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SK Telecom (SKT) and South Korea’s three terrestrial broadcasters have decided to set up a single entity to manage their over-the-top (OTT) video services. The OTT service created by the country’s number-one mobile carrier and its content-producing terrestrial broadcasters is set to compete with American company Netflix, which has been expanding its domestic presence.

On the afternoon of Jan. 3, representatives from SKT and the broadcasters KBS, MBC and SBS met in the Mokdong area of Seoul to sign a memorandum of understanding (MOU) toward cooperation on a combined OTT service. The companies agreed to launch a new corporation that will merge SK Broadband’s Oksusu OTT platform with Content Alliance Platform, which runs an OTT service called Pooq. Funded by the terrestrial broadcasters, Pooq provides real-time terrestrial programming and video-on-demand (VOD). According to the plan, Pooq and Oksusu will soon be combined and relaunched as a new brand and service.

Combined OTT service by SKT and major broadcasters

Users’ media consumption patterns will be consulted in designing the new OTT service’s payment plan with the goal of making it simple and user-friendly. SKT has agreed to contribute its streaming technology and its content recommendation technology, which is based on artificial intelligence and big data. This service won’t just distribute content already owned by the terrestrial broadcasters; there are also plans for the broadcasters to produce original content and to partner with domestic and international content makers to supply high-quality media content and work with them on joint productions. The companies involved are planning to approach domestic and international investors to raise the substantial funds necessary for these projects.

This MOU was made possible by the coinciding interests of SKT, which seeks to become something more than a mobile carrier, and the terrestrial broadcasters, which are losing their grip over content distribution in the country. Thanks to SKT’s status as the country’s number-one mobile carrier, its Oksusu OTT platform has 9.46 million subscribers, but the platform has a shortage of content. In contrast, the terrestrial broadcasters are capable of producing content, but their Pooq OTT platform only has 3.7 million subscribers (both figures based on the third quarter of 2017).

Given these circumstances, both SKT and the terrestrial broadcasters have been disturbed by the rapid growth of Netflix, which has become the world’s leading OTT service by emphasizing both the quality and quantity of its content. The emphasis of the combined service will be “defending the diversity of Korean culture and local media content” and “serving as a catalyst for extending the Korean Wave and bringing K-content to the global market.” The companies also announced that they plan to turn their combined service into a global OTT brand by expanding overseas this year, with a focus on the Southeast Asian market.

This MOU appears likely to accelerate SKT’s efforts to transcend its origin as a mobile carrier. SKT has been expanding its business operations beyond its original focus on communications (including cellular phones and internet service) to fields such as artificial intelligence, mobility and security. Through the establishment of this combined service, SKT will function as the communication platform while the joint venture will take on the role of content provider. This is similar to the vertical integration model at Kakao, which has the KakaoTalk, Melon and KakaoTV platforms and a content subsidiary called Kakao M.

“More competitive content, distinctive services, larger platforms and overseas expansion are essential for the growth of the OTT business and the development of the domestic media ecosystem, and ongoing investment must be guaranteed. Our eventual plan is to build this combined service into the Netflix of Asia and beyond that to Korea’s flagship OTT service that can compete in the global market, thus revitalizing the domestic media ecosystem,” SKT said.

By Park Tae-woo, staff reporter

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