An Empirical Study on the Subscription to Internet Protocol Television Services in Korea
Posted: 28 May 2011
Date Written: June 30, 2010
IPTV (Internet Protocol TV) service was launched in 2006 as a VOD platform by SK Broadband in Korea. IPTV with VOD and real time broadcasting channels (so called real IPTV in Korea) was started from the end of 2008 by KT and SK Broadband and LG Dacom had joined the market with real IPTV in 2009. The subscribers of IPTV have grown from .23 million in the first quarter of 2009 to 1.74 million by the end of 2009. However, the growth is lower than expectation of service operators and government as IPTV service is considered a superior TV service which is capable of providing interactive programs such as VOD, internet search, and online shopping etc. This paper empirically studies the factors influencing consumer's subscription to IPTV services in Korea.
Choice of IPTV among many alternatives can be determined by various factors such as consumer characteristics, consumption patterns of communication and telecommunication services, and the competition structure of the market where a consumer resides. Using a consumer survey data jointly with market data including regional pay-TV price and market structure, we investigate the effects of the factors. The explanatory variables we use are the number of switching of TV service provider, speed of Internet, use of bundle service, Internet service provider dummies, hours of TV watching, share of terrestrial TV programs watching, average number of channels of cable TV provided in the residence, average price of cable TV service, number of cable TV operators in the residence, size of the family, household income, age, and education. Estimation results from a logit model show that the consumers who have switched pay-TV services frequently and have preference for bundled services are likely to subscribe to IPTV services. Use of Internet service with above 100bps speed also affects positively the subscription of IPTV. However, high dependence on terrestrial TV programs negatively affect the choice on IPTV services. Contrast to the previous literature on adoption of satellite TV, market structure and the price of alternative cable TV service turn out to have only a partial effects on the choice of IPTV. It implies that IPTV has less substitutability with cable TV than satellite TV. This paper has contribution as it shows the effects of objective and controllable factors on the IPTV subscription while previous studies, mostly in the field of communications, have looked at psychological and subjective factors. We also used structural estimation method rather than simple statistical methods such as correlation analysis.
Keywords: IPTV, pay-TV, platform competition, logit model, survey
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