- KO-pick
- Grab the OTTs ① : Posing New Possibilities for the Korean Ancillary Market
- by SONG Soon-jin / May 27, 2016
- Korea’s OTT Market, Who Will Have the Last Laugh?
The theater era is slowly coming to an end. In 2016, at a time when you can have a screen with you anywhere, whether in the comfort of your house, the street, the bus or subway, films are rapidly spreading through monitors and mobile devices instead of theaters, and Korea is no exception. We’ll examine the changing ancillary market through an in-depth look at Korea's OTT (Over the Top) market, which is on the verge of gaining momentum following the Korean launch of Netflix.
The main global content platform is slowly shifting from theaters to online platforms. OTT, or in other words Internet TV, will likely become the content industry’s main platform in the near future. The growth of Korea’s theatrical market since the advent of multiplexes in 1998 has finally reached a point of stasis. The number of screens per capita, and the number of admissions per person have reached their zenith. Not much can be expected anymore save for an annual 3-4% rise in sales. On the other hand, predictions for the OTT market for the Asian region put it around USD 13.7 billion by 2019, the largest growth rate worldwide. During the past three years, Korea has shown an average growth rate of 34% in the OTT market.
Since predictions for 2019 are at USD 552.7 million, and USD 679.5 million in 2020, there’s no bluer ocean than this. This is the reason why all hopes lie with the online ancillary market represented by OTT rather than the theatrical market. Korea is among the countries with the fastest Internet speed and highest mobile device penetration rate. Furthermore, the local mobile service company-led expansion of the IPTV market has gradually reduced the culture of illegal downloads. The question then is, who will conquer this precious gem, the OTT market?
Seizing the Initiative with ContentWith the Korean launch of Netflix in January 2016, Korea’s OTT market has opened up to fierce competition. Not only are first generation Internet TV businesses such as Gom TV jumping into the game, but also broadcasting companies, mobile service companies, large-scale portal businesses and startup companies.
For now, it’s the three major mobile service companies-KT, SKT and LGT-that are offering mobile-connected services such as Olleh TV Mobile (integrated film and TV), oksusu (integrated film and TV), Uflix Movie (film) and U+HDTV (TV), that have seized the initiative in the market. These companies, which already feature power platforms that include IPTV and mobile, have a subscription base of 10.64 million viewers as of June 2015. With the media market rapidly reshuffling from TV to mobile, it is anticipated that these companies will gain great momentum. This is why we should pay attention to ‘oksusu', a new service launched this January by the second largest domestic IPTV provider, SK Broadband.
SK Broadband, which acquired Korea’s No. 1 cable TV business CJ Hellovision, has created a large scale fund. Korea is currently servicing major Korean-made films, TV dramas and other TV content through all platforms. Accordingly, SK Broadband declared it would provide specialized content, and that content will be the key to success in the OTT market. SK Broadband is also aggressively recruiting new media content such as Memedia and VR (virtual reality) videos. These kinds of risk-taking attempts by SK Broadband will surely encourage other mobile service companies. There are rumors about the third largest player in the local IPTV industry, LG Uplus, deliberating over acquiring a cable TV company.
WATCHA PLAY and Naver N Store are also strong contenders for growth. WATCHA PLAY, which started out as a mobile application based on user-entered data, is building its existing platform into an online content streaming service. The fact that they resemble Netflix while retaining a large Korean content library, and that they are reinforcing their collaboration with CJ Entertainment and Showbox, is gaining them considerable attention as a potential upcoming star in the startup business.
The Korean influx of foreign OTTs is in progress as well. First came Google Play followed by Netflix this January. Google Play, with their consistent effort to acquire applications and digital content in film, music and literature, has entered a stable stage with Korea as a top ranking market in their overall global sales.Subscriptions are rising slowly for Netflix, but they are also keeping an eye on the Korean market from a long-term perspective. Moreover, by commissioning BONG Joon-ho’s new film Okja, they hold the cards to turn the Korean online distribution market upside down.
The Impact of Netflix on the Korean Content Market
Four months have passed since Netflix, an industry behemoth with more than 75 million paying subscribers from around 190 countries, debuted in Korea. The initial predictions that Netflix would sign a partnership with one of the three local mobile carriers which own IPTV companies totally missed the mark.Despite the debate over how it would acquire local content such as films and TV dramas, and start a new channel, Netflix eventually chose to go straight to the point by opening a Korean mobile and Internet page on January 7th. And with the launch of an application service on Samsung and LG’s recently key product, the Smart TV, Netflix finalized its TV-Internet-mobile window and jumped right into the local OTT race.
The Korean media and content industry is keen about Netflix’s impact on the local OTT market, and predictions point to three areas. The first is content. A variety of new American-made content serviced directly online through Netflix will reach general consumers and creators of content or intellectual property.
Stand up comedies, which are somewhat unfamiliar to Korean audiences, documentaries of diverse formats, and well-made comedy dramas unknown in Korea such as Unbreakable Kimmy Schmidt are garnering considerable attention. “Documentaries and comedy genres will greatly influence local creators of content and intellectual property rather than large-scale content which is difficult to benchmark,” explains film critic, HUH Nam-woong.
In fact, true stories and films that break the norm have recently been attracting attention in the local film market. Top ranking titles in the box office such as Ode to My Father (2014), Assassination (2015) and The Attorney (2013) are those inspired by true characters and stories. HUH states, “Film directors have already been turning to documentaries for film material, and the documentaries offered by Netflix will serve as a new stimulus for them.”
The second is the film distribution approach. With the deepening screen monopoly issue, some art, low-budget and indie films are testing grounds by choosing to be released online. And what if BONG Joon-ho’s Okja jumps into this game? Netflix promised to guarantee as much autonomy as possible when they commissioned BONG’s latest project, Okja at USD 50 million. But on one condition, that the film should be released simultaneously around the world on Netflix in 2017. If Okja generates strong results through its online release, it will definitely inspire enormous changes to the traditional distribution approach.
The third is a change in the Korean OTT service. Not only Netflix, but other companies such as U.S.-based Amazon Prime, Hulu, Apple TV, and China’s iQiyi are aggressively gunning for original productions. Korean OTTs on the other hand are now at their starting point. SK Telecom announced its plan to spend around USD 435 million in content development during the course of five years, while mobile on-demand services specializing in TV broadcasting content, such as pooq, are setting out to acquire original online content. With this, it looks like the focus will shift from platform scale to content competitiveness for Korean OTT services.
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