A big change is expected to take place in the Korean media industry next year as LG U+ is set to distribute Netflix content through U+ TV, its IPTV service, and plans to acquire cable TV system operators.
LG U+ and Netflix are close to completing their deal. They will announce their contract soon after the National Assembly’s inspection of government offices. The service is expected to begin at the end of the year. This means that LG U+ will be the only IPTV service operator that provides Netflix content. LG U+ TV subscribers are expected to purchase Netflix content in the form of an additional service. The exclusive supply period is expected to run for one year or two.
LG U+ selected Netflix to diversify its content. Recently, the media industry is trying to create original content like Netflix and show differentiated content to subscribers. Netflix received rave reviews for its original content such as “House of Cards,” “The Crown,” and “Stranger Things.”
YouTube recently released the human documentary "Kwon Ji-yong Act III: M.O.T.T.E" starring G Dragon through YouTube Premium, a paid service that receives monthly subscription fees from users. YouTube plans to produce more than 50 original programs next year.
SK Broadband, a Korean IPTV provider, has produced about a total of 120 original programs, about 50 each year. This year, its budget for original content production tripled from last year. KT is also producing a variety of original content that attracts teenagers and those in their 20s for Olleh TV Mobile, an OTT service, with idols as main characters of the content.
LG U+ chose to cooperate with Netflix because the mobile carrier, which has the smallest share in the domestic IPTV market, cannot pour as much money into original content production as its competitors. LG U+ plans to avoid the risk of direct investment by providing already proven Netflix content and expand influence through content differentiation.
M&As are another big issue in the paid TV market. In the IPTV market, KT, SK Broadband, and LG U+ have shares of 50%, 30% and 20%, respectively. LG U+ is seeking to acquire system operators (SOs) in order to gain an advantage in the pay-TV market where companies need to secure economies of scale. "We are considering taking over a wide array of SOs. Our target is not limited to specific SOs," LG U+ said in response to the request of the Korea Exchange about a rumor that LG U+ would take over CJ Hello in August. “Nothing has been determined yet. We will publicly disclose it again if it is decided."