Netflix earning 300 billion KRW solely from advertising... Corporate tax is 3.3 billion KRW

Korean Association for Journalism Studies Conference Presentation
Advertising Revenue Forecast Up to 371.6 Billion Won

Netflix's ad pricing model, introduced at the end of last year, is expected to generate approximately 300 billion KRW in annual advertising revenue solely in South Korea, according to an analysis.

There are also calls for proactive measures such as the introduction of cross-media reps to prepare for the intensifying outflow of domestic advertising spending to overseas OTT (over-the-top) platforms like Netflix. This system would allow existing media reps, which currently handle broadcast advertising sales, to also manage internet and mobile communication advertising sales.

Drama 'The Glory'
[Photo by Netflix]

According to industry sources on the 22nd, Professor Byun Sang-gyu of Hoseo University recently presented at the Korean Society for Journalism and Communication Studies' spring academic conference on the topic "Prospects of OTT Advertising Pricing Model Introduction." He forecasted that Netflix's domestic advertising revenue will reach at least 268.7 billion KRW and up to 371.6 billion KRW annually over the next 3 to 5 years.

Professor Byun analyzed that many companies will shift their existing TV and digital advertising budgets to Netflix advertising expenses. He also predicted that terrestrial broadcast advertising revenue will decrease by 70 billion to 120 billion KRW in the future.

He explained that based on the monthly Advertising Business Outlook Index survey conducted by KOBACO, a significant number of companies are expected to allocate their existing TV and digital advertising budgets to Netflix advertising fees.

He stated, "When online advertising revenue increases by 100 million KRW, domestic advertising revenue increases by 68.9%, but terrestrial broadcast advertising revenue decreases by 33.8%," adding, "The introduction of OTT platform advertising pricing models will further damage the domestic broadcast advertising market." He also forecasted that terrestrial broadcast advertising revenue, which has already declined by 4.9% over the past decade, will decrease by an additional 70 billion to 120 billion KRW.

Professor Lee Si-hoon of Keimyung University, speaking at the same academic conference, said, "The introduction of OTT advertising pricing models is accelerating the encroachment of digital advertising on the broadcast advertising market," and emphasized, "The introduction of cross-media reps is necessary as a solution for the domestic broadcast advertising market."

He explained, "In the United States, cross-media packages have become a common sales product, and Europe also sells advertising that covers broadcasting, newspapers, outdoor, and cinema comprehensively."

In his presentation, Professor Lee added that a survey of 18 related experts, including broadcasters, advertising companies, media reps, and academia, showed that the majority supported the introduction of cross-media reps and related legislative amendments.

Greg Peters, CEO of Netflix, is giving a speech at the 'Mobile World Congress' (MWC 2023) on the 28th of last month (local time).
[Photo by Yonhap News]

Meanwhile, Netflix was the only company in the domestic OTT industry to turn a profit last year. While the second and third largest players, TVING and Wavve, posted losses in the 100 billion KRW range, Netflix recorded an operating profit of 14.3 billion KRW.

However, the corporate tax paid in South Korea was only 3.3 billion KRW, which is 0.4% of its revenue. This is because last year Netflix sent 650.7 billion KRW, equivalent to 84% of its revenue, to its U.S. headquarters as fees.

According to the U.S. Securities and Exchange Commission (SEC), Netflix's corporate tax paid in the U.S. last year was 772 million USD, which was 2.4% of its total revenue (31.61555 billion USD).

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