hankyoreh

A still from the Korean series “Squid Game,” which produced 39 times as much in profit as it cost to produce. (provided by Netflix)

“Netflix hasn’t gotten the buzz it expected in Korea. What’s the reason for that?”

Netflix founder and CEO Reed Hastings and Chief Content Officer Ted Sarandos were taken aback by the pugnacious question, which was posed by a Korean reporter during a 2018 press conference in Singapore, home to the headquarters of Netflix’s Asia Pacific division. Two years had passed since streaming service Netflix had set up shop in Korea.

The Netflix chiefs demurred, claiming the response in Korea had been positive, though they declined to disclose subscription figures.

But despite that reply, the initial response to the streaming market in Korea was actually tepid. Netflix launched its service in Japan in September 2015 and followed that up with a Korean opening on Jan. 7, 2016. The company’s total revenue jumped from US$8.8 billion in 2016 to US$11.6 billion in 2017, but in Korea, it faced an uphill climb. As of March 2017, it only had between 60,000 and 80,000 paying users in the country.

Due to Korea’s reasonable cable prices, the country never experienced the phenomenon, common in other countries, of cord-cutting — where people cancel expensive subscriptions to cable television and switch to cheaper online options such as Netflix.

A still from the first Korean Netflix original series, “Kingdom,” which brought in domestic subscribers for the platform. (provided by Netflix)

It was around that time that Netflix altered its strategy of simply expanding the customer base and began to pour its effort into producing original Korean media content. “Okja,” directed by Bong Joon-ho and produced for 58.2 billion won (US$48.7 million), got tongues wagging when it was exclusively released on Netflix, rather than movie theaters, in June of 2017.

Netflix’s attempt to make use of original Korean content proved a smashing success. Two weeks after “Okja” began streaming, Netflix brought in over 300,500 new subscribers.

That trend was continued by Netflix’s first original Korean series “Kingdom.” Following the release of the series, Netflix’s Korean subscribers jumped from 1.27 million to over 2 million in the space of a single month, from December 2018 to January 2019.

“Kingdom” arrived at a crucial time for Netflix, which by then had become the world’s top streaming company. At the end of 2018, Disney announced it would be launching its own streaming service, called Disney+, and pulling all Disney content from Netflix. Disney vaulted into the streaming market, propelled by the intellectual property it had pocketed through acquisitions of Pixar, Marvel Comics, Lucasfilm, 21st Century Fox and others.

These developments came as a huge blow to Netflix: not only had they gained a media behemoth as a rival, but Netflix had also lost all its Disney content. Netflix responded by shifting its focus to producing original content it hoped would keep people’s attention. As it so happened, that’s when “Kingdom” was released in Korea.

“Around that time, Netflix had invested aggressively in Asia, and Korea in particular. ‘Kingdom’ caught people’s attention not only in Korea and Asia but around the world, helping Netflix save face. The success of ‘Kingdom’ convinced Netflix of the importance of original content and motivated it to boost its investment here,” explained a source at a Korean production company.

Referring to “Kingdom,” Jessica Lee, then Netflix’s vice president of communications in Asia, said the company took pride in having made an original Korean television series.

If “Kingdom” put original Korean content on the map, last year’s “Squid Game” proved the power of Korean content to the whole world. The series became a global phenomenon, topping the list of most-watched programs at least once in 83 countries around the world. The series has reportedly been watched by over 140 million people.

Prior to “Squid Game,” Netflix reported 1.54 million new subscribers in the second quarter of 2021, its lowest figure in five years. There had been complaints for some time that there wasn’t much to see on Netflix.

But just as the streamer was struggling, “Squid Game” righted its course. As the show made waves around the world, Netflix’s stock soared to record levels barely 20 days after its release. On Jan. 10, Oh Young-soo was named best supporting actor in a TV series for his role as Oh Il-nam in “Squid Game” — a first for a Korean actor — at the Golden Globes.

An analysis by Bloomberg described Korean media as becoming a “threat” to Hollywood.

With “Okja” as the opening salvo and “Kingdom” as the next progression, original Korean content has been going from strength to strength with the popularity of series like “Squid Game,” “Hellbound,” and “Single’s Inferno.”

“Netflix initially thought [this content] would be appreciated by fans of foreign series, but since the success of ‘Kingdom,’ they’ve learned that people become interested when you’re confidently presenting a country’s unconventional content in ways you couldn’t do with TV,” said popular culture critic Jeong Deok-hyeon.

A still from “Political Fever,” an original streaming series from the Korean OTT platform Wavve, which generated brand awareness for the platform. (provided by Wavve)

With original Korean content drawing so much notice on the world streaming market, it isn’t surprising that it has become such a battleground among global platforms.

Currently, roughly a dozen streaming services are in an all-out competition for the South Korean market. Among the global platforms that have been slower off the blocks than Netflix are Disney+ and Apple TV+, which launched South Korean services last year; HBO Now is poised to join the fray in 2022.

