By Vivek Couto
OTT consolidation in Korea. Pooq and Oksusu, two of Korea’s leading online video services, are joining forces to drive scale economics at home as well as capitalize on potential opportunity abroad. It’s a union of convenience to improve their prospects in a tough domestic online video market, with challenging growth hurdles for SVOD in particular.
A burgeoning TVOD business, monetized through pay-TV set-top boxes, dominates Korea’s VOD ecosystem, limiting SVOD momentum while enriching ubiquitous telco-run IPTV platforms. At the same time, telcos also subsidize broadband and SVOD bundles, making life even more difficult for standalone SVOD services.
Pooq and Oksusu’s merger, due to complete by the end of June, will create an entity with 0.9 mil. paying subs and ~US$70-75 mil. in run rate revenue, heavily weighted to subscription, according to Media Partners Asia (MPA). At launch, the combined operation should account for more than 40% of direct SVOD subs in Korea with Netflix and Watcha Play, a local rival, making up most of the rest. Netflix, which has been making significant investments in Korean content, has also benefited from a set-top box integration with LG U+’s IPTV business in Nov. 2018.
Building up a successful business hinges on access to plenty of capital for the long haul as well as a unified strategic vision from shareholders to navigate Korea’s idiosyncratic online video landscape.
The two services are backed by major TV and broadband incumbents. Pooq, a Hulu-type construct anchored around catch-up TV, is run by Content Alliance Platform (CAP), a JV owned by broadcast majors KBS (20%), MBC (40%) and SBS (40%). Oksusu is run by telco leader SK Telecom (SKT) through its SK Broadband subsidiary. SKT will own 30% of the new enterprise, although how CAP’s shareholders will participate has yet to be decided.
Long-term funding will be key, with SKT looking to bring another investor on board, including a possible strategic partner, to help ramp up overseas. KBS, MBC and SBS already run a joint SVOD service called Kocowa in Japan and the US. Kocowa has fared reasonably well in Japan but struggled in the US, although its fortunes may change now AT&T has pulled the plug on one-time rival, DramaFever.
The three broadcasters also license day-and-date OTT rights across Hong Kong and Southeast Asia to PCCW-controlled platform Viu, exclusively in certain instances, as well as other local and regional platforms. Viu also carries drama, variety shows and movies from two of Oksusu’s major domestic content suppliers, CJ ENM and JTBC. Korean entertainment is a major driver of online viewing and monetization for online video platforms in many Asian markets, making a tie-up potentially attractive to multiple operators.
Content and monetization. At home, Pooq will contribute 80% of the new entity’s paying customer base at launch, generating an estimated US$6 monthly ARPU. Pooq, which launched in 2012, started making money in 2017, buoyed by catch-up viewing, especially for variety shows. Pooq also livestreams more than 75 free-to-air and pay-TV channels, including comprehensive channels (a multi-genre pay-TV offering in Korea).
Oksusu, which has a smaller paying base, has focused on advertising with more than 3 mil. claimed MAUs, although it has struggled for meaningful share, competing against YouTube as well as homegrown rivals Naver and Kakao. Oksusu’s parent, SK Broadband, also operates a successful IPTV service, and is number two in the market for home broadband and video bundles behind KT.
SKT is spinning off Oksusu as part of a broader move to simplify its business structure and monetize its equity interests in non-telecom assets. CEO Park Jung-ho recently indicated that SKT would likely restructure from being a telco that owns many non-core businesses to become a holding company that manages various assets, including the core telco business.
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