Stop Netflix's Solo Run... OTT Industry's 'Alliance with the Enemy'

Netflix's 6th Year in Korea... Overwhelming Content Investment
Native Companies like TVING and WAVVE... Collaboration with Naver and Kakao
Korean OTT Council Launched for Organized Policy and Regulatory Response

[Asia Economy Reporter Eunmo Koo] Netflix, which marked its sixth year since landing in Korea, is dominating the domestic online video service (OTT) market beyond just a smooth landing. Following Netflix's success, foreign OTTs such as Disney Plus have also begun full-scale entry into the domestic market, accelerating the movements of native OTTs striving to defend their turf.

‘Anti-Netflix’ through OTT Alliances

According to the ‘2020 Broadcasting Media Usage Survey’ by the Korea Communications Commission on the 11th, the OTT usage rate among Koreans increased across all age groups last year. The highest usage rate was among those in their 20s, rising from 83.2% in 2019 to 91.6% last year, an increase of 8.4 percentage points. The 30s age group also rose from 71.1% to 84.2%, up 13.1 percentage points. During the same period, the usage rate among those in their 50s jumped significantly from 35.8% to 63.1%.

Viewing frequency is also increasing. The proportion of users who watch OTT daily or 5-6 days a week reached 79.7% among teenagers, and 69.2% and 67.0% among those in their 20s and 30s, respectively. Naturally, the market size is also expanding. The domestic OTT market, which was worth 192.6 billion KRW in 2014, expanded to 513.6 billion KRW in 2018 and 780.1 billion KRW last year.

So far, the undisputed leader of the domestic OTT market is Netflix. According to Nielsen Korea, as of January, Netflix’s average monthly users numbered 6.37 million, overwhelmingly surpassing native OTTs such as Wavve (3.44 million), TVING (2.41 million), and Season (2.06 million). Netflix is poised to solidify its throne. Since launching its service in Korea in 2016, Netflix has invested about 770 billion KRW in domestic content and recently announced at a content roadshow that it will invest 550 billion KRW this year alone. Compared to Wavve’s plan to invest 300 billion KRW and TVING’s 400 billion KRW in content over three years until 2023, Netflix’s investment is on an overwhelming scale.

Cooperation among domestic OTTs to defend the local market against Netflix is also intensifying. On the 4th, TVING and Naver announced that they would add unlimited TVING access to Naver Plus content benefits, Naver’s paid membership service. Through this partnership, Naver Plus members, who pay 4,900 KRW per month, can watch about 70,000 broadcast video-on-demand (VOD) titles without subscribing separately to TVING.

Earlier, CJ Group and Naver signed a mutual share investment agreement in October last year involving about 600 billion KRW worth of treasury shares. Through this, Naver became the third-largest shareholder of CJ ENM and the second-largest shareholder of Studio Dragon, a CJ-affiliated production company. Wavve, operated by SK Telecom and the three terrestrial broadcasters, is expanding its partnership with Kakao. SK Telecom and Kakao exchanged shares worth 300 billion KRW in 2019, and cooperation has begun to supply KakaoTV’s original content to Wavve.

Native OTTs Speak with One Voice

Recently, the Korea OTT Council was launched for organized responses. OTTs competing domestically such as Wavve, TVING, and Watcha established the council on the 2nd and agreed to speak with one voice on policy and regulatory issues. The council plans to focus discussions on unfair discrimination issues, such as overseas services like Netflix not paying network usage fees.

Domestic operators emphasize the need for an accurate understanding of the ongoing continuous offensive by foreign platforms, as stable platform operation and quality content production are inseparable. Lee Hee-joo, operating committee member of the OTT Alliance, stressed, “If the platform dies, the content dies with it,” adding, “We must accurately recognize the platform war between large global media like Netflix and domestic new and old media.” Since most OTTs are both platforms and content producers, securing platform competitiveness ensures sustained competitiveness in content production and distribution processes.

However, the alliances and mergers occurring during the expansion of suppliers and the struggle for dominance in the domestic OTT market are generally welcomed by consumers. This is because competition leads to improvements in both the quantity and quality of content, as well as opportunities to receive services at reasonable prices. Namsoo Lee, a researcher at Kiwoom Securities, forecasted, “An increase in suppliers within the industry will favorably contribute not only to quantitative growth but also to qualitative improvements, establishing a virtuous cycle.”

Author Myungseok Ko, who wrote ‘The OTT Platform War,’ also said, “Although OTT companies may face difficulties as Disney Plus and others enter the market, the fiercer the competition to create and satisfy new customers, the richer the media ecosystem and the greater the enjoyment for customers.” He explained, “Since OTTs typically allow subscriptions to multiple services, making monopolization difficult, it is necessary to view the entire ‘CPND (Content, Platform, Network, Device)’ ecosystem in a balanced way.”

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