South Korea's Entertainment Industry Growth Through Netflix Creates Concerns

JAKARTA - When Ted Sarandos, Co-CEO of Netflix, visits South Korea this week, he will discover an entertainment industry that has achieved global fame through hits like "Squid Game" and "The Glory", but also growing concerns about its impact on the local market.

South Korea has created some of Netflix's biggest shows, which have become synonymous with the country's broader cultural export success and prompted the Californian company to invest US$2.5 billion (IDR 37.6 trillion) in local content.

Sarandos is expected to arrive in Seoul on Tuesday, June 20 according to industry sources, and will meet Prime Minister Han Duck-soo on Thursday, June 22, his first visit as Co-CEO.

However, while Korean shows are hugely popular on Netflix, with 60% of global users watching at least one title last year, the pressure for governments to support locally funded projects and secure content rights is growing.

The government last week announced plans to provide 500 billion won (Rp 5.8 trillion) to help local streaming platforms compete with global competitors such as Netflix amid soaring production costs.

"The media and content industry thrives when multiple platforms compete rather than being ruled by just a few, which benefits both creators and consumers," said Heo Seung, director of public affairs at South Korean streaming platform Watcha.

South Korea exports $13 billion worth of content by 2022, including video games, music and broadcasting, according to the Korea Institute for Economic Research, outpacing shipments of electric cars and rechargeable batteries.

The "Netflix Effect," a term coined for the phenomenon that launches actors and directors from obscurity to instant stardom when their shows appear on the platform, is part of South Korea's success.

In this context, President Yoon Suk Yeol welcomed Netflix's $2.5 billion investment as a "great opportunity" for both South Korea and the US streaming giant.

Netflix's market weight in South Korea far exceeds local platforms such as Tving, Wavve, and Watcha.

In 2022, the American company reported an operating profit of 14.28 billion won in South Korea, contrasting with Tving's operating loss of 12 billion won.

Netflix had a 38.2% market share in South Korea last year, according to Mobile Index, outperforming Tving's 13.1% market share.

Unlike the European Union, South Korea has no laws requiring foreign streaming services to produce or invest in local content. This prompted some South Korean politicians to call for Netflix to reward creators more fairly when their projects are successful.

Netflix says it aims to fairly compensate local creators in the early stages of production, regardless of how well their shows perform.

"Compensation is an important part of that, but so is the creative expression supported by our local teams, along with the global audience reach of our service," a Netflix spokesperson said in an emailed statement.

Creators who have worked with Netflix say the company is giving them a chance when others haven't. "Squid Game" creator Hwang Dong-hyuk said in various interviews in 2021 that the series was rejected numerous times before it was picked up by Netflix.

Aditya Thayi, a London-based filmmaker who is directing Netflix's upcoming documentary "King of Clones," told Reuters that Netflix changed the game by "making a level playing field for Asian filmmakers."

Although the project was commissioned by Netflix UK, it is centered on a genetic cloning scam in South Korea and includes file clips from the broadcaster's archives. Just using the clips cost as much as $40,000, making it prohibitively expensive for an unfunded independent producer.

Lim Jong-soo, a professor at Sejong University, said Netflix had given South Korean producers more opportunities, but the government could do more to help, such as by securing intellectual property rights for creators.

"The government needs to create a system that ensures that excess profits can be returned to South Korean creators."