SK Telecom, Microsoft team up to create 'Netflix of video games'

To make a foray into the fast-growing South Korean console market, currently dominated by Japanese products -- Sony’s PlayStation and Nintendo’s Switch -- Microsoft has partnered with local telecommunications operator SK Telecom to promote its Xbox consoles.

Last month, Microsoft and SKT together launched Xbox Game Pass Ultimate in Korea, a video game subscription service modeled after Netflix. By using SKT’s 5G networks, the subscription service supports cloud gaming, allowing gamers to enjoy more than 100 Xbox games with their Android smartphones or tablets for a monthly fee of 16,700 won ($14.40).

“It might seem that SKT is simply acting as the retailer and distributor of Xbox games, but it’s SKT, not Microsoft, that will actually be running the subscription service. SKT will be in charge of marketing, the subscription process and customer service,” an SKT official said.

SKT will split the profits from the subscription service with Microsoft and game developers, adding a new business model to its decade-old conventional mobile carrier service.

SKT is aiming for 1 million subscribers by 2023.

The collaboration with SKT is expected to help Microsoft promote Xbox consoles to Korean gamers more familiar with the PlayStation and Switch. For users who don’t have Xbox consoles, SKT and Microsoft also offer the Xbox All Access subscription service, a two-year installment plan that provides an Xbox console bundled with Xbox Game Pass Ultimate for a monthly fee of 29,900 won.

According to the Korea Creative Content Agency, the Korean console market saw rapid growth in 2018, increasing to 528.5 billion won from 373.4 billion won a year earlier.

However, only 9.3 percent of Korean console users owned an Xbox 360 console, while 41 percent had a Switch console and 37.8 percent had a PlayStation 4.

Hoping to increase its market share, SKT suggested an extensive translation of Xbox games upon beginning discussions with Microsoft.

“Korean console users are unfamiliar with Xbox games, so the translation will make the games friendlier. SKT will negotiate Korean translation of Xbox games with Microsoft and game developers when introducing them in Korea,” the SKT official said.

Last year, fewer than 500 Xbox games supported Korean language. As of October, the figure has spiked to approximately 800 games, and more are on the way, according to an industry source familiar with the matter.

However, it remains to be seen whether the current 5G infrastructure is sufficient to enable the success of the subscription service. SKT said last month that it would first focus on providing 5G network access to business customers, and would share the cost of rolling out 5G infrastructure.

“Though SKT’s 5G networks lack nationwide coverage, the Xbox subscription service is a long-term business that SKT aims to operate throughout the next few years,” the SKT official said.

By Kim Byung-wook (kbw@heraldcorp.com)