Until 2017, people watching videos online did not increase that much. However, the increase became remarkable since 2018 and NETFLIX is in the center of attention. According to the survey by Nielsen Korea, a ratio of people who answered that the time they watch TV decreased to 58.5 percent with the introduction of Over the Top (OTT), a streaming service. We are standing at a tipping point, where “cord-cutting” starts, which means people cut the cable of paid broadcasting service. Right before 2018, there was a “cord-shaving” situation in Korea that people reduced using fee and rather than just cutting the cable they used OTT together. What happened just over a year?
NETFLIX landed on Korea in 2016. There were voices of concern about its influence over the Korean market. People predicted that NETFLIX would be less competitive compared to the pre-paid broadcasting services, so the effect of it on domestic media market would be limited. However, this prediction was totally way off. NETFLIX started to improve its quality by preparing various and original contents, offering convenient membership procedure, and recommending personalized products.
In addition, NETFLIX invested 30 billion won to produce Korean drama “Mr. Sunshine” and emerged as a big investor in contents market at one burst. Also, they drastically invested new original Korean works such as “KINGDOM,” and “Persona.” With the appearance of such a new platform, the broadcasting market started to shift. The economic profit they earned through high entry barrier (permission system) became a seed of the “creative destruction” such as streaming, the evolution of the network, and appearance of Video on demand (VOD). On the other hand, OTT is breaking the previous market barrier and opening a new market.
NETFLIX is also bringing a new change in contents market. Expanding the scale of production cost for drama and movie is an opportunity for the production companies to create premium contents. NETFLIX, as a new distributor, offers a huge amount of production cost to production companies and gets the copyright of Asian countries by sponsoring them. If it dominates a foreign network of distribution using its big capital, the contents created by domestic production companies might eventually have to go through NETFLIX to enter the overseas market.
What is the influence of it on broadcasting companies? Among terrestrial broadcasting companies, except local private ones, rest of the companies sell advertisements through KOBACO, a public media representative. Since public media representative sells advertisement considering common goods, it is not easy for the broadcasting companies to obtain enough production fund through advertisement. Meanwhile, in the case of paid broadcasting service, they sell advertisement personally or use private media representative, so raising the production fund is easier than the former one. The funding is directly related to the quality of the drama. It is a rule of the production market. NETFLIX supports the paid broadcast channels in the advertisement selling competition between terrestrial broadcasting companies and paid broadcast channels.
NETFLIX became a maverick, which shakes stagnant broadcasting programs and movie production market. The geographical market becomes globalized and glocalized. Also, product markets are merged and become as large as the borders of the products are broken. It becomes hard to define a market. In the time of chaos, is NETFLIX just a new sensation in media production and distribution market or can it be a dominant business in the new market? It is not comfortable for me just to watch this situation.
Kang Jae-won email@example.com
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