Korea Moves

Last year one of the bestselling, award-winning albums in South Korea was Thank You I Can Smile Again by Baek Ji Young. It’s an album of power ballads, hip-hop and Latino dance tunes lapped up by teenagers and housewives alike.

Abroad, it might be regarded as the standard multi-genre K-pop fare that passes the rest of the U2- and Beyoncé-loving world by. But the way that Smile Again was bought and enjoyed was far from standard: 67 per cent of its sales were downloads, nearly all of which were to mobile phones. Ringtones and ringbacks have replaced the “single” of old times. Buyers later upload songs online as their homepage soundtrack.

While allowing consumers to express themselves across the media platforms upon which their social lives are increasingly built, two Korean conglomerates are more than likely to have taken a cut from Miss Baek’s hit album; perhaps it’s time Samsung and SK Telecom’s international competitors took note of their achievements and acquisitions on their home turf before they go global.

In the past two years SK Telecom, South Korea’s market-leading mobile service provider, has bought YBM Seoul, the country’s largest record label, and IHQ, the most influential film studio-cum-talent agency, as well as buying up a handful of the most popular cable and satellite TV channels, including YTN Star. But SK is not just interested in acquiring additional abbreviations: the telecoms giant owns the Korean iTunes challenger Melon.com, the Myspace competitor Cyworld, the leading DMB (digital mobile broadcast) portal Tumedia as well as two of the top Korean search engines, Empas and Nate. As if one huge record label wasn’t enough, SK also formed a new company with Warner Music last November, WS Entertainment. According to Phillip Oh, the ex-bass playing managing director, its job is to “scout, sign and produce new Korean talent exclusively for SK’s multiple platforms.”

In acquisitions alone, it seems SK Telecom has taken the content is king mantra to heart, pulling off the kind of integration that Telefonica’s tie-up with Endemol can only dream of. Indeed, the telecom giant stands head and shoulders above the competition in its shimmering tower in Seoul’s Jung-gu corporate heartland. Bernie Cho, a producer at MTV Korea – perhaps the only three-letter media brand not yet consumed by SK Telecom – puts it neatly: “being a telecoms company meant acquiring content through middlemen. SK realised early on that it makes more business sense to buy him out – to become the man.”

A KRW5,000 (€4) cab fare away, and it’s 18.00 in Seoul’s college district of Shinchon. While shadows lengthen and bus queues grow, the flashing neon of shop fronts, commercials and garishly competitive barbecue restaurants are passed by as you’d pass by yet another saloon in a parking lot.

The stand-out store in this up-and-coming area is the subtly branded, glass-fronted Anycall Studio. This is one of two Samsung Electronics mobile-phone concept stores in the company’s hometown. It’s called a studio because it sells no phones or gaudy fascias. It sells nothing but the market-leading Anycall brand. For a Monday night, it’s heaving with teenagers and twentysomethings engaging in keen interactive window-shopping for their next mobile. Immersing consumers in your brand means indulging them for free: there is a service for Anycall users to print photos shot on their (up to 10 megapixel) Anycall camera-phones. Meanwhile, phones configured as console handsets can be plugged into Samsung’s PAVV flatscreens, turning customers into gamers. There’s a moody, studio-like listening room where mobile musos can plug in their mp3-phones to powerful amps or watch gigs from leather armchairs. There are laptops for surfing, banquettes for lounging and walls of flatscreens running the iconic Anycall ads featuring K-pop royalty and state-of-the-art telephony.

Korean phone culture is shaped around a business model in which consumers buy their phones outright. When your little pocket rocket can cost up to €750, it’s little wonder users fondle them like the 21st-century worry beads they’ve become. “In the US you have a cellphone, in the UK you have a mobile phone, in Korea we call them ‘handphones’ – they’re an extension of your arm,” says Cho as he channel surfs DVD-quality TV on his mobile to kill the short time it takes to upload a new track as his ringback – the song you hear in place of the “brrring” when you call many a Korean mobile. The attendant snobbery and hierarchy based around who’s got what kit is acute: in certain circles, not flashing the latest model is seen as wilful Luddism. Retro chic might inspire the stylists for K-pop’s boy bands but it doesn’t wash with phones.

