It has been almost a year since President Park Geun-hye declared that she would deal with the stagnation of the national economy by means of the concept of the creative economy. The government and the people expected that the information technology (IT) industry, the core of the concept, would result in a greater number of startups to revitalize the national economy.
Nevertheless, the economic regulations governing the IT industry are becoming more severe. The Internet and digital content industries are taking a direct hit in particular. In short, the government’s creative economy drive has been a hollow promise, at least so far. What is especially problematic is that the regulations have affected only Korean companies while their competitors from abroad, which are not subject to the restrictions, are taking advantage of the situation to increase their presence in the local markets.
Korean information and communications technology (ICT) companies are groaning due to global giants’ push. For example, domestically-developed social networking services (SNSs) such as Naver’s MeToday, SK Communications’ C-Log, and Daum Communications’ Yozm have been driven out of the market by Facebook and Twitter, while eBay and Google have dominated the local open and Internet video market. Things are not much different in the portal and game sectors, either. In the former, Google surpassed Daum Communications in terms of market share to rise to the second spot in September. Chinese ICT giant Tencent recently ranked first in the online game market, too.
The problem is that this situation is not because of local consumer choice, but the government’s regulations that have led to reverse discrimination. Particularly, Google has had the inside track building on its Android operating system, whose local market share is over 80% now.
Foreign ICT Giants Dominating Korean Market
According to Democratic Party lawmaker Yoo Seung-hee, Google’s YouTube has dominated the local Internet video market since 2009, when the government put the real-name system in place on Korean companies in the industry. Likewise, eBay’s local open market share has exceeded 60% since it took over Gmarket in 2009. Things are even worse for Korean SNS providers. SK Communications’ Cyworld has given way to Facebook. Under the circumstances, an increasing number of people are expressing concerns that foreign portal and game service providers will sweep the local market in no time.
Portal companies, which are heavily dependent on search ad income, are feeling uncomfortable with the government’s suggestion for the development of Internet search services announced last month. “We are very closely monitoring the user response and sales movement associated with the restrictions,” said Naver’s Chief Financial Officer Hwang In-joon. Meanwhile, Facebook and Twitter, which enter the search ad market this month, are free from the regulations. “Twitter is moving nimbly these days, partnering with a local advertising agency right after unveiling its advertising products this month,” said an industry insider.
Korean game companies also have a headache. Currently, League of Legends, published by Riot Games acquired by Tencent, is sweeping the local market with an overwhelming 40% market share, followed by EA’s FIFA Online 3. “Nowadays, e-sports broadcasting channels are revolving around imported games like League of Legends, World of Tanks, and StarCraft 2,” a gamer explained.
Foreign SNS Becoming Channels for Distribution of Harmful Content
The impact of reverse discrimination does not stop at unfair competition. Sites such as Google, Facebook, and Twitter are increasingly becoming channels for the distribution of obscene and violent materials with no domestic law being capable of putting a brake on it. For instance, idol singer HyunA’s recent provocative music video received over four million hits on YouTube just two days after release. Adolescents do not need to go through any adult authentication process to access YouTube.
Similar things are taking place in the open markets. The Korea Communications Commission has recently announced that a total of 285 pieces of harmful digital content were distributed on Google Play and the AppStore between the first eight months of this year. Pre-censorship is applied to the local open market, and thus harmful content is unlikely to be circulated there. However, foreign markets are only subject to post-censorship.
“Unless the excessive regulations imposed by the government are eased, foreign companies will take up a larger share of the local market at a more rapid pace down the road,” said a market expert.