South Korea

Contributed by HJ Stephany Noh (University of Texas)

October 2020

Key Takeaways

• While Netflix is leading the SVOD market, local operators, threatened by its success, are launching affiliated SVOD services in the same price range.

• The regulation of SVOD, formerly covered by telecommunications law, has been transferred to broadcast law in recognition of the fact that SVOD services are content providers. 

• Netflix’s aggressive investment in television dramas has led production companies to prefer coproduction with the US company over local program providers (channels). 

• These developments reflect the extent to which Netflix is now setting the prices and practices for the SVOD market.

• Netflix’s distinction in terms of the numbers of episodes and airing of seasonal programming are altering entertainment consumption patterns in Korea.

Market

Netflix began offering its service in South Korea (hereafter simply “Korea”) via PC and mobile on 4 January 2016. At that time, the country’s internet-distributed television market was growing rapidly. Four national broadcasters (KBS, MBC, SBS, and EBS) were operating in Korea when cable was first marketed in 1995, and satellite service became available in 2000. Cable service operators dominated the pay-television market until the launch of internet protocol television (IPTV) in 2007. IPTV service made available legacy television streaming and catch-up VOD through the internet service provided by the telecommunications companies SKB, LG Uplus, and KT. Packaged with mobile and internet services, IPTV had attracted 50% of the pay-television market share in Korea as of the most recent available statistics, which are for December 2019 (MSIT 2020). 

In the five years since Netflix’s entry into the Korean market, it has expanded its presence through distribution and production partnerships with these local distributors. Thus, its foothold rapidly strengthened when it joined forces with LG Uplus in November 2018 and partnered with KT’s Olleh TV (previously Qook TV) in August 2020; these latter firms comprised 57% of the pay-television market share as of December 2019 (MSIT 2020; see Figure 4). [1]

According to KISDI’s report, in 2018, Korea’s web portal marketplace, which includes online videos, was led by Naver TV, with 33 million monthly average users, and YouTube, with 30 million. The former, a web- and app-based video portal serviced by the dominant Korean search engine Naver, provides short-form legacy media promotional content, licensed legacy-channel content, original web drama series, live sports coverage, and UCC channels. Among Korea’s online video services, Oksusu, tVing, and Pooq serviced legacy media content with a subscription-focused model most similar to Netflix’s SVOD model which continues even after  their recent mergers with each other or other firms (Figure 1). In 2018, LGU+ HDTV and OllehTV Mobile were offered as mobile-only add-on services for these telecommunications companies’ IPTV subscribers, at which point Netflix averaged 0.7 million users per month according to the same report.

Figure 1. Monthly Average Unique Users of Korean Web Portals with Online Video Services, December 2017 to November 2018 (unit: 1,000 users).

KCC released a survey showing the yearly changes from 2017 to 2019 (Figure 2). Though this survey did not report monthly average unique user numbers, it shows Netflix’s dramatic advance by 2019 to the status of Korea’s fourth-most-prominent online video service, ahead of the local services Pooq, Oksusu, tVing, LG Uplus Mobile TV, and Olleh TV Mobile. 

Figure 2. Survey of Online Video Service in Korea, 2016-2019 (Multiple answers selected; unit: %).

According to the Statista for October 2020, Korea’s internet penetration rate stands at 96%, ranking the highest in Asia. With telecommunications companies and SOs leading the SVOD market, the integration of operators and partnerships proved to be a key challenge for Netflix. Its launch in 2016 was fairly straightforward, requiring subscribers simply to log in from their computers or, in the case of mobile devices, to download the app. Its penetration of the television market proved more complex. Some 60% of Koreans consume legacy television by subscribing either to one of the aforementioned IPTV services—which are serviced through broadband by telecommunications companies and provide live streaming of legacy channels with optional SVOD service—or to service operators (SOs; i.e. traditional cable companies). As shown in Figure 3, since 2018, cable has started to decline in terms of subscriber numbers and market share. The pay-TV market has shifted to IPTV, which has surpassed the traditionally dominant traditional cable services to become the dominant form of domestic television viewing in Korea. 

