The Peninsula

How to Build a Competitive Streaming Platform

The resource that will drive future growth is data. For Korea’s entertainment industry to get a share of this new currency, it has to transition from being producers of content to becoming providers of a platform that aggregates data. But domestic streaming platforms face numerous challenges when competing against foreign giants like Netflix, Disney+, and Apple TV. As late adopters, Korean platforms begin with a disadvantage but limited capital resources and lack of coordination between TV networks make the task even more challenging.

Facing declining ratings, terrestrial giants such as MBC, KBS, and SBS have formed Wavve, a streaming platform in concert with SK Telecom. Wavve CEO Lee Tae Yoon announced plans to invest over USD 800 million into original content on the platform by 2025. Similarly, CJ ENM’s platform TVing announced over USD 4 billion of investment by the same year.

Although the platforms are raising large pools of cash, drama production costs are also rising, with an average cost of over USD 550,000 per episode. Whereas Netflix is able to cover up 100% of production costs, domestic broadcasters can typically only cover 60-70%, leaving them to rely on ad revenue or product placement to cover the rest – but product placements are increasingly unpopular with viewers.

Adding to these costs, KOMCA (Korea Music Copyright Association) proposed raising copyright fees on music in movies and dramas, charging domestic platforms the same amount of royalties as Netflix. Though settled, the move triggered fears about needing to raise subscription fees in an already competitive market.

Local firms are also struggling to weigh the benefits of immediate profit versus long-term benefits. KBS, MBC, and SBS initially formed a gentleman’s agreement against selling to Netflix until SBS broke the pact by selling the subscription video on demand (SVOD) rights of 2018 drama Hymn of Death. To compete with multinational platforms, bringing more popular content together under one umbrella will be critical. TVing CEO Jay Yang has mentioned a possible alliance of all domestic SVOD platforms to share content and prevent overlap in viewership. But that appears to be a major uphill battle when the immediate benefits of collaboration with an already globally-competitive platform are so lucrative.

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

Korea View was edited by Yong Kwon with the help of Janet Hong, Yubin Huh, and Mai Anna Pressley. Picture from the flickr account of noritoshi ikeda