[넘버스]Three reasons why KT is confident in the success of’content platform’

Let’s interpret business, economy and technology with numbers. Numbers are a source of information. Information is open to anyone, and numbers can be seen by anyone, but not everyone has an eye to see the truth behind it. A story of numbers so that everyone can relate <넘버스>I’ll try to solve it easily.

On the 23rd, KT unveiled its vision for moving toward a’content-oriented KT’ at a press conference attended by Lee Sang-mo Lee and Kook-hyun Kang, president of customer division. The recently established content specialized corporation’KT Studio Genie’ is a control tower, with plans to be reborn as a content and media company that focuses on △open, △share, and cultivate.

The news of KT’s expansion of its media and content business is not surprising. In 2019, we rebranded our online video service (OTT) platform’Olleh TV Mobile’ under the name’Seezn’, and in 2020 we spun off’StoryWiz’, a webtoon/web novel IP (intellectual property) based business. And with the establishment of a new corporation, KT Studio Genie, earlier this month, the progress of promoting the media business became more pronounced.

However, some doubts remained in the gaze of this. The question is whether KT, a traditional telecommunications service provider, has the capability to succeed in the content business. In addition, global content providers such as Netflix and Disney are already encroaching on the market by securing 100-200 million subscribers, making astronomical investments. In Korea, competing competitors such as’Wavee’ and’Watcher’ are spurring business expansion. This is why KT’s entry into the market is said to be’slightly late’. In the case of the content platform business, especially the user preemption effect cannot be ignored.

When asked,’Why is KT doing the content business?’ CEO Koo said, “The time has come.” In 2020, KT’s separate standard media and content sales amounted to about 3.2 trillion won. The total service division’s sales are 15 trillion won, which is a small proportion. The annual average business growth rate for the past 10 years is also observed at 15%.

In addition, the source of confidence that KT shows in the media and content business is in the size of its customers. According to KT, as of November 2020, there were 873 million IPTV subscribers, 2.57 million cable TV Skylife subscribers, and Hyundai HCN, which is currently under acquisition, totaling approximately 13 million. Looking at the numbers, it means that a quarter of the nation’s customers are KT media platform customers.

On the other hand, KT’s weakness was the form of business focused on distribution. We had enough content distribution channels, but the proportion of our own content was low. This wasn’t a big drawback a few years ago, when content providers and platform providers were operating in a somewhat separate form, but now the story has changed. The appearance of the global OTT’Netflix’ overturned this formula. Today, Netflix is ​​itself a powerful content distribution platform and a production company that produces a huge number of exclusive original content each year. Consumers cheered for’content that can only be seen on Netflix’, and the attractiveness of’a platform that only distributes content’ that can be viewed anywhere is gradually decreasing.

In fact, this is a crisis facing media platform operators including KT. President Kang predicted, “The greater the influence of global OTT operators, the greater the proportion of content that they distribute exclusively.” “The more time passes, the more difficult the content supply and demand will become.”

In addition, it is said that the consumption of media content has increased by 1.5 times compared to the previous year as it entered a non-face-to-face society in 2020. President Kang said, “The amount of content consumption that has once increased is not expected to decrease even after the end of Corona 19. Given the change in market conditions and consumer tendencies, rather than’Why KT does the content business?’,’Why does KT not do the content business?’ “The question has come at a more appropriate time.” It means that enhancing content competency was not an option, but a necessity.

KT is relatively optimistic about its success despite being a latecomer in the market. President Kang introduced three specific reasons. The first is the stable content distribution structure possessed by KT Group. Unlike competitors where production and distribution are separated, KT has a structure in which all production and distribution can be carried out within the group. IP for content creation can be supplied from StoryWiz, and each content can be distributed according to the characteristics of different platforms, including TV channels (SkyTV), paid broadcasting platforms including Olleh TV and Skylife, and mobile areas including seasons. Description.

