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22 August 2019

SKT given unprecedented free reign in OTT video merger move

Following in the footsteps of France’s Salto which gained regulatory approval last week, a more aggressive answer to Netflix has just been given the green light over in South Korea. SK Telecom has received permission to merge its own OTT video service Oksusu with the broadcaster-run Pooq, which SKT took a 30% shareholding in seven months ago when the Korean titan first announced its OTT roll up plans.

This is essentially the equivalent of Sky in Europe making a sizable investment in Britbox, the joint streaming venture between the BBC and ITV in the UK, and then fusing it with Now TV. Or more poignant still, imagine if a bunch of US broadcasters buddied up on a country-wide streaming initiative, only to see AT&T take a stake and then roll up the service with AT&T TV Now. Such ideas would never see the light of day.

Clearly South Korean regulators see SKT as a protector against foreign content invasion after Netflix’s rising popularity in the country, and the state’s Fair Trade Commission has therefore given the telco free reign. But to what detriment of other local South Korean services? There may be a backlash yet from the contentious move to create one dominant video platform on the back of the country’s largest cellco with over 30 million mobile subs.

Naturally, there are a number of concessions for the new service, which is called Wavve and is due to launch in September. SKT cannot make it mandatory for consumers to sign up to its telecom services in order to gain access to Wavve. In addition, the trio of broadcasters behind Pooq – KBS, MBC and SBS – have committed to supplying content to third-party OTT services for the next three years. But what then? Come 2022 these companies are allowed to sign the death sentences of other services by cutting off the air supply? If the warning signs about getting hard and fast into original content weren’t already plain to see, they certainly are now, and Netflix has set the bar with its roster of South Korean dramas.

Pooq’s management body, the Content Alliance Platform, will cooperate closely with SK Telecom to form a new umbrella corporation. Original content is high on the agenda and reportedly there are plans to approach content producers from overseas as well as local firms. The combined content angle and business model for Wavve will be interesting, considering Oksusu is a paid service which focuses on sports as well as more adventurous efforts like VR, while Pooq is a free service.

“It was the first time that the FTC imposed corrective actions regarding the merger in the telecom and media industry,” said Hwang Yoon-hwan, from the South Korean state FTC. “We believe the measure will encourage market competition and protect average consumers.”

Oksusu has around 9.5 million active users according to local reports, of which 9 million are paying subscribers, while Pooq has 3.7 million users, of which around 800,000 are paying subscribers, so a combined clout of over 13 million users puts SKT head and shoulders above any other Korean OTT video service – and significantly higher than any previous projections. Netflix, meanwhile, has around 2.8 million subscribers going by our own numbers, but growing much faster – from 1.8 million two years ago and forecast to rise to 3.5 million by 2023. Rolling Oksusu and Pooq together could, however, constrict subscriber forecasts for other OTT video offerings operating in South Korea.

Little is known about how the merger of Oksusu and Pooq will be achieved from a technical perspective, although SKT will likely take charge – hosting assets from both services on its substantial in-house infrastructure. SKT has built its own core streaming architecture, as well as its own content recommendation engine, all complemented by research into big data and AI. It’s likely this is based on SK Telecom’s T Live Streaming technology, which it launched in 2015 in partnership with Samsung Electronics, developing it continuously to become one of the most advanced streaming technologies on the planet.

SKT also uses Media Excel’s MPEG-4 AVC encoding and transcoding product, the Hero platform, for multiscreen services and has done since 2012. But for 4K UHD OTT and DTH efforts, AWS Elemental is preferred for its HEVC encoding software powered by AWS Elemental Live and Server video processing.

More significant in our view, is that a merged and soon to be rebranded Oksusu-Pooq is expected to launch overseas later this year with potential complications for smaller players in the South East Asian OTT content scene. Even then, Wavve has an all new foreign streaming presence to contend with as Disney+ launches globally in November.