Figure 3. Monthly Average Pay-TV subscribers in Korea (unit: million set-top boxes).

Thus, Netflix needed to partner with one of the distributors shown in Figure 4 to access the Korean television market. IPTV was the main reason for cord-cutting as Korean subscribers transitioned to broadband from conventional cable. At first, IPTV operators and CJ-affiliated service operator, CJ hello, turned down Netflix’s offer of a 1:9 subscription share and request for a free IDC (internet data centre). Netflix accordingly partnered with D’live, a cable company, in May 2016 before coming to an agreement with CJ Hello in August 2017. These initial partnerships with cable companies made Netflix’s content accessible on Korean television screens. 

Korea’s pay-TV market continued to consolidate around the three telecommunication companies. Netflix’s partnership with LG Uplus in November 2018 broadened that provider’s potential television subscriber base. In November 2019, Korea’s Fair Trade Commission signed off on a merger between LG UPlus and CJ Hello, making LG Uplus the second-largest distributor of television content in the country, with nearly a quarter of the subscription-television market share [2]. On 3 August 2020, Netflix’s service also became available through Korea’s largest IPTV service, the aforementioned Olleh TV. The decision by KT—the largest pay-TV operator, with over 31% market penetration—to add Netflix was intended to dissuade its audiences from shifting their serviceto LG Uplus. Having contracted with both that provider and Olleh TV, Netflix significantly increased its Korean presence. In response, Pooq and Oksusu merged to form WAVVE in September 2019 as part of the effort by free-to-air broadcasters and SKB to maintain their dominance in Korea’s SVOD market. 

Figure 4. Subscription Television Market Share in Korea, 2018-2019.

Regulations

Faced with Netflix’s sudden expansion in its distribution and production efforts in Korea, legacy media companies in the country asked the government to scrutinize the company’s operations with respect to taxes, network usage fees, and content. As a foreign service provider, Netflix registered as a value-added common carrier under Korea’s Telecommunications Business Act, the same category under which YouTube (Google) and Facebook registered to operate in the country. This categorization has made it difficult for the government to enforce content-related regulatory measures on these companies, for, while they are clearly global content providers, the fact that they operated under telecommunications regulations allowed them to forego obligations enumerated in the Comprehensive Broadcasting Act. 

On 26 July 2019, that act was revised so as to categorize internet-distributed television providers such as Netflix; henceforth, they would also be regulated under broadcast laws. Netflix now additionally reports its business under a new category: online video content provider. Nonetheless, as Netflix does not provide live linear channel streaming, it is not subject to restrictions on cross-ownership, ratings share, or access terms or to certain disqualifications, such as bankruptcy and trading with minors. 

Netflix does not publicly report its subscriber revenue, and media professionals have suspected that the company may engage in tax evasion. Yu’s Netflixonomics estimated Netflix’s monthly subscriber revenue in Korea at 20 billion Korean won (roughly $15 million USD). If the net revenue were 10% of that sum and the corporate tax 20% of the net revenue, Netflix would be paying 400 million won on this income, but the government has collected hardly any taxes at all from the company so far (Yu, p. 357). The National Tax Service has started to audit Netflix’s tax report, suspecting that the firm has falsely reported consultancy fees as having been paid to its headquarters in the US, thereby under-reporting its net revenue in Korea.

Furthermore, while local online video companies such as Naver and Kakao pay tens of billions of won annually to ISPs for the use of their networks, Netflix has been exempt from this obligation. As a foreign internet content provider (i.e. an IT company), Netflix was not obliged to pay additional network fees since no applicable regulatory measures were in place. Korea’s IT companies, by contrast, have been paying network and co-location fees (for server set-up and maintenance) to ISPs proportionate to their data traffic. ISPs in Korea claimed that they have been able to provide effective maintenance and establish fast and affordable broadband across Korea with the support from network fees. However, in the absence of a legally enforceable measure, global content providers preferred to skip fees by offering local cache servers. Korean IT companies have complained that this exemption amounts to an unfair practice. A telling example of the demand that Netflix places on this infrastructure is the launch of the program Kingdom, which so increased data traffic that the overall internet speed slowed for KT and SKB users. An international internet line extension was therefore needed, which the two local ISPs had to provide. LG Uplus accepted Netflix’s offer of a local cache server within LG Uplus, which substantially decreased its dependence on the use of international internet lines since popular streamed videos were saved on the local cache server. Netflix argued that it was not obliged to pay additional network fees because it was providing a cache server for its services. 

