Monday, February 9, 2004

Poor George Glider is Right... Korea's Bandwidth Environment Proves It

I got back into Seoul Friday night. I just tried to recover from jetlag this weekend, so it's been a few days since my last post. When I was in Las Vegas that first week of January, I saw this interview on TV that bothered me so much I was planning on blogging about it since but didn't get a chance until today. I thought it was appropriate to post it on AlwaysOn, the tech news and community blog, but it limited my entry to 900 words, so I pasted the complete entry below:

Korea's Bandwidth Environment Proves Him Right

In early January when I was traveling throughout the U.S. from Korea, I was surfing the TV in my hotel room and I came across a CNBC show that was interviewing George Glider. I believe I only missed the first few minutes, but I wish I missed the whole interview because all the primary interviewer did was blast him on how he was one of the voices during the boom times that misled investors in his promotion of the age of infinite bandwidth. Both interviewers were trying to get him to admit his "mistake" while it seemed poor Mr. Glider was slightly dazed and confused by these attacks. He must have been thinking what I was, "Is this 2000 or 2001? What is going on here?... Get over it people, it's 2004 now..."

The main interviewer, which I failed to find out his name, insincerely stated, "I believed in you back them... I was one of those you misled..."

Not exactly his words, but along the same ridiculous and self-promoting lines. George Glider stuttered his reply, "...but you can look at Korea..."

These CNBC reporters didn't listen. They didn't care about interviewing a technology analyst or possibly learning something from a man they invited on their show, but simply to rail him and to get him to admit his "mistake." Poor show, poor form, poor effort.

If they only listened, they could have dugged deeper into Glider's comments about Korea and asked, "Why is Korea an example of what you were promoting a few years ago? Or what can the U.S. learn from Korea?"

George would have probably started by stating how the U.S. hasn't measured up to his predictions and that it's still not there. To take a step back for some of you, a few years back George Glider was promoting through his various public articles and forums that the cost of bandwidth would drop faster than that of computing power... "Simply put, bandwidth is a superior substitute for computer power, memory, and switching. It can handle far more data, far faster, and with far fewer problems." Though I don't completely agree with the strength of some his statements, his general theories have been played out in Korea. Also another assumption within this realm was that as the cost of bandwidth speed decreases the number of services available in the Internet will increase, which also has been executed in Korea.

As I wrote before, the best example of a new industry being born in a ubiquitous broadband environment is the online gaming industry in Korea. Video games are produced only for broadband and distributed via broadband. This industry has flourished for three main reasons:

- INEXPENSIVE AND UBIQUITOUS BROADBAND, which allows for a low user barrier and low-cost marketing. The leading Korean online gaming companies, such as NCSoft, NHN, and Nexon, have net profit margins of 40%-50% on their domestic operations since Korea's broadband infrastructure (ISPs & PC rooms) allow for low-cost distribution and marketing.

(In ITU's "Birth of Broadband" report, Korea leads all countries with 21.3 subscribers per 100 inhabitants. Hong Kong is second with 14.9, and the U.S. has 6.9 subscribers per 100 inhabitants. Also 98% of Internet users have broadband access. From home service to one of the 20,000+ PC rooms in Korea that provides access for 1,000-1,500won/hr or about US$1/hr)

- INSTALLMENT AND ACCEPTANCE OF MICRO-PAYMENTS. Users can pay for games on a per-play basis, hourly, or monthly fee through their debit cards, credit card, mobile phone bill, ARS billing (fixed-line billing), pre-paid cards, and exchange with affinity services. These charges may be as little as 500won (40 cents) to US$30/month. Best example of how micro-payments allow for untapped revenue streams is NHN Corp's Hangame division. Hangame is the leading casual online gaming company in the world. These are simple games that people can play at their leisure (e.g. online blackjack, pool, battle tetris, chess, etc.). Most of their revenue is derived from micro-payments, 40 cents to a few dollars, that allow users to extend their gaming playing time (i.e. one full day of unlimited play), create their own rooms to invite people, or obtain special powers that create advantages during gameplay. After the first few months, Hangame's revenues hit US$30,000 per day from just all these tiny transactions and by the end of the year they hit $60,000 per day. I haven't checked recently, but they were generating $80,000-$100,000 per day the last time I checked. "Amazing," was my first reaction when I learned about this.

My second reaction was the thought that this would never succeed in the U.S. and this acceptance of micro-payments is unique to Asian cultures. I was wrong. I believe this is the culture of an "always on generation." The wired youth of today, the spread of their habits to mainstream, and broadband's rapid growth in Korea fueled this acceptance of micro-payments. I truly believe this acceptance of micro-payments will occur in the U.S. too. Another example are camera phones. When they took off in Korea over a year ago, I initially wrote it off as an "Asian" thing, but now they are taking off in the U.S. too. I mistakenly identified technological barriers for cultural barriers.

- COMMUNITY ELEMENTS OF ONLINE GAMES. The realtime chatting, playing, and communicating in online games allowed for strong community building and sometimes fanatical following. This last factor might have a stronger impact on Asian cultures and countries, but it will still be a factor in when online gaming explodes in markets, such as the U.S. Maybe I'll be completely off again and the "always on generation" in the U.S. will prove that the community elements of gaming are not biased towards certain cultures.

In addition to online gaming, there is VOD (video-on-demand) of prime-time TV shows that add to the inefficiency of office workers throughout Korea. People will pay 500won (40 cents) to watch their favorite dramas during the convenience of their office PC or even live broadcasts on their mobile phones. There is so much more. Successes and so many more failures. New content programming or services continue to be created in a ubiquitous broadband environment within a society that I believe whose strengths are not creativity or innovation as with the U.S. When the U.S. truly becomes a wired world, with ubiquitous broadband, George Glider will be smiling. Maybe then he will be courteous enough to allow CNBC to interview him again.

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