It is unsurprising, therefore, that the branding and marketing of the company’s handsets in Korea is as sophisticated as the technology they contain. Samsung Electronics spends some KRW177bn (€130m) a year on Korean advertising to increase Anycall’s 52 per cent market share. It spends that money with Cheil Communications, for which Jae-hang Park is the managing director of the agency’s brand marketing institute. “Our youth and consumer reports have been throwing up different results in the past two years: youngsters expect quality and amazing features and technology as standard. Our market is now all about design and individuality.”

Indeed, hushed conversations in Seoul’s more upmarket bars often touch on Prada’s collaboration with LG Electronics. The “Prada phone” is yet to launch in its manufacturer’s homeland and some are worried that it might not be hi-tech enough, behind its elegant façade.

Culture and commerce, content and distribution, artist and advertiser are stitched seamlessly together in Korea’s convergence society: the youth and the technology have met and become inseparable. “The digital culture is allowing modern youth culture to thrive – they’re the same thing here,” says Cho.

Korean youth chat, network, swap music (for a small fee), flirt and express themselves across the new technologies, formats and platforms that big businesses provide, and that youngsters seem to use unquestioningly, rely on unquestionably and, it seems, love unreservedly. Are the kids concerned that there might be a monopoly afoot, that they are hamsters on a technology wheel or guinea pigs in a branding laboratory? “Not really,” continues Cho, “Koreans are proud of their brands and they’re curious; they celebrate the new, they like to have the first, fastest.”

No Korean company understands Korea’s “first, fastest” attitude to early adoption better than SK Telecom, whose acquisitive practices and marketing budget have aided the take-up of new technologies and platforms. “The site became popular when SK bought Cyworld in 2003. Camera phones had become standard, so people started uploading to their blogs and homepages. The technology became more personal.”

But then Donjeong Kim, SK Telecom’s internet strategy manager, would say that. Kim is a fine brand ambassador; illustrating his point with his own phone homepage featuring the dapper manager singing karaoke in a Warhol-esque four-panel portrait. “And no, I can’t remember what I was singing,” he laughs. He might well laugh: since SK took over Cyworld, 90 per cent of Korean twentysomethings have a Cyworld account.

Rank is Korea’s best-known chart show, filmed as-live from the Melon Axe (Melon, as in SK’s Telecom’s newly acquired iTunes challenger, of course). Tonight’s bill is topped by top-selling hip-hop penseurs, Epik High (Monocle’s cover stars). They are led by Tablo, perhaps the only respected MC on the Korean music scene with an English literature degree from Stanford. Despite playing to a crowd of rabid groupies, Tablo’s cooler than ice backstage. “I’m not sure big companies owning everything is good for music, or for music lovers,” he says, “there are a lot of companies getting richer while musicians see next to nothing of their success.”

While Rank’s set design consists of bright neons on a black soundstage, and the building’s branding as the Melon Axe is subtle by sponsored-venue standards, not all TV gigs are as purist. “One time we flew on stage because we heard the crowd were going nuts and there was a car on stage – a bright red sedan that we had to dance around!” says Tablo, smiling, “we felt like we were on a forecourt.”

That said, the group have just cut their first track for a brand. Three new models of Samsung’s YEPP mp3 player are to be brought to market accompanied by a specially commissioned track by a hip-hop act, an R&B group and a rock band, and Epik High are the hip-hoppers. That doesn’t sound very “street”. “This was a good job and we’re proud of it – the track we recorded is for a music player and it’s as good as anything we’ve done, because we were given complete freedom,” argues Tablo. “They didn’t make us rhyme about how cool the player is.”

