Exclusive Interview: KBS’s Kim In-Kyu

PREMIUM: Ahead of receiving the International Emmy Directorate Award at tonight’s International Emmy Awards Gala, Kim In-Kyu, the president and CEO of the Korean Broadcasting System (KBS), talked to World Screen Newsflash about the broadcaster’s initiatives to drive technological development.

TV ASIA PACIFIC: How has Korea’s advertising market performed over the last year? How important is advertising revenue for KBS?
KIM: In 2011, total advertising revenue in Korea increased by 10.9 percent to 9.56 trillion won ($8.7 billion). Terrestrial broadcasting advertising, which takes up the largest portion, increased by 6.9 percent to 2.36 trillion won ($2.1 billion). This is due to [increased] competition between the large advertisers, such as the electronics, telecommunications, and automotive companies; a surge in marketing [spend] in proportion to the increase in exports and domestic demand; and a recovery of the advertising [market] in general to an average level, which shrunk in the financial crisis in 2008.

KBS operates 13 channels, including two TV, seven radio, and four DMB [digital multimedia broadcasting] channels. We sell advertising for one TV channel (KBS 2TV), one AM radio channel, one FM 1 channel, and one DMB channel (KBS Heart). In 2011, the advertising revenue of KBS was 598 billion won ($544.8 million), a 25.4-percent share, second among the terrestrial broad­­casters (following MBC).

The ad mar­ket for cable TV in 2011 was 1.4 trillion won ($1.3 billion), an increase of 18.4 percent, [with the fourth-largest share] after terrestrial TV, the Internet and newspapers. Cable TV channels are aggressively investing in content production and trying to take their share of advertising, which remains [half the size of] the advertising income for terrestrial TV. Even the growth for cable TV has stalled recently. Meanwhile, in December 2011, four general-entertainment cable channels whose major shareholders are the main newspapers launched to an unexpectedly poor performance in terms of audience ratings and advertising revenue.

KBS is largely financed by the license fee, advertising revenue and other commercial income. Through a reorganization in 2011, KBS created new departments responsible for developing business opportunities, which include a global strategic center and new-media center. Due to such efforts to diversify income, commercial revenues increased from 14 percent [of total revenues], 193 billion won ($130.2 million), in 2005 to 23 percent, 348 billion won ($317 million), in 2011. Content sales increased from 26 billion won ($23.7 million) in 2005 to 140 billion won ($127.5 million) in 2012 thanks to diversification of sales outlets, development of killer content and the efforts to secure the copyright wherever it is necessary and possible.

TV ASIA PACIFIC: Is the 15-second or 30-second spot still preferred among Korean advertisers? What new ad forms are you developing?
KIM: The 15-second or 30-second spot is a common form of the commercial in a terrestrial-TV advertising market as well as for cable TV. The percentage of [product placement] in terrestrial-TV advertising in comparison to total advertising is still negligible. Nevertheless, [product placement] when legally permitted for the first time in 2010 amounted to 4.7 billion won ($4.3 million), but increased to 211 billion won ($192.2 million) in 2011, displaying a remarkable 450-percent growth.

In the past, advertisers’ relationship to the program was indirect in the form of sponsorship. But recently, with the advent of new forms of advertising such as [product placement], there begins to emerge a trend of advertisers trying to be involved in the production in a way to increase the effectiveness of their marketing [spend]. This trend is more prominent in cable TV than in public TV.

Having taken into account the fact that commercialization can violate the independence of production and programming, KBS does not allow advertisers to take part in the process of program planning and content development.

TV ASIA PACIFIC: On-demand and DVRs have radically transformed the broadcasting business in the U.S. Are these factors affecting KBS?
KIM: South Korea is one of the most wired countries for broadband coverage, including wireless connections, and also has very high rates of PC, IPTV and smartphone penetration. Naturally, real-time viewing of terrestrial TV decreases while viewing hours through PCs, IPTV and smartphones have been increasing.

KBS, in an effort to keep pace with this trend, has developed Player K to make it possible to watch not just real-time TV but also reruns on smartphones, [tablets], PCs and so on. Around 3 million viewers (6 percent of the entire population) have access to Player K.

Player K, unlike traditional terrestrial TV, is interactive and can give a variety of different viewing experiences to the audience. Moreover, anyone anywhere in the world can have access when connected to the Internet.

In addition, KBS is building a new smart-media ecosystem (Open Smart Platform, OSP) in response to over-the-top [platforms] such as Google TV and Apple TV. The existing OTT market is a closed one dominated by large companies while OSP allows everyone in the value chain of OTT to play an active role. KBS is working on the rules and systems in which revenues are evenly distributed according to contribution, and standardizing content and devices so that everyone can participate in this ecosystem. OSP will become a global platform on the strength of Korean content.

TV ASIA PACIFIC: What progress still needs to be made to complete the digital switchover?
KIM: The digital transition will be completed at the end of this year. KBS invested 818 billion won ($745.1 million) for the successful transition, aiming at 96-percent digital coverage nationwide. Since Korea is a mountainous country with a number of small islands, it is not possible to achieve 100-percent digital coverage only with a terrestrial signal. In 2010 KBS put up 32 billion won ($29.2 million) to establish the Foundation of 100% Digital Viewing. The purpose is to deliver clear digital broadcasting for areas that a terrestrial digital signal cannot reach by setting up satellite low-power repeaters. But for the successful transition, the voluntary participation of the viewer and the government’s active support are needed more than anything else.

TV ASIA PACIFIC: What are KBS’s plans for 3D broadcasts?
KIM: In 2010, KBS set up a 3DTV Strategy Plan and has been in discussion with the Korea Communications Commission for allocation of a frequency in order to provide universal 3D viewing.

We did test broadcasting of full HD dual streams for the Seoul region in 2010 and 2011, and demonstrated 3D TV broadcasting of the G20 Summit in November 2011. As a part of trial broadcasting we also broadcast the IAAF World Championships Daegu 2011 in high-definition 3D. To stimulate production of 3D content, we launched a project team for 3D content and produced a medical documentary, Fetus, in 3D, which records pregnancy from inception to birth.

TV ASIA PACIFIC: What gains have you seen in KBS’s international-distribution business?
KIM: In Asian markets, Korean content is one of the most popular. Of Korean content, KBS content scores the highest turnover. The 2011 revenue was approximately $80 million. And it is expected to grow to $85 million in 2012. Overseas sales are occurring mostly in Asia. However, we are trying to expand our markets in the Arabic region, Eastern Europe, Russia/CIS region and Latin America. Although VOD is a preferred form of content consumption in Western Europe and North America, we recently sealed a deal with a French company for the broadcast rights to Boys Over Flowers and Iris. What is behind the popularity of Korean content is K-pop and Korean pop-music stars. Stars such as Girls’ Generation, TVXQ, Big Bang and other artists are popular across Asia as well as in Europe and America. Dramas that feature them also enjoy enormous popularity.