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SEPTEMBER 1 , 2000 VOL. 26 NO. 34 | SEARCH ASIAWEEK

Starting with a Baang
Korea's PC rooms have a view on the future
By ASSIF SHAMEEN Seoul

Off a cramped, congested alley in Seoul's Shinchon district, an unlit concrete staircase leads down to a subterranean den. Behind a metal door marked only by a poster for a computer game (Diablo! Evil Has Survived!), dozens of young men slouch in front of rows of PC monitors as they engage in mock combat with fellow gamers. The floor is sticky with spilled soda and beer. A large model aircraft hangs from the grimy ceiling, so low that you can crack your head on it. In a corner, three women in their early 20s huddle together and giggle as they surf Internet entertainment sites. It is 8 p.m. on a Saturday night, and in South Korea, this is a hot spot. "A cool place," says C.J. Lee, a business administration student at nearby Yonsei University. "There is broadband access, there are many games and the sofas are nice. Also I can smoke here. At home my mother won't allow me to sit in front of the PC for too long and smoke."

Marketing types may rattle on about tech-company "incubators" being the wombs of Asia's Internet revolution. The real petrie dishes can be found all over South Korea in busy "PC Baangs" (literally, PC rooms) like the one in Shinchon. Part Internet cafE, part video game parlor, the distinguishing characteristic of PC Baangs is their rows of late-model computers hooked up to the Internet over super-swift broadband network connections. Here, the nation's youth pay about $1 an hour to match reflexes with each other, playing the latest multiplayer computer games such as Rainbow 6, Starcraft or Quake. Others cruise South Korea's growing mass of broadband Internet content such as music and streaming video. At PC Baangs, a generation of South Koreans are bonding with — or being soldered to — their machines, while road-testing the networks of the future in the process.

"PC Baangs are a unique Korean institution that is strengthening the base of the information society in Korea," says Lee Yong Tae, the chairman of South Korea broadband access provider Thrunet and of computer manufacturer Trigem as well. "In my days as a university student we had tea rooms, then came the beer parlors, video gaming parlors, Western fast-food joints. Now the latest fad in Korea is Baangs." It's a genuine phenomenon. There are an estimated 16,000 rooms in South Korea, up from about 4,000 in June last year. Industry insiders say there could be 40,000 by the end of next year. According to one survey, 25% of all Koreans access the Net from a public establishment, each person spending about two hours online every session.

"PC Baangs are popular because they are inexpensive, convenient and provide faster Internet access," says Sonia Kim, Internet analyst with CS First Boston in Seoul. Growth can also be traced to the country's fevered techno-culture. Nearly 60% of Korean households own PCs, slightly ahead of the U.S. With some 16 million surfers, (triple last year's total), Internet use in South Korea is among the highest in Asia. Broadband connections recently hit two million — the highest per-capita usage in the world.

The nation's embrace of all things networked makes turning a profit with a PC Baang almost as easy as point-and-click. Analysts estimate rooms are raking in combined revenues of about $6 billion a year. In chic, upmarket districts like Apkujong, PC Baangs are appointed with thick carpets and velvet sofas, and access costs as much as $9 an hour (including a sandwich). In working-class areas, rooms tend to be dank and crammed with up to 100 machines. "Running two PC Baangs is better than running ten restaurants," says Seoul businessman Park Kyun Chung, 38, owner of mgame.com, a Shinchon district room with 68 PCs and 24-hour-a-day access. Overhead is low — the recent recession put of lot of cheap retail space on the market — and traffic is heavy. "I used to run a video gaming parlor," says Park. "It didn't make much money." Profits from a PC Baang are more than double that of a big video game parlor, he says. Park's preferred customers are students. "They only play games, send e-mail, surf the Internet. They never make trouble." Stock traders he discourages. "They come here in the morning and don't leave. They make too much noise when they lose money."

With about a thousand new PC Baangs opening every month, analysts say total takings from South Korea's rooms could more than double to $14 billion next year. But some areas are starting to reach saturation, and fat profit margins (Park estimates he pockets as profit $2 of every $3 in revenue) are likely to ease. Aware the rooms are minting money, landlords are now typically demanding two years rent in advance plus another two years' worth in "tea money" — a refundable deposit.

Still, Park says he is looking to expand. With another generation of Netheads coming up — in Korea, mandatory Internet training in schools starting from primary level begins next year — a steady supply of customers needing a place to smoke and surf is almost assured. "Our national psyche is very well suited to the Internet revolution," says Lee Jae Woong, chief executive of Daum Communications, Korea's biggest Internet portal. All it needs is a fertile dish in which to ferment.

Write to Asiaweek at mail@web.asiaweek.com

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