[The Decline of Movie Theaters] No Hunter to Catch the 'Dinosaur' Netflix

Netflix's Solo Dominance Likely to Strengthen
Concerns Over Weakening Competitiveness of Domestic Companies

[Asia Economy Reporter Eunmo Koo] Although the online video service (OTT) market is rapidly growing, domestic operators seem unable to secure leading roles on the local stage, overshadowed by Netflix's dominance. Amid this, Netflix, which has confirmed the competitiveness of so-called K-content such as "Sweet Home" and "Space Sweepers," is set to aggressively invest in Korean content again this year, aiming to dominate the market, making the survival competition among domestic OTTs even fiercer.

According to mobile big data platform company IGAWorks on the 22nd, as of February this year, Netflix's monthly active users (MAU) reached 10,013,283, marking a 113% increase from January last year (4,704,524). In contrast, domestic OTTs Wave (3,948,950), TVING (2,649,509), U+ Mobile TV (2,126,608), Season (1,683,471), and Watcha (1,385,303) combined barely reach a level comparable to Netflix.

As Netflix's solo dominance intensifies in the domestic OTT platform industry, concerns are growing about the weakening competitiveness of domestic OTTs and the bargaining power of content producers. While killer content plays a crucial role in expanding platforms, the nature of platform industries, where economies of scale strongly apply after platform activation, can shift bargaining power further towards the platforms.

Professor Jimin Ko of the Graduate School of Culture and Arts Management at Hongik University explained, "When the industry grows and new platform operators increase competition, content companies exercise strong bargaining power. However, as platforms consolidate and stabilize through coordination, the platforms gain bargaining power."

In fact, Netflix is strengthening its influence in the domestic OTT market by securing exclusive content backed by massive capital. In this process, it is also changing the content production and revenue-sharing structures. Netflix, which announced it will invest $500 million (about 550 billion KRW) in Korean content this year alone, proposes content production by guaranteeing profits through 100% production costs plus a 10-20% production fee. Production companies, facing difficulties in theatrical releases and box office performance due to COVID-19, are accepting these proposals to secure stable revenue.

However, since all intellectual property (IP) rights belong to Netflix in this process, production companies cannot expect additional revenue generation, and as domestic content production capabilities concentrate on Netflix, the content competitiveness of domestic OTTs may relatively weaken. Changseo Yoo, a member of the Korean Film Council, predicted, "Currently, only Netflix's original content in the Korean market applies the production fee method, but if global OTT companies like Disney Plus enter, this method could become widespread."

Voices are emerging that domestic OTTs need to form alliances among local operators to secure competitiveness against global OTTs. However, since artificial mergers and acquisitions (M&A) are realistically difficult, creating a consultative body among domestic operators to jointly invest in content production, distribution, and revenue-sharing systems could be a practical alternative.

Professor Donggyu Sung of the Department of Media Communication at Chung-Ang University said, "Under the current structure where all domestic content is sold to overseas OTTs, the competitiveness of domestic platforms inevitably weakens. Since web dramas and similar productions with relatively low budgets cannot compete in the long term, jointly producing content and distributing it exclusively on domestic platforms is currently the only viable solution."

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