In March 2020, Netflix’s traffic increased by 34% over the previous month as a result of the COVID 19 lockdown, but it still paid no network fees. Since LG Uplus had an agreement with Netflix to utilize its cache service and share subscription fees, one of the three IPTV operators, not partnered with Netflix, SKB asked the Korea Communications Commission (KCC) for arbitration. However, Netflix sued SKB before the arbitration was complete, insisting that it was not obligated to pay the fees. KT is also continuing negotiations with Netflix regarding network fees and holding off Netflix’s local cache server option, while Olleh TV began servicing Netflix in August 2020.

This controversy revealed the pressing need for clearer legislation regarding these issues. Accordingly, on 20 May 2020, the telecommunications law was revised so as to make value-added common carriers, including foreign content providers, responsible for unstable internet connections on Korean local networks caused by their heavy data traffic. Since local content providers such as Naver and Kakao were liable for such payments, the National Assembly reasoned, foreign content providers were likewise responsible for providing stable quality service, and with the intent of ending the free ride that global online content providers had been enjoying. Ratified on 9 June 2020 and going into force on 10 December 2020, the Telecommunications Business Act‘s Amendment 22 includes value-added common carriers with data traffic over 1% of Korea’s total internet data traffic (based on the previous year’s Q4’s monthly average) among the companies that are regulated under the act. Currently, the amendment would apply to eight internet content providers, including Naver, Kakao, Netflix, Google, and Facebook. The purpose of the law is to prevent the concentration of data traffic usage, maintain the quality, stability, and speed of internet connections, provide for the issuance of advance notice regarding changes that can affect the stability of service, and establish guidelines internally for stable service. This clause has been interpreted as a legal means to compel global internet content providers such as Netflix to pay network fees for their Korean operations.

While this policy speaks to the policy request of telecommunications firms that they be paid by foreign content providers, nascent online video services such as Watcha are asking for reductions in network fees for local internet content providers overall.

Original productions by Netflix have been reviewed by the Korea Media Rating Board, the purview of which includes online and mobile VOD services. The board assigns each production one of four ratings, either General Audience, PG-12, PG-15, or R. According to an ongoing study conducted by News Lab It, Netflix Korea submitted 4,558 shows in the three-year period ending in April 2019, of which 37% (1,658) were rated R, 36% (1,602) were rated PG-15, 17% (764) were rated PG-12, and only 10% (447) were rated G. Thus, Netflix’s programming has skewed strongly toward adult-oriented content. 

Figure 5. Netflix Ratings, 2016-2019

Viewing Habits

The Korea Communication Commission (KCC) conducted a survey of media usage in Korea from 3 June 2019 to 9 August 2019 (N=6,375) according to which 52% (N=3,316) of viewers had consumed online video during the previous week. These figures represented a consistent increase over the past two years, from 42.7% in 2018 (N=7,234) and 36.1% in 2017 (N=7,416). The breakdown in online video usage by age group over the past three years is presented in Figures 7 and 8. 

Figure 6. Online Video Service Usage by Age Group, 2017-2019 (unit: %)

While all age groups have been showing an increase, usage was greatest in the age groups from 10-19 and 20-29. 

Figure 7. 2019 Online Video Usage by Age Group (N=6,375)

The five most-viewed online video portals are broken down by age group in Figure 8. As can be seen, YouTube showed the highest level of usage across all age groups, and online video usage tended to correlate negatively with age. For Netflix and AfreecaTV, the 20-29 age group showed the highest level of usage.

Figure 8. 2019 Online Video Usage Time Frame (N=3,316)

Among those surveyed who replied that they had streamed online videos in the past week (N=3,316), the most active time for doing so was on weekdays from 9 pm to midnight, followed by weekdays from 6 to 8 pm and noon to 3 pm.

