Netflix Official to Visit KCC to Discuss Regulatory Issues

A high-ranking official at Netflix, a global video streaming company, will pay a visit to the Korea Communications Commission (KCC) to discuss regulatory issues and cooperation with Korean companies.

According to the KCC on June 11, Netflix’s top lawyer David Hyman will visit the KCC and meet with Yang Han-yeol, head of the Broadcasting Infrastructure Department among others on June 21.

Lawyer Hyman has been handling legal and public policy issues at Netflix since 2002. He is also serving as secretary general for Reed Hastings, CEO of Netflix.

The official visits Korea amid growing concerns in the Korean broadcasting community over Netflix's entry in the Korean market.

During his visit to the broadcasting regulator, Hyman is expected to explain Netflix’s visions for investment in content distribution and production, and exchange opinions on Netflix’s cooperation with Korean broadcasting and media companies.

Netflix, which launched a Korean-language service in 2016, is accelerating its business expansion in Korea by increasing investment in original Korean content and partnering with Internet TV (IPTV) operator LG U+.

Korean broadcasters have publicly expressed their concerns that the Korean broadcasting industry will collapse if Netflix with huge capital makes a foray into the Korean market in earnest.

Some KCC officials believe that the playing ground is not level for Korean companies as foreign video streaming companies are not subject to any regulations in Korea.

In this regard, Huh Wook, vice chairman of the KCC, discussed Netflix's power over the Korean market in a meeting with officials of the Korea Information Strategy Development Institute (KISDI).

Meanwhile, the Korea Broadcasting Channel Promotion Association (KBCA) and its member companies urged some Korean pay-TV broadcasters to stop discrimination against Korean companies, saying that the pay-TV broadcasters were trying to provide an extraordinary treatment to Netflix in order to form business ties with it.

The association issued a statement saying, "The discriminatory behavior of pay-TV broadcasters will result in the collapse of Korean program providers and give the hard earned fruits of the Korean cultural wave to foreign capital."

According to the KBCA, the revenue share ratio that pay-TV operators will offer to Netflix is 9:1, meaning Netflix will take 90 percent of the profits earned. Korean program providers and pay-TV channels generally share profits from pay channels and video-on-demand (VOD) services 5:5 or 6:4.

"This means that the Korean broadcasting market is harsh to Korean program providers but very generous to Netflix," said a representative of the KBCA. "If large foreign capital like Netflix secures more favorable terms than Korean program providers, Korean program providers will have no choice but to lose its competitiveness in content production."

"Even in a tough environment, content providers such as program providers are promoting the Korean cultural wave, and as the fruits of their efforts become more visible, foreign capital is wasting no time and take the fruits from Korean content providers," the representative said. "There is concern that the hard earned value of the Korean cultural wave may be lost."

The KBCA emphasized that it was imperative to create conditions to prevent Korean media ecosystems from breaking down due to Netflix’s expansion in Korea. Pay TV broadcasters should change their perceptions to cooperate with program providers and increase the market pie, the association said.

"Pay-TV operators should take the lead in correcting the current unreasonable market structure and achieving the mutual growth of the Korean platform and content industries," the representative said. “The first step is that pay-TV operators pay fair content costs to program providers."

"It is also important for the government to play a role in preserving media ecosystems," the representative said. "The government should begin to take actions to help a virtuous circle structure to take root. In this structure, content will be traded at fair prices and profits generated from fair content trade will be used to produce new content.”