Multiple cable television multiple service operators (MSOs) are navigating the recession of the paid broadcasting market by bolstering their core businesses with ventures in internet and telecommunications, while also seeking to uncover future revenue streams.
According to the paid broadcasting industry on the 11th, the proportion of additional business revenue among cable TV operators' total revenue is gradually increasing. The phenomenon of 'cord cutting,' where subscribers are moving to online video services (OTT) and Internet Protocol Television (IPTV), is substantially reducing sales in the broadcasting sector. In contrast, the revenue generated from internet service provider (ISP) operations and mobile virtual network operator (MVNO) businesses remains stable, and despite any declines, is smaller than that of broadcasting.
However, the revenue scale of additional businesses such as internet and telecommunications remains small compared to broadcasting, and the market is already saturated with participants, making growth difficult. Accordingly, industry insiders have noted that "cable TV operators need to find future revenue streams to survive." Major corporations have already begun restructuring and controlling costs since last year.
◇ Rapid decline in operating profit due to cable TV market contraction
Among the five MSO companies, four (SK Broadband, LG HelloVision, CMB, KT HCN) have submitted their business and audit reports for last year, excluding D'Live. All three companies, except for SK Broadband, reported a decline in consolidated annual results compared to the previous year.
LG HelloVision recorded revenue of 1.1964 trillion won and an operating profit of 13.5 billion won last year. Although revenue increased by 0.52% from the previous year, operating profit decreased by 71.5%. KT HCN's revenue last year amounted to 229.5 billion won, a 3.86% decrease from the previous year, and its operating profit dropped by 54.28% to 10.1 billion won. CMB also saw a revenue decline of 2.10% to 133.8 billion won and an operating profit decrease of 10.04% to 6.5 billion won, marking a 62.78% decrease compared to two years ago. CMB's broadcasting segment accounts for a higher proportion of its total revenue than other companies.
After SK Broadband, which operated in the ISP and IPTV sectors, acquired the MSO T Broad in April 2020, it entered the cable TV market. This corporation is the only one among domestic MSOs to see an improvement in annual results compared to the previous year. Revenue grew by 3.1% to 4.4089 trillion won, and operating profit rose by 12.35% to 352.4 billion won.
Although it successfully defended its performance due to growth in the IPTV sector, cable TV revenue is estimated to have been sluggish. SK Broadband combined its cable TV and IPTV businesses under the category of 'media operations,' making detailed results from last year difficult to verify.
According to the 'Broadcasting Providers Asset Conditions Report' from the Korea Communications Commission, SK Broadband recorded 306 billion won in revenue and an operating loss of 28.2 billion won in its cable TV business in 2023. This business, which was profitable during the T Broad period, has turned to a deficit. This is the first time this corporation has recorded annual losses in this sector since the Commission began publishing asset conditions for broadcasting providers in 2007.
◇ Increasing subscriber churn as OTT grows
The background for the contraction in the domestic cable TV business is attributed to the growth of the OTT market. The number of paid broadcasting subscribers in the second half of 2023 was 36.31106 million, a decrease of 37,389 from the first half of 2022. This marks the first decline in the number of paid broadcasting subscribers since surveys began in 2015. In the first half of last year, 5,328 more subscribers left than before.
In contrast, the number of paid OTT users increased from 30 million in December 2021 to 31.75 million in April last year. The overall OTT usage rate rose from 72.0% in 2022 to 79.2% last year, up 7.2 percentage points, and the proportion of paid users also increased by 4 percentage points to 59.9% during this period. The Commission analyzed that the OTT usage rate among those in their teens to 30s consistently exceeds 90%, and the usage rate among those aged 40 and above is steadily rising.
The growth of the OTT market is cited as a factor accelerating the cord-cutting phenomenon. An industry insider noted, "Cable TV operators, who are losing subscribers and experiencing declining profitability, are enduring the current chill by relying on the adjacent market they entered," adding, "If it weren't for the institutional sector of internet and telecommunications, which has seen a slower decline compared to broadcasting, some corporations might have collapsed much earlier."
In fact, looking at the revenue composition of domestic MSOs, the proportion of additional business areas is increasing. SK Broadband generated 2.4885 trillion won in revenue from its fixed telecommunications sector, which handles internet and telephone services. More than half (56.4%) of its total revenue came from this segment, which is an increase of 1 percentage point from the previous year.
◇ Before the market contracts further… Focusing on new business development
In response to this situation, cable TV operators are rolling up their sleeves to uncover 'future revenue streams.'
SK Broadband, LG HelloVision, and KT HCN are focusing on creating synergies with their parent companies while pursuing their own new business initiatives. SK Broadband is responsible for the AI data center (AIDC) sector, which is a pillar of its 'infrastructure super highway' strategy aimed at monetizing artificial intelligence. Additionally, it is accelerating its business development in business-to-business (B2B) transactions, having recently secured a project for building dedicated lines for post-quantum cryptography (PQC) from Korea Electric Power Corporation. KT HCN is also working on strategies to synergize with media affiliates within the KT Group after being acquired by KT Skylife in October 2021.
LG HelloVision is focusing on the rental and education markets. They are expanding their business scope from major appliances to rental of pet-specific appliances. Last December, they signed a contract worth 175.4 billion won with the Seoul Metropolitan Office of Education to provide tablet PCs to students.
CMB is working to secure new revenue streams based on 'Rainbow TV,' which combines media, commerce, and local information with cable TV. Their strategy is to merge the advantages of cable TV and OTT to attract subscribers. Last year, they also launched the 'Rainbow TV App TV,' which is pre-installed on Samsung and LG TVs.
An industry insider commented, "It is safe to say that most cable TV operators are pursuing new business initiatives," though they added, "It will still take more time for any meaningful performance changes to emerge."