotelecom (now known as SK Broadband), and our mobile VOD deal with SKT have all been reported on before.” Pollack agrees that South Korea’s IPTV operators had more imperative to offer VOD but does not agree that operators elsewhere in the region have been any less committed to on-demand. “The IPTV operators in South Korea had to use VOD to build their businesses, but on demand offering is important to all platform operators. The way consumers watch/consume content is changing all over the world and it behoves the platforms who want to stay competitive to provide VOD as part of their service. There will certainly be a change in focus with the launch of linear channels, but the IPTV platforms in South Korea built their service with VOD so we expect on demand to remain a big part of their strategy.” Joyce Yeung, senior vice president and general manager Asia, sales & distribution at BBC Worldwide (BBCW) says, “Regulatory restriction on linear channels is definitely one key reason driving the growth of VOD/SVOD business in Korea. Technology is another major factor. Supported by the highly developed broadband networks, Korea has had a strong VOD following through offering by internet portals and terrestrial networks’ websites. Recently, we also see the Pay TV operators in Singapore offering innovative VOD windows.” She says it’s too early to comment whether Korean telcos’ commitment to VOD will diminish, “But I highly doubt it, as there is a strong VOD viewing habit in Korea. VOD will be a great complement to the linear channels and there are many ways to create USPs through content, window, pricing and marketing strategy.” As for content popularity trends in South Korea, with on-demand being immediately measurable, “Local content including TV series, general entertainment and movies still come in at the top, followed by western movies and TV series. Children’s programs also perform well and are considered to be a key category,” says BBCW’s Yeung. “VOD/SVOD offers a great platform for western content that would otherwise have limited/no exposure on terrestrial and cable channels. It was impressive to see how quickly both Broad & TV (previously HanaTV) and Mega TV built their subscriber bases by offering thousands of hours of programming on SVOD/VOD. Children’s programming performs well on SVOD as kids love to see their favourite shows repeatedly. We haven’t seen any surprise failures.” Says SPTI’s Pollack, “We expected the big blockbusters to do well of course, but what we didn’t expect is the popularity of our ‘Direct to Video’ titles such as Lake Placid 2, Bats: Human Harvest and Boa VS. Python. There is definitely a market in Asia for these type of genre titles and apparently, people like to order them on demand.” And CIMG’s Fellowes explains, “There’s not a lot of data we can share, however anecdotally we see the demand strongest for the slightly more adventurous (risqué, comedic) programming from E! and the Live From The Red Carpet events, special interests titles from The Style Network such as wedding related reality shows and niche programs from G4 targeting video game fans.” Another content provider with a much-publicized commitment to new distribution opportunities, is Disney-ABC International Television (DAIT). In Korea, TV series Desperate Housewives, Grey’s Anatomy and Lost were made available for the first time on VOD on hanaTV and Mega TV IPTV services. DAIT was also the first US studio to offer Hollywood movies on-demand on CGV Choice channel in Korea. In 2007, DAIT launched the company’s very first international movie subscription VOD service, The Film Factory, on SingTel’s mioTV IPTV service in Singapore. Additionally, the latest Disney movies are available on-demand on mioTV. In May 2008, DAIT launched the latest Disney blockbuster movies on VOD for the first time in Taiwan on Chunghwa Telecom’s ‘multimedia on demand’ MOD IPTV service. And in July 2008, DAIT announced a landmark deal with SingTel to make its US series available 24 hours after the US telecast and on-demand on SingTel’s mio TV IPTV service. This is the first time outside the US & Canada that such a large volume of US network series will be offered day and date. “Singapore fans will be the first in Asia to get their must-watch shows like ‘Lost’ and ‘Grey’s Anatomy’ so close to the US air date. At Disney-ABC we understand that consumers want convenience and flexibility to watch their favourite shows when and how they want. By partnering with a new media pioneer such as SingTel’s mio TV, we keep viewers needs front-and-center,” said Rob Gilby, senior vice president and managing director, DAIT (Asia Pacific) Gilby said that VOD/SVOD is a model that is very attractive to the consumer as it offers them convenience and flexibility. “All platforms are additive, not cannibalistic – all platforms create a virtuous cycle for the television industry and each continually drive current fans and new viewers back to the primary platform – television.” Companies interviewed were understandably reluctant to admit that other operators in the region have been less committed to offering on-demand services, despite having the technological capability. “There may be other factors affecting the roll-out in certain territories, but to stay competitive, pay TV platforms will eventually have to make VOD part of their offerings,” says Pollack. “I think success stories with VOD, as demonstrated by the IPTV platforms in South Korea, will continue to spur the growth of the on demand market in Asia.” Explains Fellowes, “The speed to market for VOD offerings is somewhat driven by the momentum of digital upgrades. Investment in the appropriate technological infrastructure to support VOD only makes sense with a strong digital subscriber base when operators look to VOD to increase ARPU and customer loyalty. Content costs for VOD have slowed platforms’ adoption in South East Asian markets. In Japan also costs are often prohibitive for independent productions to create language tracks or subtitles for VOD alone. Jupiter has been acquiring Japanese language programming for VOD and the studios will have versions available for a VOD window following DVD or theatrical release. It is likely that eventually the movie and TV series rental business will be replaced by high-speed HD VOD/SVOD, which may be through existing pay TV platform or possibly through online portals.” “Japan, Korea, Australia and Singapore are likely to lead the way in VOD although we predict the business will develop greatly over the next five years. The big development to watch in VOD will be the online players and we expect this space to grow with connectivity and speed upgrades,” adds Fellowes. “SingTel’s IPTV platform was designed and installed to support a high quality VOD experience. They will attract viewers through broad content offerings, HD and special interest programming that linear channels cannot support.” Says BBCW’s Yeung, “Hong Kong was actually the first country in the world to offer VOD. It didn’t gain traction probably because the market was not ready then. So it is understandable that current players will take more careful consideration. As technology continues to advance and with the emergence of very different audience behaviour ie consumers want to be in control of how they consume content, we expect VOD roll out will pick up its pace in the near future. Other than technology capability, one key challenge for operators is to identify the optimal business model to monetize on VOD.” “Many new pay TV operators are IPTV backed by telcos, so it is only natural for them to leverage on their technology capability in offering VOD and other interactive services. Competition is always the biggest driver to grow a business!” she concludes.