Figure 9. 2019 Length of Online Video Usage (N=3,067)

Most users viewed online video for less than 1.5 hours at a stretch, with significantly fewer watching for 1.5 to 2 hours, and more again doing so for more than 2 hours. The low numbers for 1.5-2 hours of viewing may indicate that users tended either to watch relatively brief online videos or short series amounting to 1.5 hours or to binge-watch series (i.e. view multiple episodes of a programme in one sitting) or watch films with running times of greater than 2 hours.

Figure 10. 2019 Length of Online Video Usage by Age Group (N=3,067; unit: minutes)

The 10-19 and 20-29 age groups spent the most time viewing online videos on weekends. Further, while the usage rate by viewers over 70 years of age was very low, those who did view online videos tended to watch for about an hour per day. 

Figure 11. 2019 Online Video (OTT) Usage Device (N=3,316; Multiple answers selected; unit: %)

Online video was predominantly viewed on mobile phones, with other devices—televisions, laptops, PCs, and tablets—each being used by around 5% of viewers. Also, a preference for using mobile phones to view online video was observed across age groups.

Binge-watching is a conspicuous viewing habit with regard to VOD consumption in Korea as elsewhere. A survey conducted by Research and Research in May 2018 found that more than 70% of viewers aged 20 to 39 and 47% of those 50 or older had engaged in binge-watching. In terms of genre, across demographic groups, television drama was the most binge-watched genre, accounting for 79.7% of content consumed in this way, followed by entertainment variety shows (39%), films (27%), and documentaries (13%). More specifically, respondents to the survey binged Korean TV dramas most (89%), followed by American series (34%) and Japanese TV dramas (11%). Similarly, 41% of respondents to a KBS national panel conducted on 28-29 May 2019, indicated that they had binge-watched; the panel also found that the duration of binge-watching averaged around 4-6 hours, though a significant portion of respondents (13%) admitted to binge-watching for more than 10 hours at a time. 

Internet Pricing and Availability

When Netflix entered the Korean market, various forms of internet-distributed television were available, some of which are listed in Figure 2. Figure 13 presents a summary of the revenue models for online video services ranked by numbers of monthly active users (MAU; unique users who visit a site within the past month) as in Figure 2. The revenue models for the top three—YouTube, Facebook, and Naver TV—are advertiser-supported. Netflix has had the largest number of MAU as a subscription-only revenue model, followed by AfreecaTV, which is also advertiser-supported and allows direct payment by viewers to the creators of UCC. Oksusu, Pooq, and tVing are the subscriptions-based models affiliated with telecoms, free-to-air broadcasters, and multi-program-providers (MPP), respectively. These three online video services are going through various developments as Netflix’s direct competitors in terms of their revenue models and content (i.e. scripted series and entertainment shows).

Figure 12. Revenue Models of Online Video Services

Oksusu and Pooq merged to launch WAVVE in September 2019, which promoted itself as the main platform for the Korean Wave and also as a source of pan-Asian content catering to the broader Asian market. SKB relaunched another separate online video service, OCEAN (formerly Premier) in July 2020 for the purpose of focusing on licensed films, leaving WAVVE to concentrate on television dramas. CJ’s tVing is also joining forces with JTBC to strengthen its MPP-based catalogue. Olleh TV Mobile, while remaining mobile-only, has relaunched as Seezn with a new user interface with such features as the ability to recognize facial expressions and suggest content accordingly.

As of 2020, Netflix offers three tiers of service, basic, standard, and premium. As the figure shows, assuming an exchange rate of US$1: 1,200₩, the basic tier in Korea costs $8 per month and includes one screen, the standard tier costs $10 per month and includes two screens at once in HD quality, and the premium tier costs $12 per month and includes up to four screens at once in HD quality.