The second is KT’s artificial intelligence (AI) and big data capabilities. For example, even the most interesting webtoon IPs are not all successful when they are visualized. This is because the content grammar of pictures and videos is different. President Kang said, “KT has 700 billion viewing data generated by 13 million pay TV subscribers in one year.” “We analyzed this with AI to create a sophisticated box office prediction model.” In this process, KT can divide the video into units of 1 second and analyze which scene the user enters and exits. We also have enough viewing data, such as the concentration of previously distributed content and the use of OTT. Based on this, KT explains that it can measure the likelihood of success in 10 stages in the pre-production stage of content.

The third is’time’. KT believes that there is still room for growth in the content market. As the demand for domestic and foreign K (Korean)-contents increases, a number of excellent directors, actors, and works are being discovered, and it is an analysis that existing platforms are rather insufficient to accommodate them. Furthermore, in the process of contracting with global OTT, we plan to expand their opportunities to enter the market by actively sharing profits and IP with small and medium-sized content producers who are afraid of becoming a’subcontractor’.

KT Studio Genie Co-CEO Kim Cheol-yeon said, “The KT platform is open to anyone and will not claim monopoly or priority.” We plan to actively open the source IP owned by KT to our partners and introduce a system in which profits are shared from the beginning of collaboration. CEO Kim explained, “KT is a business that can generate enough profits in the content business, but it means that we will share more with less.” Along with this, we plan to revitalize competitions and mentoring programs to foster young creators, and provide them with opportunities to grow based on the environment of multiple media platforms possessed by KT.

So, what are the mid- to long-term goals of the KT content and media business? To make Studio Genie a corporate value of KRW 1 trillion, that is,’Unicorn’, the policy is to first secure more than 1000 source IPs by 2023 and produce 30 original content titles and 300 episodes.

The role of Studio Genie will also be strengthened. CEO Koo declared on the day that “Studio Genie will become a control tower that leads the KT media business.” At the site, there were also questions asked about Studio Genie’s plan to convert to an intermediate holding company. President Kang replied, “I am still contemplating.” It is explained that we will prioritize the creation of synergy between affiliates over the reorganization of the corporate governance structure, and decide when the Studio Genie lineup of works is completed in the future.

There was also an explanation from CEO Koo that “in fact, it operates as an intermediate holding company.” As the season also acknowledged that there is a high possibility of a spin-off in the future, there is no big change in the prediction that these businesses will unite under Studio Genie in order to unify the governance structure and establish quick decision-making.

However, it is regrettable that the specific investment scale was not revealed at the meeting of key executives such as the group representative. The amount of investment and content completion are not necessarily proportional, but the more money is invested in the content market, the more high-quality production resources can be used, and the number of content that can be produced increases. According to the industry, Netflix invested a content budget of 3331 billion won in Korea alone in 2020. This year, more than double that of 840 billion won is expected to be executed.

On the other hand, KT is in a position that it will not be based on investment funds. As the production cost of each work is different, the plan is to focus on the number of contents created within the deadline rather than the investment funds. The only hint about the size of the investment is that Mr. Kang explains, “It will be the largest investment among domestic competitors.” SKT’Wave’, a strong domestic competitor of KT, announced a plan to invest 300 billion won by 2023 last year. It is about 100 billion won per year. Even if KT invests more than this, it will not be significantly close to the size of overseas business investments such as Netflix.

In the end, the task left for KT is to maximize the return on investment (ROI) through the right’choice and focus’. To do this, KT’s vast user data and the box office prediction model that analyzed it must work well above all else. Incidentally, it will be an opportunity to check KT’s capabilities as a technology company.

Instead of being alone, the strategy of strengthening the production and distribution of Korean-style content through cooperation with competent small and medium-sized content producers seems to be quite a practical strategy. Now what’s important is the proof as a result. As the growth rate of domestic and foreign media platform competitors is also getting faster, there is not much room for KT. Through careful planning and execution, I look forward to preparing a briefing session that focuses more on results than on growth potential at this time of year.