In Korea’s changing but conservative culture, Tablo’s “fuck-the-president” stance on “Flow” (from the album Remapping The Human Soul) makes him an edgy brand ambassador. The criticism of South Korea’s premier will have raised nods of agreement from the nation’s youth but few would commit it to record.When it comes to signing stars as brand ambassadors, the scions of Seoul’s advertising industry have got it down to a fine art. Cheil Communications is Korea’s largest agency, the fourth largest in Asia and responsible for handling all of the Anycall brand creative. It, too, has a nice synergy with the manufacturer of the handsets for which it dreams up commercials: Cheil is a subsidiary of Samsung. “Technically we all work for the same company, but it’s so huge it might as well be the same country,” says Jae Hang Park, “and we have to be very scientific to make sure we choose the right faces to match the products.”

The MD of Cheil’s brand marketing institute heads up a team devoted to focus grouping new telephones with Korean celebrities and marrying them commercially. An elaborate grading system, like a celebrity stock exchange, has been developed by the agency to measure the potency and longevity of idols to see how they “pop” with the latest product. Young professionals and students are ushered into unassuming office blocks to explain just why it was they didn’t like so-and-so’s last commercial in this continuous, fastidious trend analysis.

Cheil’s greatest hit, however, is the branded content it produces for Anycall. The average primetime Korean TV spot is 15 seconds, just enough time to recognise a famous face and be left on a cliffhanger. “We use celebrities for impact – to tease the consumer so they’ll have to finish the story on other media,” says Sung Soo Chang, a Cheil account executive. “Viewers are led to the longer-form commercials that are taking on a life of their own online and on Anycall’s phones.” Consumers are sucked into big-budget productions with storylines unveiled in instalments: branded short films. The rise of the form and its application are relentless, helped by K-pop’s biggest stars recording exclusive content for the brand. Korea’s Queen of Pop is Hiyori Lee, a Cheil signatory since 2005 and Anycall’s biggest and best brand ambassador. “Hiyori started singing in a high-school group but she’s become a sex symbol,” says Chang, “so her sexiness is rooted in wholesomeness – a very good way to reach more of the right people.”

Indeed it is: the latest Anycall branded drama starring “Hiyolee” has taken six million hits from fans keen to watch it first, download the exclusive track and be part of Anycall Land. Youngsters don’t use their handset’s numerical suffix: the 6600 is simply the “Hiyori phone”.

Anycall does not just rely on well-known faces to add value to its brand, it also breaks new talent via its campaigns. The popular actress Lee Na-Young was a relative unknown before she signed with Anycall, while other acts have seen their sales rise after the added publicity of the ads. Hiyori’s new Anycall commercial is remarkable for the way in which Cheil is aiming to break its new star, Park Bom (pictured on Monocle’s story opener).

“Starring alongside Hiyori was a dream come true, especially after all the auditions I had to pass!” laughs Miss Park in the studio at YG, the label that signed her as a singer around the same time as Cheil signed her as a face. How does cutting a record compare to plugging phones? “I’ve got freedom in both – the record’s for me but Anycall’s a big deal – they will help to get my music to the people.” And Bom Park is right. Fly-postering bus stops in Seoul is small-fry when six million people have seen you saving Hiyori Lee from a fan-mobbing in Anycall’s latest commercial.

Both agency and celebrity have to be careful, however. In 2005, a top-secret 113-page research file commissioned by Cheil was let loose on the internet detailing weapons-grade celebrity gossip: their rising or falling stock, weight, concerns over their health, wealth, sexual predilections and anecdotal evidence of affairs and drug use. Within a week, 55 of the 99 celebrities mentioned in the document filed class action libel suits against Cheil and Dongseo Research, responsible for the report based on hearsay acquired from TV and tabloid reporters.

