Integration VS Differentiation, Opposing Netflix OTT Alliance's 'Different Dreams'

Content and Revenue Models Both Differ
Concerns Over Competitiveness Decline if Unified
Calls for Expanding into Chinese Market Grow Louder
Discrimination Against Broadcasting Development Fund Must Also Be Prevented

[Asia Economy Reporter Koo Chae-eun] Although a coalition of native online video services (OTT) such as Wavve, TVING, Watcha, and Season is emerging as a 'Netflix rival,' the industry holds 'different dreams.' It is difficult to expect immediate synergy after a merger, and since the domestic OTT market is not yet mature, the argument that differentiation rather than integration and competition rather than alliances are necessary is gaining traction. While content cooperation in the form of private autonomy may be possible, mergers involving capital integration are considered premature. Rather, voices are calling for the government to foster the OTT market's self-sustainability through lifting the Hallyu ban (China's restrictions on Korean wave content), alleviating the burden of broadcasting and communications development fund collection, and deregulation, instead of unconditionally promoting 'win by uniting' style 'government-controlled alliances' or using M&A as the sole incentive.

Why is native OTT integration difficult?

According to the industry on the 31st, although government departments and the market mention the necessity of 'native OTT integration' and 'platform unification,' the industry remains skeptical. Each OTT has different content characteristics and operators have different revenue models. Watcha focuses on movies, TVING on tvN dramas, and Wavve on terrestrial broadcasting variety shows, each emphasizing different strengths, making full content sharing difficult and synergy hard to achieve when merged. In particular, TVING is vertically integrated with Studio Dragon and broadcaster CJ ENM, so there is a greater incentive to secure competitiveness independently rather than merge. Even if all domestic OTTs were combined, they could not match the investment scale of global OTTs like Netflix or Disney. Netflix invested $15 billion (about 18 trillion KRW) in content last year alone, and Disney invested $18.7 billion (about 20 trillion KRW). In contrast, even if Wavve, TVING, Watcha, and Season jointly invest, it is difficult to reach 1 trillion KRW.

An OTT industry official said, "If the platform is unified, the principle of competition may disappear, and competitiveness may decline, worsening the concentration on Netflix," adding, "Since many heavy users subscribe to multiple OTTs, the number of subscribers may not explode but only overlap, so the actual benefit may not be significant." Lee Jang-sang, senior expert at the Democratic Party, said, "What native OTTs need most is a differentiation strategy," adding, "If Disney Plus or Netflix showcase portfolios centered on Anglo-American content, our OTTs could absorb content from Asian regions such as the Islamic world as an example."

No discrimination in opening Chinese market and broadcasting development fund

▲Netflix. (AP=Yonhap News)

The industry agrees that M&A among companies should be left to the market, but government support in other areas such as content investment or market development is necessary. The Hallyu ban, which started as a retaliatory measure following the deployment of THAAD (Terminal High Altitude Area Defense, a U.S. missile defense system) in 2016, is a representative example. Since then, the complete ban on airing Korean dramas and exporting Korean content to China has completely blocked market access.

However, with the upcoming visit of Chinese President Xi Jinping to Korea, the atmosphere has changed, raising industry expectations. A content industry official said, "If the Chinese market reopens, a large market inaccessible to Netflix will emerge, enabling OTT platform exports or joint investments, which could alleviate Netflix's monopoly," adding, "The government needs to make diplomatic efforts in this regard."

There are also voices that the issue of collecting the broadcasting and communications development fund from OTTs must be resolved first. An OTT industry official said, "It is absurd to talk about industry revitalization while applying the broadcasting development fund, which cannot be collected from Netflix or Disney Plus, to native OTTs," pointing out that "reverse discrimination issues may arise." Professor Lee Sang-won of Kyung Hee University emphasized, "The government must play a supportive role so that domestic operators can compete with global players," adding, "Institutional support and considerations such as tax incentives to encourage content investment and support for content convergence are necessary."

This content was produced with the assistance of AI translation services.