[Reporter’s Notebook] The Shadow of Netflix’s 3.3 Trillion Won Investment

"We will invest 3.3 trillion won in Korean content over the next four years."

On the first day of President Yoon Seok-yeol's visit to the U.S., Netflix opened its wallet. This amount is double what Netflix invested in Korea from 2016 until last year. The government praised this as a result of President Yoon personally engaging in export marketing as Korea's first top salesperson. Although President Yoon welcomed the bold investment decision, there remains some disappointment in simply celebrating this news. This is because there was no discussion at all regarding the long-standing issue of network usage fees in the telecommunications industry.

[Image source=Yonhap News]

When news broke that President Yoon would meet with Netflix, Google, and others, telecom companies expected discussions on network usage fees to take place. Internet Service Providers (ISPs, telecom companies) and overseas Content Providers (CPs) such as Google and Netflix have been embroiled in a multi-year dispute over network usage fees. Content providers generate massive data traffic worldwide but are criticized for avoiding payment for network usage, effectively 'free-riding.' Korea has been at the forefront of discussions on network usage fees, with telecom companies and Netflix engaged in a landmark legal battle. The National Assembly even proposed a 'Network Usage Fee Act' requiring operators above a certain scale to pay for using telecommunications networks. However, the surprise investment announcement has put telecom companies' efforts to receive fair compensation at risk of being nullified.

The scale of the investment is also somewhat underwhelming to be touted as a major achievement. Netflix has invested about 1.5 trillion won over the past three years. As Korean content gains global popularity, the investment amount is gradually increasing. This year’s investment is expected to exceed 800 billion won. If Netflix continues investing at this rate for four years, the total would be around 3.2 trillion won. Thus, the '3.3 trillion won' figure is not particularly groundbreaking. From a long-term perspective, the profit-generating effect is also limited. Netflix invests fully in original content production costs but retains exclusive intellectual property (IP) rights. Even if the content is successful, producers cannot earn beyond a certain profit threshold. The growing dominance of Netflix could also undermine the competitiveness of native online video services (OTT) in Korea.

Following the investment announcement, Netflix launched corporate promotions featuring President Yoon. There are bitter remarks that this was Netflix’s best promotional strategy, leveraging the Korean president. Ultimately, the main protagonist on this stage was neither 'President Yoon' nor 'Korean content companies,' but 'Netflix.'

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