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Trends in Korea’s mobile content

Country is test market for technology

Next to movie stars, some of the sexiest items to be found in South Korea are the mobile phones. Sleek and high tech, Korean phones and other mobile devices were among the first to offer live television, games, music, e-books, user-generated content, mobile blogging and other services to consumers. Together with Japan, Korea currently serves as the world’s de facto test market for new mobile content and technology.

For urban Koreans, a pocket-sized phone is the ideal device to grab a few minutes of entertainment. But a look at actual usage patterns reveals a few surprises.

Ryan Sim, VP and Asia Pacific partner at mobile content provider Gigigo, identifies three key trends in Korea’s mobile content market: “First, people now consume mobile content as much at home as they do outside the home. For example, rather than boot up the computer, users will play games on their phone for a few minutes before going to bed. Next, uptake among users in their 30s and 40s is stronger than we expected. And virtual communities are beginning to form around mobile content, just as they did on the Internet.”

Certain types of content have shown strong potential with users. One report estimates that 12% of Korean mobile users download at least one game per month. “User-generated content has also shown really strong potential, but without a proper legal framework in place, trying to make money from it is a big risk,” Sim notes.

In one sense, this is a big market: In Korea and Japan, mobile content accounts for 50%-75% of revenues from non-SMS data services. Yet data transmission fees comprise the largest slice of this pie, and most firms that produce exclusive content for mobile devices remain small in size. Some believe that, in contrast to Japan where regulations were established early and competition among mobile content firms is high, Korea lacks a truly level playing field.

The major operators SK Telecom, KTF and LG Telecom have a built-in incentive to support data-rich services for which they can charge high transmission fees. Mobile content providers also tend to have little available for R&D costs, which has negatively affected industry diversity.

Nonetheless, major players in the film and television industries are taking a hard look at the fledgling industry.

The popularity of mobile broadcasting (DMB) would seem to offer up a new ancillary market, except that the service has been hard to monetize.

Satellite DMB firm TU Media (a subsidiary of SK Telecom) has a legitimate business model, charging customers a $12 monthly fee for its services, but has only signed up 1.2 million subscribers to date — about half of what it needs to break even.

Unsurprisingly, free terrestrial DMB has been more popular, but the service is bleeding red ink. Each of the service’s six operators are said to have lost between $22 million and $33 million since launching in 2005.

Another option is to create mobile content based on existing films and TV dramas. Content/ game firm CosmoCNT and KBS Media produced a game based on the popular TV drama “Winter Sonata.” Targeted at women who can access it through their phones, the game sold to Japan for $8.3 million.

Korea’s leading film production house Sidus FNH (a subsid of KTF parent KT Corp.) and mobile content firm Mo2 Communication have pacted to produce mobile games based on Sidus’ feature films. Timing releases to coincide with a film’s rollout, the two firms hope to steer gamers to the film, and film fans to the game. Latest title is “Femme Fatal,” adapted from a Korean remake of French comedy “Serial Lover” (1998).

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