When Netflix entered the Korean market, some analysts said that it would end up in a “storm in a teacup.” However, it took less than three years for the U.S. firm to dominate the domestic video service market. Netflix has established itself as an over-the-top (OPP) video service operator with 1.84 million paid subscribers in South Korea who pay 24.10 billion won (US$20.41 million) every month to watch its content.
To counter Netflix, a local OTT platform “WAVVE” will be launched in September. The new service will integrate SK Broadband's OTT platform “Oksusu” and the three Korean terrestrial broadcasters’ “Pooq” service. “Korea OTT Forum,” the country’s first OTT research body, has also been launched. The domestic OTT industry is asking the government to improve regulations so that it can compete with global companies.
The number of Netflix’s paid subscribers came to 1.84 million as of June this year, according to app analyst WiseApp on July 16. The figure increased 192 percent from 630,000 a year ago. Each subscriber pays 13,130 won (US$11.12) a month on average. Accordingly, Netlfix rakes in 24.10 billion won (US$20.41 million) worth of money from the South Korean users every month.
Most notably, nearly 70 percent of Netflix’s paid subscribers are in their 20s and 30s. By age group, the 20s accounted for 38 percent, the 30s 31 percent, the 40s 15 percent and over the 50s 17 percent. When Netflix first started its service in South Korea in 2016, experts said that the company would not be able to grow into a popularized service except for a handful of American drama fans. However, the 20s and the 30s who enjoy watching American dramas and are accustomed to binge watching have grown Netflix into “the eye of a typhoon” beyond “a storm in a teacup.”
Experts expressed concerns about the rapid growth of Netflix during a seminar held on July 16 to celebrate the founding of the Korea OTT Forum.
Noh Woong-rae, chairman of the National Assembly’s Science, ICT, Broadcasting, and Communications Committee, said, “Netflix has taken up 74 percent of the U.S. OTT market and 60 percent of the British market and it is on track to dominating the domestic market. The domestic OTT industry is still underdeveloped so it is time to make a huge effort to jumpstart its growth.”
Domestic OTT companies strongly urge the government to eliminate reverse discriminations against them. For instance, domestic operators pay a network use fee to telecom companies depending on traffic, but global OTT service operators practically use the domestic network for free.
During the seminar, Choi Se-kyoung, a researcher at the Korea Small Business Institute (KOSBI), said, “It is difficult to apply domestic regulations concerning network use fees, infringement on copyrights and distribution of copyright fees to global operators. Therefore, domestic operators are discriminated against. It is necessary to amend regulations for application to offshore operators.”
The government is also aware of the need to grow the domestic OTT industry. Lee Hyo-seong, chairman of the Korea Communications Commission (KCC), said, “We will build an institutional and human infrastructure to prepare for the convergence of new technologies.”