Figure 13. Netflix Subscription Fee Tier Chart

For Korean subscribers, Netflix’s rates may have seemed expensive, requiring an additional charge in addition to pay television. As Netflix settled into the Korean market, though, other SVOD services adjusted their rates accordingly. The range of IPTV pricing has been an important factor in the responses of Korean pay-TV subscribers to Netflix’s pricing. The cost of IPTV subscriptions also varies by tier, video quality (i.e. standard, HD, or UHD) and length of contract; as seen in Figure 15, the average monthly subscription is around 20,000 won (less than 20 USD). Compared with the relatively low cost of basic internet-based television access in Korea, then, Netflix is significantly more expensive. Further, while LG U+TV has offered Netflix at a bundled price, Olleh TV has offered Netflix to its subscribers like an add-on at the same price as online Netflix subscription. In any case, as Netflix’s presence has grown and domestic Korean services have adjusted their fees accordingly, the range of charges that Korean subscribers are willing to pay for SVOD has become apparent. Thus, as seen in Figure 15, Netflix and its SVOD competitors WAVVE, OCEAN, Seezn, and tVing are charging similar prices. According to WiseApp (2019), Koreans pay on average 13,130 won (US$ 11) for SVOD subscription fees, more than Netflix’s basic and standard tiers and only a dollar less than its premium tier.

Figure 14. Price Range of Monthly SVOD Service in Korea, IPTV, Netflix, and SVOD (unit: KRW)

Content 

In 2016, when Netflix first launched in Korea, it served mainly as a platform for accessing American content. The acquisition of Korean content and full original productions ensued, but international content has continued to make up the bulk of its library. According to an ongoing study conducted by News Lab It, Netflix Korea submitted 4,558 shows to the Korea Media Rating Board (Figure 16) in the three-year period ending in April 2019. All new shows airing for the first time in Korea are reviewed by this board, so these numbers reflect first-run titles on Netflix only and do not include domestic acquisitions or second-run titles. Thus, of the 4,558 titles, the vast majority were foreign shows; only 39 titles (less than 1%) were original Korean productions. US productions made up the majority (2,572 titles, or 56%), followed by productions from the UK (435), Canada (210), and Australia (102). More broadly speaking, then, since 2016, Netflix has submitted an average of 1,200-1,400 shows annually for review and thus has introduced this many new shows in Korea, amounting to some 15-20% of all of the new shows that the board reviewed. Although the present study does not account for the full range of Netflix’s content catalogue, the analysis does make it possible to estimate the percentage of new shows introduced by Netflix by country origin. Compared with other countries, Netflix’s full original commission rate in Korea, which calculates original productions in relation to its subscription rate is at the highest level. 

Figure 15. Imported Netflix Shows by Country, April 2016-April 2019

Though Netflix’s large American catalogue offered much for Korean audiences interested in that country’s content, it lagged in attracting a broader Korean audience. As might have been expected, the production of Korean-language and Korean-style content proved to be a key factor in garnering the attention of this broader Korean audience, even more important than the provision of acquired or coproduced content that was also available on other channels. Internationally, Netflix sought to be the exclusive channel for all full original Korean shows that it acquired, coproduced, and commissioned. This effort made the distinction regarding procurement less of a factor, but again, in the domestic Korean market, full original productions were crucial to the feasibility of Netflix’s strategy.

Since its launch in Korea in 2016, then, Netflix has acquired, coproduced, and commissioned numerous full original Korean productions. The willingness of legacy media to coproduce with Netflix has varied across media companies in accordance with a range of industry mandates. National broadcasters have been reluctant to do so because they were accustomed to enjoying a lengthy exclusive first window. The cable channel tvN and must-carry general channel JTBC, on the other hand, initiated coproduction deals with Netflix to secure its early investment in large-scale productions. In 2017, as China closed its market to Korean programming in retaliation for the deployment of the THAAD defence system supplied by the US, and as demand for Korean content slowed in Japan, Netflix emerged as the most substantial foreign investor in Korean entertainment media, licensing across all media formats, including films, television dramas, entertainment/variety shows, web series, and stand-up comedy. 

