"High Definition Requires Payment"... Streaming Industry Seeks Profitability

Video streaming service providers are making every effort to strengthen profitability by blocking account sharing or initiating restructuring. YouTube has differentiated its paid service by offering high-definition services to YouTube Premium subscribers.

YouTube recently announced on its official blog, "To provide YouTube Premium members with a higher video quality experience, we plan to launch an enhanced bitrate version of 1080p HD resolution starting with iOS within the next few weeks."

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Although the specific implementation schedule was not disclosed, the service will first start on the iOS operating system and then be offered on the web. Even at the same resolution, a higher bitrate means better image quality. YouTube explained that the newly provided 1080p quality exclusive to YouTube Premium shows videos with a lot of movement or delicate details more clearly. However, the 1080p resolution that was previously provided as a basic service to free users will continue to be supported.

In addition, YouTube Premium users will newly be supported with features such as watching YouTube simultaneously with multiple people on Android and iOS. YouTube Premium is a paid subscription service that allows users to watch YouTube videos without ads. In South Korea, it costs 10,450 KRW per month.

Last year, YouTube also attempted to offer 2160p resolution to paid subscribers but withdrew the plan due to user backlash. In February, it also tested the YouTube Premium-exclusive 1080p option with some users.

YouTube’s provision of high-definition options for paid subscribers is to overcome deteriorating profitability. YouTube’s advertising revenue in the fourth quarter of last year was $7.96 billion (approximately 10.5271 trillion KRW), down 7.8% from $8.633 billion (approximately 11.4171 trillion KRW) in the same period the previous year. To expand revenue, YouTube also introduced ads in 'Shorts,' short video content, starting in February.

YouTube is not alone. As market competition intensifies and outdoor activities increase due to the COVID-19 endemic, the video streaming industry is struggling with declining profitability. A representative case is Netflix. Netflix had long encouraged account sharing with the slogan "Love is sharing a password," but recently changed its stance. In March last year, it piloted a feature in Latin American countries allowing users to share accounts with people outside their family for an additional fee. Then, in January, when announcing its fourth-quarter results, Netflix declared it would officially introduce paid account sharing and began implementing it in February in Canada, New Zealand, Spain, and Portugal. Although user backlash is expected and it has not yet been implemented domestically, it seems imminent.

In November last year, Netflix also introduced an ad-supported Basic plan. It is 4,000 KRW cheaper than the existing Basic plan but requires watching 4 to 5 minutes of ads per hour. Netflix’s revenue in the fourth quarter last year was $7.85 billion, a 19% increase year-over-year, but net income for the same period was $55 million, significantly down from $607 million the previous year.

Disney has been cutting 7,000 employees since last month, accounting for 3.6% of its total workforce. Disney explained that this is to save $5.5 billion (approximately 7.2738 trillion KRW) in costs and to improve the profitability of its streaming business. Disney’s streaming platform business operating loss for October to December last year (fiscal first quarter) was $1.05 billion (approximately 1.3886 trillion KRW).

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