Business Strategies of Korean TV Players in the Age of Over-the-Top (OTT) Services

This paper is a comparative analysis of business models and strategies employed by firms in the digital video marketplace facing competition from Over-The-Top (OTT) content services. It focuses on the Korean TV market, that is, and analyzes the strategies of all players including traditional over the air broadcasters, pay TV providers, telecommunication network providers, and the new over-the-top (OTT) service providers. According to the definition of ABI Research, OTT content is characterized as “online video from services and operators that is distributed over a number of channels including fixed (e.g. to computers, connected computer equipment, tablets) and mobile (e.g. smartphones and tablets) broadband - it is not associated with a pay TV service provider subscription” (ABI Research, 2014). Consumers are increasingly streaming or downloading long-form video programming (mainly movies and TV shows) by using OTT content services, and sometimes unsubscribing from traditional video providers. This phenomenon - described as ‘‘video cord-cutting’’ or ‘‘over-the-top (OTT) bypass’’ - suggests that the business models of traditional TV service providers are under threat (Banerjee, 2014). OTT services were initially provided by specialized OTT video content providers such as Netflix and Hulu. As a result, traditional pay TV service providers are experiencing some revenue losses and slowdowns (Banerjee, 2014). For instance, while Netflix added 14 million subscribers in the last three years, the cable and satellite TV lost 7.6 million. In the third quarter of 2013, Netflix subscribers (33 million) surpassed the HBO subscribers (28.7 million) (Song, 2014; Variety, 2014, April 30). PayTV providers are responding to this new threat by experimenting with new services such as: 1) multiscreen (N-screen): everywhere, anywhere 2) monetizing content beyond the subscription 3) online pay TV packages: a fully OTT model 4) cloud pay TV: app in smart TV or disruptive business model 5) Hybrid broadcast/broadband services (Gartner, 2013, July 25; cited in Song, 2013). Not only pay TV providers but also all types of service providers, including terrestrial broadcasters, IT companies, and device manufacturers wishing to enter the TV media business provide services in OTT form (Song, 2014; Crandall, 2014; KISDI, 2013). Unlike the case of the United States in which the third party players (e.g., Netflix) rather than pay TV providers dominate in the OTT content service market, the Korean case draws a different picture. Domestic telecommunications service providers, terrestrial broadcasters, cable TV providers and IPTV providers have led the OTT content market actively launching OTT video services as part of their N-Screen strategies. In addition, while global companies pay attention to large-scale global platforms, domestic companies focus more on making connections to multi-screens and mobile devices (KISDI, 2013). About 6 service providers have led the OTT content market, including traditional telecom service providers:, (KT’s Olleh TV mobile, SK BB’s Btv Mobile, and LG U ’s U HDTV), terrestrial broadcasters (POOQ), and cable TV providers (TVing by CJ HelloVision and EveryonTV, a joint venture between Hyundai HCN and Pandora TV) (KT, 2014). Despite the criticality of OTT content services, not many studies have been conducted about business models and strategic positioning of TV players except in consulting firm reports or company trade reports (ABI Research, 2014; Song, 2013; Ross & Erasmus, 2013; Aidi, et al., 2013). Therefore, this study aims at providing insights and implications for deploying the global OTT content services by comparing and contrasting the business models and strategies of Korean TV players as a case study.