DMB Loses 115.8B Won in 7 Months

Digital multimedia broadcasting (DMB) providers that began operation in South Korea for the first time in the world are facing business suspensions after raising deficits above 100 billion won in 7 months from the start of formal broadcasting.

If the land based DMB service comes to a halt, the users of 1.7 million units of DMB devices supplied so far will be damaged. Further, the losses to the enterprises that have been manufacturing mobile phones, navigators and PDAs with DMB functions, let alone the manufacturers of DMB devices, are inevitable.

Such facts were revealed through the document related to land-based DMB which was handed in to Grand National Party assemblyman Lee Gye-jin by the Korean Broadcasting Commission (KBC) and Korea Broadcasting Advertising Corporation on September 20.

According to the document, the gross income (advertisement sales amount) the six DMB service providers including KBS, MBC and SBS raised between March, when the formal broadcasting began, and September, was as low as 1.995 billion won.

On the other hand, the amount of investment the service providers spent in the facility investment and the production of programs to be broadcasted was more than 116.9 billion won, raising the total operation deficit to 115.8 billion won. The amount of deficit will only become bigger when the fixed costs such as wages and the regular costs planned for disclosure by the service providers in December are included in the calculation.

In terms of monthly basis, the average income of the six service providers was slightly above 20 million won, and the monthly average of the costs excluding the facility investments above 700 million won, raising 680 million won loss every month.

Accordingly, the six companies decided to make requests to KBC for special aids, saying, “Most of the service providers will start to experience impaired capital in the first half next year and come to close down in the second half.”

But the possibility that KBC will turn down such requests is high, since the companies are expected to demand unrealizable aids such as the permission for ads during the program or duplex ads.

It is pointed out that the reason the land based DMB companies are experiencing bankruptcy risks is because KBC failed to make proper predictions on the profitability of the business and promoted business blindly trusting the rosy provisions suggested by the government and the electronics companies.

According to the aforementioned document, KBC predicted in the “Final Report on the Appropriateness of Land Based DMB Business” that the ad sales in the land based DMB business this year would be 52.7 billion won, but the actual sales amount up to September is 10.995 billion won.

“Losses to the audience and the related companies are predicted in case the land based DMB business discontinued due to the wrong policy decisions by KBC. The current plans that aims at expanding the DMB broadcasting only streamed in the capital area to the provinces should be fully revised,” Assemblyman Lee stressed.

myzodan@donga.com