Securing 'Kkoerikkoeri Muneun' IP Is a Top Priority for K-Content

The Path to Coexistence in the OTT Era and IP...
Critical Role of IP in Story Linking and Commercialization, Fierce Competition Among Platforms and Producers
Licensing IP Yields High Profits but Is Difficult and Complex... Requires Specialized Systems and Commercialization Environment

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The era when video content was consumed only in theaters and on TV is over. Now, it freely crosses the boundaries of platforms and devices. Dramas and movies are produced for Over-The-Top (OTT) services, and webtoons, games, performances, NFTs, and more are created based on storytelling and intellectual property (IP). Due to this diversification, the forms of planning, production, and distribution have shifted from a pipeline to a network. The entire process has transitioned from a sequential procedure to a value chain. This phenomenon has occurred as numerous video contents have achieved global success.

◆The Fluidity of Media, IP as a Focal Point

Last year, the most-watched title on Netflix was Squid Game. This year, All of Us Are Dead ranked 3rd, and Business Proposal ranked 7th. Titles such as Crash Landing on You, Itaewon Class, Reply 1988, Hospital Playlist, Vincenzo, and Hometown Cha-Cha-Cha remained in the top 10 viewing rankings for an extended period. Some of these are not Netflix original contents. They are distributed by sharing IP with other distributors or broadcasters or by exclusively holding global IP rights. This leaves room for creators and production companies to generate new revenue and expand IP.

Professor Lee Sung-min of the Department of Media and Video at Korea National Open University said at the “Leading K-Content and OTT Promotion Forum for Cultural Attraction Countries,” held on the 29th of last month at Gwanghwamun Content Korea Lab (CKL) by the Ministry of Culture, Sports and Tourism and the Korea Creative Content Agency, "Recently, the importance of story IP and licensing IP has increased significantly." The former is realized through story linkage and expansion and world-building across various platforms. The most notable fields are web novels and webtoons. Business Proposal achieved great success through a strategy linking webtoons and global video content, and Semantic Error succeeded by adapting a web novel into video. Our Beloved Summer gained popularity by turning the drama’s prequel into a webtoon.

The latter trend involves IP experiences extending into daily life through merchandising. Opportunities for branding expand through goods production and collaborations with other companies. Professor Lee emphasized, "The value of content IP comes from fandom. It is important to understand and realize the desires for participation and play. Branding strategies that make fandoms feel proud are required."

◆Securing IP and Unfavorable Revenue Structures

Director Hwang Dong-hyuk and his production company Siren Pictures did not earn much profit despite the global success of Squid Game. Netflix pays the production company a fixed amount and monopolizes all future revenue from IP usage through a buyout contract. Production companies must be satisfied with recovering production costs and receiving 5-10% of profit sharing. However, they do not bear losses even if the project fails. If the work succeeds and a sequel is produced, contract terms change. A film industry insider said, "Some works have been guaranteed profits at the level of Hollywood in the United States."

Securing IP is also a hot topic in the broadcasting industry. Eggiscoming, which produced Spanish Hostel, Kang's Kitchen, Three Meals a Day, and Hospital Playlist, has been investing directly in production costs for three years. Ko Joong-seok, CEO of Eggiscoming, said, "To acquire IP, we take responsibility for 20% of large-scale projects and 50% of smaller ones." He added, "Broadcasters take all advertising revenue, making it difficult to create a stable revenue structure. From the perspective of strengthening internal capabilities, we plan not to rely on CJ ENM PDs such as Na Young-seok as early as 2025."

Professor Kim Tak-hoon of the Graduate School of Advanced Imaging Science at Chung-Ang University pointed out, "Even if production companies transfer IP to platforms or co-own it, the poor revenue structure remains unchanged. The revenue that can be earned solely from video content is 10-15%."

◆Licensing IP, Still a Burden

For production companies, IP is like an infinite driving force to improve unstable revenue structures. This is even more true for animation and character production companies, as the revenue scale from merchandising such as goods is considerable. However, most face difficulties in utilization regardless of the field.

CEO Ko said, "We planned a performance using the Hospital Playlist IP, but had to resolve issues with the management companies of the actors, schedules, and portrait rights. Producing goods also required additional investment, making realization difficult."

At the 'Lotte World Adventure 30th Anniversary Birthday Party' held on the 11th at the Lotte World Adventure Garden Stage in Songpa-gu, Seoul, characters including Loti and Lori, as well as Pororo, Pinkfong, and Lightning Man, are performing a birthday celebration with children. Photo by Jinhyung Kang aymsdream@

Film production company CEO A said, "The expansion of story IP and licensing IP are completely different issues," adding, "In the latter case, there is no specialized system in Korea, and the interests are intricately entangled." He said, "Even large corporations that have acquired management companies show reluctance," and insisted, "The government needs to establish an environment that can actively engage in commercialization."

◆The Problem Is the Netflix Dilemma

Government policy is focused more on securing IP than expanding it. Kang Ji-eun, Director of the Broadcasting and Video Advertising Division at the Ministry of Culture, Sports and Tourism, said, "We are considering support based on sharing IP with production companies, tax incentives, and production cost support funds," and added, "We will work to ensure related legislation is passed promptly." On the other hand, regarding value-added creation, she gave a general answer, saying, "We need to create a virtuous cycle of investment beyond the dichotomy of platforms and production companies." In fact, only a few targets can be expected to have significant effects. Many drama IPs that contribute to the spread of Hallyu are owned by overseas OTTs such as Netflix.

On the 25th, a Netflix original 'Hellbound' experience zone was set up at COEX in Gangnam-gu, Seoul. Released on the 19th, 'Hellbound' ranked first as the most-watched TV show worldwide within a day. Photo by Moohnam Moon munonam@

The problem is that domestic OTTs like TVING, Wavve, Watcha, and Season may also aggressively pursue IP acquisition like Netflix. Ko Chang-nam, Head of Business Operations at TVING, expressed concern, saying, "If Netflix dominates the OTT market, competitors who have conceded IP to production companies will have no choice but to change their strategies." He added, "Maintaining a competitive system among various platforms and establishing a content fund worth around 1 trillion won will make coexistence between OTTs and production companies possible." Kim Yo-han, Marketing Director at Watcha, emphasized, "If Netflix does not feel 'cost-effectiveness' in Korea, its investment will shrink. We must prevent the entire content industry from shrinking due to the policy decisions of a single company."

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