Korean mobile content kings spill the beans

BLOGGING INQ WANNABE JC Allen has trying to avoid squid all week.

Now he's settled down for a serious interview with a couple of chaps shaping the use of mobile content in one of the most technology-friendly societies in the world.

Here's an edited version of account culled from his INQybog here.

IN SEOUL I met with Sean Lee & Kang-Min Ahn who are respectively , CEO & CFO of DirectMedia. We discussed their business of mobile content distribution and their accelerating transition to become the biggest mobile content producer in South Korea.

DirectMedia is a joint venture combining KTF (Korea Telecom Freetel), Samsung and Yedang, the third largest music publisher in Korea.

Their mandate was to explore the opportunities in mobile from a content perspective, whether that could be achieved via a platform, application or a service. In 2002 they successfully commercialised their first mobile TV broadcast and subsequently became the exclusive mobile content 'operator' for KTF.

By 2006 they were the 3G content provider. Since then they have experimented with WiMax, with mixed results, and now they are branching out into web distribution with the recent acquisition of the content provider for the hugely popular Daum portal.

So, one could fairly say that they are in the pretty unusual position of being a mobile content buying up traditional web/online properties. They just turned over $15 million and now
they see themselves as an' Entertainment Content Company' and ready to take on broadcasters and video producers.

So naturally I had to ask Sean and Kang, how did they start and what factors led to their success? What insights can we learn from them and how has their service evolved over the past few years?

Firstly, it is worth noting that 60 per cent of all music downloads are conducted via mobile in South Korea whereas mobile downloads are only responsible for 15 per cent of music downloads in the rest of the world.

Secondly, they were able to benefit from the Korean Telco's 'open
umbrella' approach where they create big opportunities for startups in the mobile space by acting primarily as investors who also offer the enormous power of their payment systems. In particular, distribution channels was where all investments were focused at the turn of the millennium, so DirectMedia was well positioned to take a large chunk of the money.

Thirdly, and this is where things get spicy, Korea is an interesting
case in terms of how content is released and distributed. Traditional channels, like TV and cinema, are very important here but there is a faster turnaround where that content gets distributed onto other formats like DVD, VOD and now mobile. Whereas Hollywood and western content companies tend to release content serially into these other product lines, in South Korea, content releases are almost parallel.

Essentially they are still staggered but within much shorter
timeframes. So whereas in the UK, you might postpone a cinema visit in favour of typically waiting 3-6 months for the DVD release and a year for VOD/cable release, in South Korea audiences are able to expect it much sooner than that.

These factors allowed DirectMedia to capitalise on a hugely under
estimated source of revenue; simultaneous and prior releases of
derivative content. By working directly with the content rights
owners, their distribution power initiated their transition into
producing both online and offline derivative content offerings.

In general, the type of content produced is on a case-by-case basis depending on the show format, be it blockbuster, TV drama, Talk show or Sports. Typically you might be able to download the movie soundtrack via your mobile, get a ringtone or ringback tone. (My understanding of Ringback tones are when music gets played when you call someone instead of the normal dialing/beeping sound which has happened a few times whilst calling people over here - Blondie eat your heart out - means you end up dancing whilst 'hang-ing on-the tel-ephone').

By way of an unusual and innovative example, a blockbuster movie is released and DirectMedia will produce a printed comic & mobile comic version (either hand drawn or movie screenshots with speech bubbles).

Storylines within the mobile comic format tend to mimic blockbusters, whereas TV dramas, such as the hugely successful 'Coffee Prince' can experiment with parallel storylines.

This led me to ask Sean and Kang if this meant that strategies of the content producers were changing to include provisions for parallel and derivative content. Their reply was 'interesting you say that!' as this is one of the key factors for their evolution into a content production company rather than a pure distribution company. With their massive distribution power, now DirectMedia is in a position to sign deals with hugely popular writers and recently signed an exclusive deal with Park Ing Kwang (need to clarify this name).

Given this is mobile content channel company buying up traditional Korean web channels in order to distribute their own produced content online, might you give an insight into the directions Google is taking. And actually Direct Media like the comparison. Google monetise via text and display ads that is relatively agnostic, whether it's search queries or contextual ad matching on content sites. In the same way, content is the business driver for DirectMedia and what they do
is provide ubiquitous access to it along with unique, rich and
unbelievably fast consumer experiences.

So how do they make money out of this content? Currently through user subscriptions and pay per use. Advertising is the next model they are looking to crack. The internet has almost killed off these models in the UK, has it survived here because they own the digital rights? No, actually they produce mostly DRM free content and they don't see DRM free products as a threat.

They believe there is a misperception at work in the realm of content purchase behaviour. Most consumers would rather be honest, which corroborates iTunes' story of success, and as long as the price is right, consumers will buy it. Besides, Sean sees users as not specifically buying content. He says that users are really buying functionality. Ringtones, Ringbacktones, music for your blog, videos on your mobile are all seen as simply applications; Content is Apps.

And this is where perhaps the UK Telco's hand mobile startups are missing opportunities. Their focus is generally on how to generate revenue directly from the user, rather than exploring the range of experiences users want for themselves. Perhaps the west should drop the content is king mantra, be looking at creating apps and functionality with content in mind. DirectMedia generate revenue in three ways. Revenue share on content (b2c), operator fees for supplying the platform (b2b) and shared data charges on sporadic special events, such as a Korea Vs Japan Baseball game. Incidentally the only time their servers have gone down.

So in a world of openness and agnostic distribution the consumer power of the fanboy still holds true. If people love content and it works how they want it and when they want it, people will buy it. µ