Already disappointed in the subscriber numbers for its satellite-digital multimedia broadcasting (DMB) service, TU Media now faces the end of its monopoly in the market with the launch earlier this month of a terrestrial competitor backed by major Korean TV broadcasters.

The terrestrial-DMB service will provide consumers with seven video, 13 audio channels and eight data channels, which the head of the Korean Broadcasting Systems (KBS) believes will provide serious competition for TU Media’s satellite-based service.

“I am certain that terrestrial-DMB will experience the greatest growth among all media over the next two years,” said Yun-Joo Jung, the president of KBS. “First, it is one of the megatrends that people go mobile and ubiquitous. Second, in Korea, audiences want content produced by terrestrial networks, which have differentiated ability of producing competitive program like major studios in Hollywood do in America. Third, the slowing Korean economy will give a lot more merits for free [terrestrial]-DMB content rather than the paid service of [satellite]-DMB.”

Strong Market Growth Expected

The two offerings are battling for share in a DMB market likely to be really strong over the next year, the company officials said. “The ratio of purchases for mobile handsets combined with DMB will increase rapidly over the next month,” said Soon Kyu Kang, vice president of TU Media. “Information-Communication Minister Chin Dae-je recently stated the majority of people now buying handsets look to buy one which is DMB compatible.”

Given the expected growth in the market, TU Media is confident it can continue to grow its subscriber base, Kang said. The service, which launched in May, has attracted 310,000 customers willing to pay 13,000 won ($12.53) per month and a subscription fee of 20,000 won ($19.28). The company had been targeting 600,000 subscribers by the end of 2005 for the offering, which provides consumers with eight video and 24 audio channels. TU Media plans to expand the service to 14 video channels and add content such as interactive games and still expects to have 6.6 million subscribers by 2010.

TU Media’s holds the market advantage because it was the first to market, Kang said. “The problem is that [terrestrial]-DMB phones are not likely to come into the market this year,” he said. “By contrast, [satellite]-DMB boasts of 19 terminals, including 15 cell phone types. For now, [terrestrial]-DMB service providers have no lucrative business model, and it remains to be seen whether companies will buy TV ads on them. If not, they would be in trouble.”

Jung, however, already believes the terrestrial offering is on more stable footing than TU Media’s satellite offering. “[Terrestrial]-DMB operators also have a low cost advantage over [satellite]-DMB because they save large amount of construction costs by using existing facilities,” he said. Generally speaking, [terrestrial]- DMB operators don’t carry a lot of risks. On the other hand TU Media has to test its willingness of how large amount of initial loss it will bear before it turns black, which I see highly unlikely at least for several years.”

Terrestrial Content Advantage

The terrestrial offering has a huge advantage in terms of content, the two official said.

“Although the audience share of the terrestrial networks are shrinking, almost all of the killer content still comes from the competitiveness of terrestrial programmers,” Jung said “Three major terrestrial TV networks in Korea (KBS, MBC, SBS) have dominated in terms of the quality of human resource and the scale of production. This is the first reason many think terrestrial network-backed DMB will have the edge over the [satellite]-DMB.”

TU Media will have to work hard to compete on content, Kang admits. “The lack of killer content is a potential Achilles’ heel for [satellite]-DMB,” he said. “We are looking to add killer content such as big sports events, strong drama, etc.”

The service, which attracts a young audience in particular, and the content likely will draw a lot of interest from the advertising community, Jung said. “The size of the market for [terrestrial]-DMB will not exceed that of television in the near future, and ultimately conventional television will remain the largest revenue generator. But at least in terms of new market development or effectiveness of targeting, [terrestrial]-DMB attracts more attention from advertisers as well as broadcasters than TV.”

–Mark Holmes

(Chuloong Jung, KBS, jungcr@kbs.co.kr; Huh, Jae-young, TU Media, yoakim94@nate.com)