The broadcast networks were reluctant to share a first-run window with Netflix but intermittently sold the second-run rights of television series that had finished airing. Production houses that owned the licensing rights for their productions were the first to coproduce with Netflix. The earliest example is C Story’s White Nights (2016), which Netflix Korea released a day after the national broadcaster MBC’s first airing and released internationally on Netflix a month later. Netflix has also been an investor in content developed for Korean local legacy channels. In addition, it acquired One More Time (2016), a short television series developed for national broadcaster KBS for exclusive release. The must-carry general channel JTBC produced Man to Man (2017) targeting the Chinese market but Netflix acquired the programme after China’s closure of its market to Korean television. Also in 2017, Netflix and the cable channel tvN coproduced Stranger, which was nominated as one of the ten best international television series that year by the New York Times. Though Netflix was introducing Korean titles exclusively to the international audience, Korean audiences had little incentive to subscribe to Netflix for the co-productions since domestic legacy channels usually held the first-run rights.

Netflix gained much more traction in Korea when it began releasing its own full original productions. The first Korean film to be produced entirely by Netflix was Bong Joon Ho’s Okja (2017), which attracted attention for several reasons. To begin with, Netflix paid all of the production costs, a total of US$50 million, which was ten times the average cost of a film production in Korea at the time. However, the funding was provided with the stipulation that Okja be released exclusively on Netflix. The absence of a theatrical release induced cinephiles to subscribe to Netflix, at least for the free trial month, simply for the purpose of seeing Bong’s film. Further controversy arose when the 2017 Cannes Film Festival refused to consider Okja for the Palme d’Or because it had not been shown in theatres. The anthology film Persona (2016) also was distributed by Netflix without theatrical release; the producer, Yoon Jong Shin, felt that this arrangement would provide the experimental film with greater exposure and a longer shelf-life than would otherwise have been the case. 

Amid these successes and controversies, Netflix moved forward with original programming in various television genres. In 2018, it launched a variety show called Busted starring the popular Korean comedian Yoo Jae Seok and YG Future Strategy Office, a sitcom filmed in a mockumentary style starring Seung Ri, then famous as a member of the boy band Big Bang. Netflix also commissioned stand-up comedy, which rarely airs on television in Korea, by comedians Yoo Byung Jae (2018) and Park Na-rae (2019). Thus, the streaming service has been producing entertainment that was already popular in Korea, such as variety shows, while also adding new media forms, such as stand-up comedy, to the country.

Among the many genres that Netflix commissioned, televised Korean scripted series, the so-called “K-dramas,” already had an established market presence internationally and also attracted the most interest in the domestic Korean market, as the subscriber estimates provided below demonstrate. The first commissioned full original Korean TV series commissioned by Netflix, Kingdom, which premiered in January 2019, is a prominent example of Netflix’s strategy of incorporating K-drama into its catalogue of entirely original content. The script for this historical zombie thriller had been passed around various legacy channels for seven years before Netflix picked it up. The local channels had reasoned that the zombie theme in a Korean historical setting would be too experimental for the domestic audience—zombies do not number among Korea’s traditional horror tropes—and that the violence would limit the age range of the general audience. Netflix greenlit the production for the same reasons, calculating that Kingdom would be greeted as a fresh kind of narrative by the Korean television audience. The company also had faith in the show’s writer, Kim Eun Hee, who had found success with mystery thriller series. At US$1.6 million per episode, the budget for the six-episode series was about three times that for the average feature-length Korean film. While Kingdom’s impact was apparent in the increase in subscription numbers in Korea mentioned earlier and discussed below, there was also international interest in the main character’s hat, the traditional gat worn by noblemen in the Chosun era, that reflected interest in the series.

Netflix has continued to invest heavily in both co-productions and original programming. In the case of tvN’s Mr. Sunshine (2018), it provided 70% of the US$39 million production budget, thereby obviating the need for the production house to raise the funds to support the programme and significantly reducing its dependence on first-run domestic cable channels. Not surprisingly, the generous investment and promise of creative control have led production houses to prefer working with Netflix over the legacy channels. In 2019, Netflix contracted with Studio Dragon and JTBC to produce 20 series titles annually over a period of three years starting in 2020. The broadcast networks (again, KBS, MBC, and SBS) once adhered to a gentlemen’s agreement not to sell programming to Netflix until at least a year after the first run, but this agreement was broken when SBS’s production house SBS Content Hub sold the SVOD rights for Netflix to air The Hymn of Death (2018) almost immediately after its original release. While the legacy channels and distributors have tended to consider Netflix a competitor, threat, and disruptor of the media market that they created and have maintained, the production houses welcomed the US company’s generous commission contract for large-scale investment in production, which, again, decreased their dependence on legacy channels. Recognizing production houses’ strong preference for working with Netflix, the broadcast networks decided that the best strategy would be to select two shows per year for joint productions with the company. Thus, in 2019, One Spring Night (MBC), When the Camellia Blooms (KBS), and Vagabond (SBS) were coproduced with Netflix and streamed worldwide.

