Newteevee and the Korean Times are reporting that Sony Pictures has left South Korea because of “sluggish sales and rampant piracy”. Sony wasn’t first to abandon the Korean market though – appearantly Paramount, Universal, Buena Vista and 20th Century Fox have all left which means no big Hollywood studio is operating in the country.

This is important news and means the DVD Industry is actually dead in South Korea - and the death is spreading!

South Korea’s DVD sales has rapidly been falling in the recent years ($673 million in 2002 vs. $285 million in 2008) while broadband penetration and broadband speed has rapidly increased. The average broadband penetration rate by household hit 90.1 percent last year and it’s quite easy to see where the people have gone.

South Korea is at the Internet forefront and has previously shown trends to come – today almost 50 percent of Korea’s Internet users admit to downloading movies from the Internet, and at an average of about a movie a week.

If we look at Sweden where the broadband penetration also is high (74% of the households according to WII), 25% of the whole Swedish population also download a movie or TV show once every week (MMS Rörliga bilder 2008:1) and this includes children and elderly – the actual percentage amongst 16-30 year-olds is 50% (MMS).

If these numbers are correct it could mean that when broadband penetration reaches a certain level and speed, users will turn away from physical products and download/stream instead. Yes, this might be a very elementary notation but I wonder if everyone has thought of the consequences – and if this is true – can we predict what countries are after South Korea?

Gartner released a report in July where they predict broadband penetration into homes by 2012. This list of countries could give us an indication of where to look for declined DVD sales (Sweden is listed as having only 58% broadband penetration though, which seems low compared to the Swedish MMS survey).

Markets with Highest Broadband Penetration of Households, 2007 and 2012 (Percent)
Country                                        2007               2012
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South Korea                                    93.0               97.0
Netherlands                                    74.0               82.0
Hong Kong                                      76.0               81.0
Canada                                         65.0               79.0
United States                                  54.0               77.0
Japan                                          54.0               77.0
Switzerland                                    69.0               76.0
Singapore                                      57.0               75.0
United Kingdom                                 58.0               74.0
Taiwan                                         59.0               74.0
France                                         58.0               73.0
Australia                                      52.0               72.0
Sweden                                         58.0               69.0
Spain                                          54.0               68.0
Germany                                        49.0               68.0
Belgium                                        55.0               66.0
New Zealand                                    43.0               64.0
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Source: Gartner (July 2008)

The lesson to learn from these numbers is that the market is changing fast, in the same pace as increased Internet access speed. It might only be a few years until everything will be consumed online (despite Blu-ray and other physical formats). I hope Hollywood understands this because there’s only little time to act and embrace a complete digital strategy. One major Studio told me in late 2007 that they’d be last to enter the digital market(!) – they have luckily reconsidered and now offer (some) content online but it sure was late. Perhaps the resignation from South Korea convinced them!?

2009