Cheil’s scientific methods of star-mapping might seem a little cruel, but the practice has borne considerable fruit for its client. In 1993 Samsung’s mobiles had 14 per cent of the Korean market against Motorola’s 70 per cent, this year the Anycall brand dominates with a 50 per cent stake, while LG, Nokia and Motorola fight the other half out between themselves. Ten years ago Cheil’s creative team hit on patriotism and exploration and featured Heo Young Ho, the famous Korean explorer. It became the most successful campaign in the history of Korean advertising and Anycall never looked back.

Some fear that Korea has become a saturated market in which a few big fish circle a small pond but those fish seem more than aware of the ocean outside. SK’s new Chinese, Japanese and US Cyworlds are seeing significant subscriptions and its formation of WS Entertainment with Warner Music is designed to place SK at the top of the music industry food chain.

As multinational record labels have fumbled in the dark to rebuild their profits and handle the complex digital value chain, SK simply bought out the extra elements in that chain, ensuring it profits from every stop between artist and listener. “The Korean music industry was worth $400m [€293m] in 2000, before illegal downloads,” says Daniel Suh, WS’s business development director. “By 2010 we could make similar profits again.”

While WS might struggle to export Ji Young’s power ballads and Park Bom’s star will have to rise in the East before it can shine in the West, Korea’s brave business model might make a more valuable export than its phones or platforms. The first word of Korean those in big business and the entertainment industry would do well to learn is “convergence”.

With a small-for-its-size population of 48 million, the third largest economy in Asia (the 10th largest in the world) and media and manufacturing industries run by a few large corporations, South Korea is a laboratory for the future of hi-tech industries including mobile technology, video games, branded content and, in its new digital form, the music industry. In 1995, the Korean government pulled off what now seems like a masterstroke of future-proofing when it invested in a nationwide high-capacity broadband network on which any of the competing telecom networks could provide a service. This one-off €1.1bn investment has allowed Korean companies in the relevant sectors to reap unrivalled rewards. Ninety per cent of Koreans pay less than €15 a month to enjoy lightning-quick internet speeds whether wired, wireless or mobile. According to recent figures from the Korean government, all of Seoul’s population have access to broadband.

Having stolen a 10-year internet march on the West, Korea has picked up a knack for being the earliest to adopt, and fastest to grow, in the industries on which the rest of the world are clamouring to make a start in. Korea is the most connected and most mobile country in the world.

Out of a population of 48 million Koreans, 40 million carry a mobile phone and over 20 million of them subscribe to SK Telecom. The most muscular of the three major service providers has 50.5 per cent of the market share, while rivals Korea Telecom (KTF) and LG trail behind with just 32.2 and 17.3 per cent, respectively.

When Korea’s mighty SK petrochemical corporation bought a fledgling car phone management service from KTF in 1984, SK Telecom developed into a company of firsts: the first Korean mobile provider, the first to take advantage of SMS messaging, 3G technology and launch the first DMB satellite to provide high-definition satellite television on mobile phones.

While being fortunate enough to find success at home and abroad, the brand has not been without its critics: earlier this year, a Mr Kim called SK 16 times and visited the head office twice to complain about his phone. With no resolution in sight, the 47-year-old businessman felt sufficiently aggrieved to crash his Mercedes-Benz S500 through the revolving door of SK’s Seoul headquarters. SK promptly fixed the door with a small portion of the €128m operating profit it made from January to March 2007.

Jim McCafferty is head of research at Seymour Pierce investment bank in London

“I’d suspect there are less stringent controls on media ownership in the Korean media market, which might help a corporation to become dominant. Most European companies that have tried to be all things to all people have expressly failed to deliver while investors prefer focused companies anyway. Although each country is different, the European market has generally been moving away from convergence over the past 10 to 15 years with BT and Tel Italia devolving their mobile arms. On a global player’s shopping list, Sky might be an interesting proposition – purely as a content provider. On this side of the world however, mobile users generally expect their service provider to be the conduit – not the content.”