Two more full original television series followed Kingdom in 2019: the romance drama My First First Love premiered with eight episodes for its first season in April and another eight for its second season just three months later, and the drama Love Alarm was released in August. In February 2020, the romantic drama My Holo Love premiered, and the second season of Kingdom was released in March. Apart from Kingdom, then, Netflix seems to have preferred romantic-themed programming; and, indeed, romance is the genre for which K-drama initially achieved international recognition. However, Netflix also picked up an experimental script, Extracurricular (2020), about a high school student willing to do anything for money, after that script had been passed around linear channels for six years. This production demonstrates an interest in shows with potential appeal to international audiences without a previous interest in K-drama. 

Netflix is also influencing the production formats of Korean television. Specifically, more and more Korean series are being commissioned for fewer episodes per season and/or developing seasonal productions, and this trend has become apparent in legacy television content, especially in series co-produced with Netflix. Before Netflix, Korean television series did not usually adhere to the concept of “seasons” and rarely revisited past narrative universes (exceptional in this regard, I Need Romance and Rude Miss Young-ae on tvN). Beyond the logistical problems involved in reuniting the members of the production staff and cast, there also was a general consensus among Korean producers and audiences that the narrative arc, at least of programs in the romance genre, should culminate in a happy ending and deliver closure in one season. The number of episodes typically produced was 16 to 24 episodes airing twice weekly so that shows usually lasted for two to three months. By contrast, US programming has usually taken the form of series focused on a fairly fixed cast of main characters over successive seasons. Now, with Netflix’s entry into the Korean market, this format is becoming more common—thus, Kingdom and My First First Love were produced with several seasons in mind—with the number of episodes per season being kept below eight, possibly to encourage binge-watching. The first season of Chief of Staff, for instance, coproduced by Netflix and JTBC, aired in June 2019, consisting of ten episodes, with ten more being released in November of the same year as the second season. More recently, the final episode of Hospital Playlist (2020) closed with the message “Hospital Playlist will be back for a new season in 2021.” In these ways, Netflix’s changes in terms of the numbers of episodes and airing of seasonal programming are altering entertainment consumption patterns in Korea. 

Korean programming funded by Netflix is also now being enjoyed across the US. Thus, during the week of 21-28 March 2020, when most US states had issued stay-at-home orders in response to the coronavirus pandemic, Crash Landing on You (tvN, 2020), an hour-long, 16 episode romantic comedy about a South Korean heiress who accidentally lands in North Korean territory while paragliding during a storm, ranked as the sixth-most-watched television show on Netflix in the US. Netflix’s substantial investment in K-dramas, then, has increased US audiences’ exposure and access to these programmes.

Though production houses have generally welcomed investment from Netflix—which has stabilized production budget structures and thus enhanced production quality—debate continues regarding its standard business model of procuring all IP rights. Masayuki Furuya, a Japanese DJ who has been following the Korean Wave, provided insights into Japan’s access to Korean content (BCWW 2020), observing that Japan was once at the vanguard of the Korean Wave, as Hallyu K-dramas became a nationwide phenomenon in the country, particularly with the national television broadcast of Winter Sonata (2002), a drama that engaged audiences across age groups and regions. However, according to Furuya, more recent exclusive Netflix programming such as Crash Landing on You (2020) and Itaewon Class (2020) went largely unnoticed in Japan, and were limited to Netflix subscribers a comparatively narrower audience than would have been the case had these series been distributed by national Japanese broadcasters. The distribution of K-drama is following distinct paths across various countries depending on Netflix’s penetration of each. 

