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Aug. 31, 2017, 10:56 a.m.
Business Models

This Korean incubator gives young media entrepreneurs a launchpad in a rough environment for startups

“When young people start working for traditional media, they lose their edge, which is why it’s crucial from Mediati’s point of view to recruit young people before they get corrupted.”

“Change the story, change the world,” South Korean media consultant Jeong-soo Kang told aspiring journalists and entrepreneurs in a lecture on the digital media business at Yonsei University in Seoul, back in 2014. After consulting for some of the country’s top media companies — from Korea Economic Daily to Vogue to the Yonhap News Agency — he’d started to doubt if legacy media outlets were structured for innovation.

After the lecture, Sodam Cho approached Kang and said she wanted to launch a startup instead of trying to land a job in legacy media. Kang advised her against it, twice over, knowing how difficult it would be in the Korean media environment.

But Cho’s determination was a spark that led Kang to launch an incubator for media startups in Korea last September. Her social video outlet Dotface became the first company to be fostered by his media incubator, Mediati, and recently became profitable on its own, according to Kang.

“The seed of innovation can be found in [startups], not in the legacy media structure,” he said. Support for new media companies in Korea is scarce — whether it’s venture funding, philanthropy, or government support — so Kang felt he had to start a new space.

Mediati, which takes up two floors in a quiet office building in central Seoul, houses up to six media startups for six-month periods, providing them with up to 60 million won (a little over $50,000 U.S.) in initial seed funding, along with networking opportunities based around Kang’s own political and business circles and the circles of Mediati content lab director Sanghyun Park. In exchange, the incubator holds a 10 to 15 percent stake in each startup.

(Kang drew inspiration from the Google News Lab Fellowship in Korea. The News Lab’s two-month program introduces diverse talents — a programmer, designer, videographer and journalist — to each other, with some teams getting together to work on startups at the end. And of course the incubator model is common in American startups, including the media-focused Matter.)

Mediati’s portfolio includes other publications like the English-language digital magazine Korea Exposé, which covers Korean society and culture. Other projects are specifically built for the millennial audience: Geekble makes videos for gadget lovers to promote engineering, The Edit produces pieces for young urban women, G Pictures is experimenting with community-based video news, and Deepr is creating a news on-demand platform.

The incubator tries to integrate the startups through a virtual community as well as in-person brunch talks on various industry topics and skill-sharing sessions. It’s currently funded through a $2 million investment by Jaewoong Lee, the retired founder of Daum, one of Korea’s top web portals (Lee himself is the largest shareholder of Sopoong, a social venture incubator).

The entrepreneurs recruited into Mediati are mostly in their twenties. Mediati’s content lab director Park was blunt about why:

“When young people start working for traditional media, they lose their edge, which is why it’s crucial from Mediati’s point of view to recruit young people before they get corrupted,” he told me. “We want to support young people who want to be reporters or content creators, so that they can set up their own company to compete against the legacy media.”

Innovation drought

Despite bigger budgets, legacy media still can’t always keep up with new technologies, having to compete with high-paying tech companies for developers. Established journalists are often reluctant to leave traditional careers to found their own startups. The way into a traditional newsroom in the first place is strenuous — cub reporters must prepare for a certification test and reporting bootcamp once accepted by a company — leading to stronger bonds between those who start at a news organization together.

“In order to innovate, we need new talented people, but the legacy media environment is not where they want to go,” Kang said. “When CEOs of media groups talk about how to innovate in journalism, they always emphasize ‘digital first’ and ‘mobile first.’ But if you look closely, it’s the organization itself that is resistant to such change.”

Mediati hopes to break the cycle by focusing on younger entrepreneurs — in particular, young women. It tries to lure young programmers and videographers into journalism by pairing them with the startups it’s incubating. (Developers who had been fellows through the Google News Lab Korea, for instance, joined Mediati startups Geekble and MeanIt, a political engagement app.) Mediati also tries to ease technical barriers for young startups by giving them access to an in-house content management system, commissioned by the incubator, that helps with creating online communities.

