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South Korea Local OTTs Against Global Rivals

South Korea's local video streaming providers are ramping up original content production to better compete with industry leader Netflix Inc.. Since the homegrown over-the-top (OTT) industry felt growing pressure from multiple global media giants like Netflix and Disney Plus.

In the midst of a fast-changing digital media market, the use of OTT services is spiking with Netflix and YouTube leading the market. They together now account for an overwhelmingly high portion of 78% of the domestic market, with local OTT platforms such as Wavve and Naver TV taking up the remaining 22 percent. Up until last May, Netflix's active mobile application users in the country totaled 6.37 million, far exceeding local players such as Wavve at 3.46 million and tving at 2.54 million, as reported by market researcher Nielsen KoreanClick. With foreign OTT taking a dominant position, Korean government started to roll up its sleeves to foster local OTT platforms.

Korean government has set the goal of expanding the Korean media market to 10 trillion won by 2022. With that goal, it has decided to abolish or ease regulations on market shares in the broadcasting market. More specifically, its plan to abolish the regulation that limits the market share of a paid broadcasting company. Currently, an IPTV or a cable TV operator is prohibited to control more than one-third of the IPTV or cable TV market. Media industry experts have indicated that this contradict to the global trend towards large-scale M&As among media powerhouses. As a matter of fact, Disney amplified its presence by acquiring Fox and Hulu, while AT&T acquired Time Warner earlier.

(Photo Source: Korea Communications Commission)

Meanwhile, the Korean government revealed its plan to raise more than one trillion won(US$825 million) in cultural content promotion funds by 2024 to help more local media firms strengthen their capacity to produce quality content and make inroads into overseas markets.

In a way to compete with global media giants who rapidly expand its influence in the country, local content provider like Wavve -- a joint venture between local telecom giant SK Telecom Co. and three local broadcasters-- has came to an agreement to spend 300 billion won (US$251 million) for content production by 2023. Nevertheless, the scale of its content investment is dwarfed compared with Netflix's estimated budget of $17 billion.

"Netflix's big-budget strategy has played a role in forming the skewed business landscape," culture critic Jeong Duk-hyun said. "It definitely is competitive in discovering quality content, though. But I don't think homegrown OTT services make efforts to keep up with it."

Against this backdrop, local streamers are seeking new alliances to pull through the fierce market. SK Telecom Co., which partially owns Wavve, proposed a merger with tving, which has also received a collaboration offer from KT.

"User activity depends on content," a Wavve official said. "We are investing so that ultimately there is more content only available on Wavve."

Tving, an OTT platform under local entertainment titan CJ ENM Corp., announced its plan to strengthen its original content production capability via a joint venture with broadcaster JTBC.

CEO Lee Tae-hyun said in the interview: “But whatever platforms come into the market, local content matters the most. [Even] on Netflix, local content dominates the Top 10 ranks. In the local market, the key [to success] is how much good local content the platform possesses. [However] we are aware of the fact that we do not have as much original content [as Netflix], but to be able to compete on an equal playing field, we are focusing on producing our own content.”