Korea Communication Market Data  Pay TV: Pay TV Revenue Breakdown by Source

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	1. Pay TV revenue breakdown by source - Korea total, 2011 - 2016 2. Pay TV revenue breakdown by source - IPTV, 2011 - 2016 3. Pay TV revenue breakdown by source - Cable TV, 2011 - 2016 4. Pay TV revenue breakdown by source - Satellite TV, 2011 - 2016   Sources of pay TV revenue include subscription charge, home shopping channel commissions, equipment rental fees, activation and installation fees, advertising/sponsorship, etc. Subscription charge is an amount of money that subscribers pay for TV programs and VoD content delivered by pay TV providers, and it includes subscription charges for basic channels, paid channels, VoD content, etc. These charges are the primary revenue source for pay TV providers who retransmit programs and VoD content from OTA, PP and CP to their subscribers. Home shopping channel commissions are commissions paid by home shopping networks to pay TV providers for a license to transmit their content. Because transmitting home shopping channels does not incur high extra costs, practically most of transmission commissions collected can be seen as revenue. Equipment rental fees are fees that subscribers pay for their equipment (e.g. STB) supplied by pay TV providers. Activation and installation fees are paid by new subscribers for joining and installing equipment required for the service at home. Advertising revenue is generated from ads placed on VoD, right before TV replay or movie. As pay TV providers cannot directly do programming as OTAs or PPs do, their advertising revenue is mostly coming from these ads.   • Pay TV Platform: IPTV, Cable TV and Satellite TV • Data: Korea Communication Commission (KCC)

 

 

1

Pay TV Revenue Breakdown by Source - Korea Total, 2011-2016

 

 

Source: Korea Communication Commission (KCC)

Note: The Dollar amounts shown for the years ended December 31, 2016, 2015, 2014, 2013 and 2012 were translated at the rate of KRW 1,203.7 to US$1.00, KRW1,169.3 to US$1.00, KRW 1,090.9 to US$1.00, KRW 1,055.3 to US$1.00 and KRW 1,063.2 to US$1.00, respectively.

 

Above figure shows pay TV revenue breakdown by source in 2016. Basic channel subscription charge in a total of KRW2,033bn (2.2% year-over-year increase) was the No. 1 revenue source, with the largest share (39.4%) in the total pay TV revenue. The second biggest source was home shopping channels commission, which accounted for 24.3% share up by 10.7% from the previous year, followed by VoD at 13.7% (up by 10.7%), equipment rental fees at 11.3% and advertising at 4.8%.

 

 

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Pay TV Revenue Breakdown by Source - IPTV, 2011-2016

 

 

Sources: Korea Communication Commission (KCC)

Note: The Dollar amounts shown for the years ended December 31, 2016, 2015, 2014, 2013 and 2012 were translated at the rate of KRW 1,203.7 to US$1.00, KRW1,169.3 to US$1.00, KRW 1,090.9 to US$1.00, KRW 1,055.3 to US$1.00 and KRW 1,063.2 to US$1.00, respectively.

 

IPTV is growing not only in quantity (subscription and revenue), but also in quality (ARPU). In 2016, IPTV grew by 13.5% in subscription, by 27.2% in revenue, and by 10.3% in ARPU year-over year. Armed with fixed-line and mobile bundles and abundant content, IPTV has been successfully expanding its subscriber base. Upturn in subscription (particularly basic channel and VoD subscription) and home shopping channel commission is boosting revenues and ARPU.
In 2016, IPTV had a total subscription revenue of KRW1,721bn, up by 14.6% from a year ago, accounting for 70.9% of the total IPTV revenue. Of the total subscription revenue, KRW1,120bn was generated from basic channel subscription and KRW548bn was from VoD. The basic channel subscription revenue went up by 13.5% and VoD subscription revenue were up by 15.0% year-over-year. IPTV is the only platform that is experiencing growth both in basic channel (primary product) and VoD (secondary product) subscription revenues. Particularly, VoD is generating high revenue, almost half of what basic subscription is yielding. The VoD has share in the total IPTV revenue at 22.6%. Compared to Cable TV (7.3%) and Satellite TV (0.7%), it is overwhelmingly high.
Home shopping channel commission revenue in 2016 reached KRW337bn, up by 40.1% from the previous year. Its share in the total IPTV revenue has also risen from 11.8% in 2014 to 13.9% in 2016.

 

 

 

3

Pay TV Revenue Breakdown by Source - Cable TV, 2011-2016

 

 

Source: Korea Communication Commission (KCC)

Note: The Dollar amounts shown for the years ended December 31, 2016, 2015, 2014, 2013 and 2012 were translated at the rate of KRW 1,203.7 to US$1.00, KRW1,169.3 to US$1.00, KRW 1,090.9 to US$1.00, KRW 1,055.3 to US$1.00 and KRW 1,063.2 to US$1.00, respectively.

 

Cable TV had continued to expand with growing subscription base and revenue since its launch in 1995 until 2009 when a formidable rival platform, IPTV, entered the pay TV market offering a great collection of bundles with fixed-line and mobile and compelling content. IPTV, stealing considerable numbers of customers from cable TV, has grown 33.6% annually on average, securing 13 million subscribers by 2016. On the other hand, after hitting a record high at 15.1 million in 2009, cable TV subscription continued to go down by 1.1% (CAGR: 2009-2016) on average per year until 2016 when it dropped to 13.9 million, losing 1.2 million within seven years.
Due to shrinking subscription base, cable TV has been struggling with declining subscription revenue and stagnant home shopping channel commission revenue since 2012.
As seen in Figure 4-9, the total Cable TV subscription revenue of all providers has also decreased by 7.0% on average per year from KRW1,209bn in 2011 to KRW842bn in 2016.
Other factor contributing to the revenue decline for cable TV was discount rates that cable TV providers applied to basic channel subscription charge to prevent further customer churn. IPTV providers offered IPTV packages bundled with phone (fixed-line/mobile) and/or Internet at discounted rates to win new customers (up to 20% discount when bundling IPTV with Internet, fixed-line or mobile). On the contrary, cable TV had significantly fewer bundle subscribers than IPTV, with more than 80% subscribing to standalone TV service.
To compete against IPTV providers who offered IPTV bundles at discounted rates, cable TV providers had to offer lowered or heavily discounted rates to stop their customers from turning to their competitors, which apparently resulted in steady decline in subscription revenue for years.
Due to decrease in subscription base and the resulting downturn in home shopping revenue in cable TV, home shopping channel commission from home shopping networks dropped. As a result, the home shopping revenue growth rate began slowing down in 2016 for the first time (the growth rate went down by 0.6% as the commission revenue barely went up from KRW709bn in 2015 to KRW767bn in 2016).
With cable TV providers gradually losing their market share to IPTV, it is not likely they will have opportunities to regain subscribers and rebound from there.

 

 

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Pay TV Revenue Breakdown by Source - Satellite TV, 2011-2016

 

 

Sources: Korea Communication Commission (KCC)

Note: The Dollar amounts shown for the years ended December 31, 2016, 2015, 2014, 2013 and 2012 were translated at the rate of KRW 1,203.7 to US$1.00, KRW1,169.3 to US$1.00, KRW 1,090.9 to US$1.00, KRW 1,055.3 to US$1.00 and KRW 1,063.2 to US$1.00, respectively.

 

Decline in subscription revenue was offset by growth in home shopping channel commission revenue, leading to a slight growth in the total revenue.