Kang hopes that of the more than 20 startups slated to go through Mediati by the end of 2018, two or three of them will become financially successful. Until then, Mediati — a team of five including Kang and Park — is working on reaching the breakeven point with its startups within the six-month term and keeping them sustainable. The top priority is for the outlets to develop content and a loyal readership. Then it helps each startup develop its own business model, and tries to facilitate sales through networking introductions.

The ethical dilemma

Korean media across the spectrum are facing the common pressures of commoditization, as a result of growing mobile consumption and the control Korean web portals — like Daum, which merged with messaging app maker Kakao — have over content distribution. But Park said he believes problems with the media industry are not financial, but largely ethical.

While concerns over new revenue sources have dominated U.S. media, traditional Korean media is still thriving financially. National dailies earned an average of 15.8 billion won ($14 million) each in 2015, on par with 2013, according to the latest Korea Press Foundation report. But the online subscription model has largely failed in such a limited market; in November 2015, for instance, The Wall Street Journal pulled the plug on its Korean site, which had high readership when it first launched but a low subscription rate when the paywall went up.

“In South Korea, the population cannot support a big news corporation. For now, even the biggest news companies cannot survive on subscriptions. We are a country with our own language and the market is really small,” Park said. “For our young companies to survive, they must find a model, but it’s not subscriptions at this point.”

Conflicts abound: There have been reported cases of newspapers blackmailing big companies with damning stories in exchange for advertising. Tensions flow in the other direction as well. Last year, Samsung vice president Lee Jae-yong (no relation to Daum’s founder), who was recently sentenced to five years in prison for corruption, had to pledge to “work harder” to not pressure newspapers that published negative news about his company by threatening to withhold ads. And constitutionally, the president of public broadcaster KBS is actually appointed by the South Korean president.

Korea’s newspaper industry has thrived as long as it has in part due to the loyalty of older readers, Kang believes. Daily print newspapers made a combined 376 billion won from print newspaper sales in 2015, compared to 1.6 trillion won from advertising in the period, according to the Korea Press Foundation. A key factor keeping traditional newspapers alive, Kang believes, is that the paying subscribers tend to be influential people in government and business, and the possibility of getting messaging in front of that group of people can artificially drive up rates for newspaper ads.

“They thrive on this revenue stream which requires them to sacrifice their integrity,” Se-Woong Koo, publisher of Korea Exposé, said. “These conventions are an illustration of what is wrong with Korea as a whole, which is why having these new companies is not just to show that we can make money in a different way — it’s also to show we can do things in an ethical way.”

The way in — and the way forward

Platforms like Facebook and search engines have opened possibilities to access new readers and viewers who have less loyalty to any one legacy outlet. High smartphone penetration, long commutes, and world-leading internet speeds also make Seoul a perfect environment to test mobile-focused media. But new startups still need to find new ways to monetize these new audiences in a market that’s struggled to support digital subscriptions, and for that, there’s no magic bullet. Geekble has found a demand in selling gadget kits, while Dotface is experimenting with branded content and e-commerce. Korea Exposé, whose deep dives are time-consuming to produce, is now experimenting with a premium-priced lecture series and intensive education programs for aspiring journalists.

“We try many different models and I think it might be different from the U.S., European, or Japanese models,” Mediati’s Park said. “We must find a model that will work in this small, one-language market.”

To support high-potential media startups after they graduate from the program, Mediati aims to establish a $6 million Series A fund for second-round investments by the end of the summer; they’re currently in negotiations with a number of funders. Kang is convinced other investors will be drawn to the sector once more profitable cases arise. Mediati may even look to forming a media house like Vox Media, facilitating close collaborations between its startups, Kang said.

Ultimately, the incubator wants to offer opportunities to young people interested in media outside of the status quo of legacy news organizations.

“We want to change the definition of success,” Kang said. “We hope the small successes that media startups make become the DNA for innovation in the Korean media industry.”

Ryu Ji-min and Yoon Hye-soo contributed to this article.

Photos taken at Mediati incubator’s offices in Seoul by Elaine Ramirez.

POSTED     Aug. 31, 2017, 10:56 a.m.
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