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The Reasons Behind Many Korean Producer Choosing OTT Platforms Over Major Broadcasters

When asked about “Why all of you chose Netflix over KBS, SBS, MBC (the biggest broadcasters in South Korea)?” to those local production firms that have collaborated with Netflix, the answers are always the same. "If it wasn't Netflix, we couldn't even dare to make it."

Shinae Yoon, CEO of Studio 329 said “Youth sexual crimes are so sensitive that it seemed difficult to produce them on major broadcasts which lead me to the conclusion that ‘I have no choice but to go to Netflix.'”

CEO Lee Sang-baek from Studio 'A Story' said, "In order to make the zombie genre more realistic, it has to be cruel and brutal. While big broadcasters hesitating between rather the drama 'Kingdom' can or can not be green-lighted or whether it can receive good viewership as a PG13(in Korea PG15), Netflix swiftly reckoned the potential and made a bold decision to grab the project for their ‘original content’.

“It was a drama where the production cost per episode was over 1 billion won(less than 1M USD), but the major broadcasters couldn't pay the corresponding amount of broadcasting rights. We could recoup the production budget right after Netflix bought the copyright for a even higher cost”, told by a director from a anonymous studio.

"The reason I'm most pleased with the arrival of Netflix (to Korea) is ​​that it is possible to tell a variety of stories, unlike the existing major broadcasters," said Yoon, the CEO of Studio 329, which brought in Netflix's original drama "Human Class" in April. Representative Lee from A Story, who previously produced the hit zombie drama “Kingdom,” set in the Joseon Dynasty, said, “Netflix is latching onto the gap where the major networks have lost its capacity to create a masterpiece.”

The most positive changes Netflix has brought to the domestic drama market is to allow industry officials to more actively create “masterpieces”. The production cost per episode for Korean dramas is about 400 million to 500 million won(36-45 thousand dollars) on average. The KBS megahit TV series “Descendants of the Sun(2016)”, the most talked-about drama of all time, also received extra attention for its eye-opening production budget - 750 million won(68thousand dollars) per episode.

With the advent of Netflix, the scope of investment has changed radically. The production fee for Netflix original drama 'Kingdom' Season 1, which according to its studio ‘A Story’, is known to cost about 2.3 billion won (2 Million dollars) per episode. It is five times the production cost of existing Korean dramas. High production costs can lead to content completion.

In that case, CJ E&M's drama production studio Dragon is the one who have benefited from the OTT sales. It is known that Netflix paid 28 billion won, or 70% of the production cost, to acquire the exclusive distribution rights for 'Mr. Sunshine(2018)', which Studio Dragon spent a total of 40 billion won to produce. Exclusive distribution copyright means the right to distribute content exclusively in certain regions except for a few specific regions. Netflix distributed “Mr. Sunshine” as one of their exclusive original content that is only available on Netflix in all countries but Korea. SBS showed interest from the early stage of “Mr. Sunshine,” however it had to give up the series since it is way too expensive to obtain the broadcasting rights when its rival is Netflix.

Restrictions for certain concepts or stories have also withdrawn by expanding and maximizing the freedom of diverse plots. In many major TV series, universal stories were often used because advertisements were the main source of revenue. On the contrary, Netflix's revenue comes from subscription fees from subscribers. The freshness and completeness of the content is of overriding importance because the subscriber is the king, not other way around. CEO Yoon said, "In the past, if I was doubting myself about 'Can we make this drama or not?', now with the arrive of Netflix, it’s more like “'how can we make it even better?'"

(Photo Source: Sweet Home ranked in 8th place on “Top 10 TV Shows on Netflix Worldwide”)

In the meantime, "Sweet Home", one of the most expensive Netflix originals ever made in Korea, have already gained many viewers’ attention and according to Netflix’s official internal ranking system on December 20. This monster-filled episodes had expectedly, smashing records only in two days after the premiere and became the first-ever Korean drama to make it to the U.S. Top 10.

(Photo Source: Official Poster of "Sweet Home", Netflix)