D’Live Pegs Future On Content, OTT
Tie-ups with A+E and Netflix point the way forward.
The last few years have tested the bottom line for Korea’s cable incumbents, squeezing revenue and profit as big-spending telcos ventured into a large but saturated market for basic pay-TV.
For the country’s third-largest MSO however, private equity backed D’Live, turnaround comes with a strict timeline: three years, following a refinancing agreed with creditors last July.
That has added extra urgency to starting up new growth engines that can re-establish D’Live as an attractive asset for investors.
CEO YJ Jeon, who took up the post just over a year ago, has been busy diversifying content and services while overseeing a rebrand for the company, formerly known as C&M, to underscore its new ambition.
“I firmly believe that ultimately cable and even IPTV will be a traditional legacy business,” Jeon says.
“Our 2017 strategy will be a multiplatform strategy: cable plus OTT.”
To help D’Live on its journey, Jeon struck deals with two global majors, Netflix and A+E, but is keen for more. Distinctive driver content and broadband delivery are key ingredients for growth.
Although capital constraints add to the challenges ahead, Jeon is hopeful that early moves into OTT, coupled with an openness to partnerships, can help steer D’Live through its transition.
“Telcos are big and bureaucratic,” he says. “We are simpler and fast moving, but we need strong weapons from outsiders to compete.”
A distribution partnership with Netflix, for example, lays a foundation stone for a new OTT ecosystem that can take D’Live beyond its cable stronghold around Seoul, including international markets.
It’s a non-exclusive arrangement but the only one of its kind in Korea so far.
Jeon is hopeful that the tie-up will extend to production as well. Netflix executives are keen to develop a slate of Korean content, commissioning their first Korean movie (Okja, to debut this year) and first Korean drama (Love Alarm, announced earlier this month) with other studios.
A+E meanwhile, also eying a new production hub as well as increased share in one of Asia’s biggest pay-TV markets, has purchased a 5% stake in IHQ, D’Live’s channels and production subsidiary.
This year, IHQ is looking at making two to three variety and entertainment shows and one to two scripted programs for new localized versions of History and Lifetime, A+E’s flagship channels, before ramping up output in 2018 and 2019.
D'Live will also guarantee wide Korean distribution for these brands, which will replace two channels A+E has bought, FoodTV and TVIS.
Jeon, who has risen through the ranks in production and talent management, retains his former role as CEO of IHQ, a separately listed company 50% owned by D’Live.
D’Live also has a content distribution pact with Sony that includes a localized AXN.
Jeon’s content experience and personal network should come in handy for D’Live’s new OTT offering, which is scheduled for launch in the second half of the year.
The service, anchored around Korean celebrities and content, will debut in Korea before expanding overseas, initially in Southeast Asia.
Jeon has already introduced a streaming box at home called D’Live Plus, in a bid to woo younger households as well as people living outside D’Live’s main catchment area.
At this stage however, apart from big screen access to Netflix, there isn’t much content to set D’Live Plus apart, even though the box retails for more than US$100. That’s about the same as a similar box with a richer content offering in the US.
Meanwhile, consumers will soon have more boxes to choose from. Korea’s largest MSO for example, CJ HelloVision, is working on its own offering called Tving Box.
Nonetheless, an initial 10,000-box run for D’Live Plus has sold out, encouraging Jeon to raise this year’s sales target to more than 300,000 units.
The box will incorporate more original content from IHQ as well as, hopefully, access to more OTT services.
A dual strategy
To survive, D’Live must also protect its existing business. That means investing in new services for an aging but relatively affluent cable base, alongside initiatives in OTT to attract new customers.
In all, D’Live serves 2.3 million cable subs, mainly in the Seoul Metropolitan Area. That base includes about 1.6 million (~70%) on digital networks.
Upgraded set-top boxes unveiled earlier this month, D’Live-UHD and D’Live Platinum, will start rolling out in February among the MSO’s top-tier subs, opening up opportunities for D’Live to sell a wider range of connected services.
Jeon is targeting 50,000 installed in subscriber homes by the end of the year.
Overall, the future for cable remains indistinct in Korea after regulators derailed a proposed merger between CJ HelloVision, the country’s biggest MSO, and SK Telecom last year.
Uncertainty over M&A could persist through 2017 but become clearer in 2018, following this year’s presidential election.
The focus of consolidation so far seems to have been subscriber acquisition, rather than business reinvention, Jeon notes. That’s something no pay-TV operator can hide from, he argues.
“After a mature stage, if they do not cultivate another business model, all companies die, even telcos,” he says.
“All pay-TV operators are in danger. Everyone is fighting on price. That is very dangerous.”