While Netflix’s exclusive content is a crucial part of its subscription business model, it is shifting the landscape as the Korean Wave expands in the digital terrain. It is too early to tell what this shift will mean, but Netflix as a global media company and K-drama as a major production force together are creating new patterns of content production. 

Figure 16. Netflix originals produced in Korea

Consumer and Press Reactions

On 25 November 2019, Netflix CEO Reed Hastings gave a presentation at the ASEAN-ROK’s Culture Innovation Summit at Busan, Korea (the ASEAN, or Association of Southeast Asian Nations, includes Indonesia, Thailand, Singapore, Malaysia, the Philippines, Vietnam, Brunei, Myanmar [Burma], Cambodia, and Laos). In his speech, Hastings discussed his reasons for investing in Asia and his vision for Netflix’s Asian content. Mindful that he was addressing government officials and national leaders, including Korean President Moon Jae-In, he carefully positioned his company, differentiating it from other US media firms that, according to him, viewed the international market as merely an arena in which to reap profits. Hastings emphasized Netflix’s various investments in Asia as well as the creative freedom and financial support that the company offered to local talent, noting that it produced content in 19 Korean cities and had formed partnerships with domestic broadcasters, distributors, and device manufacturers. As he described it, Netflix’s international power in original storytelling was fueled by its productions in Asia, which were rooted in its relationships with domestic artists whose creativity the company shared with the world. 

Subscriber Estimates

In 2016, six months into its launch in Korea, Netflix’s subscribers numbered around 60 thousand (Wiseapp). By 2019, FlixPatrol’s estimate increased to 3.5 million, similar to the count by Nielsen Korean Click of MAU in December 2019. In August 2020, Nielsen Korean Click announced Netflix’s MAU increase to 7.86 million, which more than doubled since in the past nine months and is also more than double the second largest SVOD service in Korea, WAVVE, at 3.88 million. 

Local Netflix Offices

Netflix opened a branch office, Netflix Services Korea Ltd, in Seoul on 27 July 2015. Within the company’s corporate structure, this office is subordinate to its Asia Pacific headquarters in Singapore, which supplied the full-time employees for the Seoul office. In April 2018, Netflix Korea moved its offices to a different neighbourhood in Seoul (from Euljiro to Gwanghwamun) and continued hiring local employees—who are expected to number around 60 by the end of 2020—renting additional nearby office space, presumably, to house the new hires.

The work conducted in Netflix’s Korean office is focused on the production and licensing of original content. The office listed five business objectives when registering as an online marketing business: to carry out marketing, customer research, promotion, and project development efforts; to distribute online video and related services; to engage in e-commerce; to import, export, sell, and circulate IT devices; and to import and distribute films. The Korean representative of Netflix Services Korea Ltd is listed as Reginald Shawn Thompson.

References and Suggested Reading 

KCC: Korea Communications Commission. 2019. Media Consumption Behaviour Analysis. 방송매체이용행태조사. ISSN 2005-498X 

Available at: www.mediastat.or.kr and www.kcc.go.kr

Kwak, Dong Kyun, 2019. Korean Main OTT Service’s Online Video Content Status Analysis.

국내주요 OTT 서비스의동영상콘텐츠제공및이용현황분석. KISDI: Korea Information Society Development Institute.ISSN 2233-6583

Moon, Sung-kil. 2017. Netflixed: Netflix, the Keyword of the Fourth Industrial Revolution. Seoul: Three Chairs.

MSIT: Ministry of Science and ICT. “Pay Television Subscription Numbers and Market Share Quarterly Report” (유료방송 가입자 수 및 시장점유율 발표).

Available at: www.msit.go.kr

Yu, Konshik. 2019. Netflixonomics: Netflix and Korea’s Media. Seoul: Han-ul Academy.

Notes

[1] When Netflix first partnered with LG Uplus, the latter firm’s market share was 11%, and it increased to 24% after its merger with cable operator CJ Hello; the most recent figure, for December 2019, is 25% (Figure 4).

[2] On the same day that the Fair Trade Commission agreed to the merger of LG Uplus and CJ Hello, it also signed off on a merger between SKB and Tbroad, which together would comprise 24% of the market (Figure 4).