For its debut, Apple TV+ presented “Dr. Brain,” a Korean original series starring actor Lee Sun-kyun — known to overseas audiences for his role in the film “Parasite” (2019). It’s following that up with “Pachinko,” another original series starring Lee Min-ho and Academy Award winner Youn Yuh-jung.

Disney+ is now at work on “Moving,” a superhero series based on a story by webtoon artist Kang Full, with a production budget of 50 billion won. “Moving” is poised to be the start of the real battle against Netflix.

Against these global services, other platforms are managing to stand out — not just existing Korean services like Wavve, Tving, and Watcha, but also newcomers like Coupang Play and KakaoTV. With the power of Korean content already tested in the global market, these local providers are now taking advantage to produce their own.

Tving plans to invest a total of 400 billion won through 2023. It’s working on 30 original content projects in 2022 alone.

Since picking up the longtime tvN broadcast “Saturday Night Live Korea,” Coupang Play has drawn even more notice with the original series “One Ordinary Day.” Also using original content to cement their status are Wavve, a partnership among the three terrestrial networks; Tving, a partnership between CJ ENM and the network JTBC, and Watcha, South Korea’s first domestic OTT service.

Previously used mainly as a way of re-watching programs that had already been broadcast on TV networks, Tving began producing its own content last year. In 2021 alone, it came out with 24 of its own original offerings — including six series, 12 entertainment programs, and various movies.

Tving said that its “paid subscribership has risen by 256% since we started offering original programming.”

“Original Tving content has driven the services’ rapid growth,” it explained.

In particular, it noted, “After debuting in June of last year, the entertainment program ‘Transit Love’ had recorded over 1.2 billion minutes of viewing time as of November, while the series ‘Work Later, Drink Now’ recorded over 400 million viewing minutes over a one-month period [after debuting in October 2021].”

In Wavve’s case, the rapid rise in name recognition has come with the success of its “Political Fever,” which is available only through streaming.

In an interview with the Hankyoreh, lead actor Kim Sung-ryoung said, “When we started filming, people I know didn’t even realize a platform called ‘Wavve’ existed.”

“They all know about it now that the show has become so popular,” she added. “The response to content seems to be crucial.”

After its previous focus on replaying movies, Watcha has been switching things up and developing original content as well. It has also become the first service to produce its own series based on an open contest. Over 600 ideas were submitted, and the service is now at work producing the winning entry, a show titled “Industrial Complex.”

Also on Watcha is “Unframed,” an omnibus-style series featuring actors Park Jeong-min, Son Seok-koo, Choi Hee-seo, and Lee Je-hoon.

A similar case is "Good Good Company,” which begins airing its fourth season on Tuesday. Previously, Watcha had supported the show with investment when it was an independently made web series. With the fourth season, it has begun investing in and producing the show itself.

Explaining its decision to begin producing its own content, Watcha said, “With the arrival of overseas streaming services in the Korean market and the intensifying competition globally, we’re working to establish content competitiveness that is unique to Watcha.”

Stills from the show “Good Good Company” which started as an independently produced series on YouTube before being picked up by Korean streaming service Watcha. (provided by Watcha)

As Korean original content continues growing its value on the global streaming market, many are insisting that the time has come for it to receive its due rather than being sold short.

As an example, “Squid Game,” which has been massively profitable for Netflix, was made for around 20 billion won all told (roughly US$16.7 million)— while the investments for two other major Netflix series, “Stranger Things” and “The Crown,” came out to around US$8 million and US$9.8 million per episode, respectively.

Since its debut last year, “Squid Game” has helped increase Netflix’s market capitalization to the tune of some US$10 billion. In a word, South Korea offers a lot of bang for the service’s buck.

Many are now complaining that the shows aren’t receiving a production budget beyond the amount decided early on, no matter how well made or successful they are.

“This is something people have been saying ever since we started supplying Korean content to global streaming services,” said a source at one TV series production company.

“It’s no different from the way things were before, when the entertainment program producers took money from China and provided them with all the knowhow but everyone basically lost their jobs, and they said it was because of the ‘anti-Korea prohibitions,’” the source added.

“We do the work and Netflix makes the money. Why is nobody taking issue with this?” they asked.

Others are predicting a potential reversal where the onslaught of global services like Disney+ and Apple TV+ gives content producers the upper hand over the platforms.

“In the past, you had to go through all sorts of different processes and scrutiny to expand overseas. What ‘Squid Game’ showed us is how you can show your production capabilities throughout the work with just a single piece of good content,” said an official at one South Korean network.

“The period of ‘testing’ Korean content production capabilities in the global market is already over, and we’re now at the point where we can choose from among streaming services,” they added.

“Sure, you can see us Netflix as having done us a favor at one point, but how about we start thinking about using that as a springboard for showing our abilities?” they asked.

People in Bangkok, Thailand, dress in costumes from the Korean series “Squid Game” and play tug of war in December 2021. (EPA/Yonhap News)

While Korean and overseas streaming services may be battling for original K-content now, some are stressing the need to prepare for competitiveness in the long term.

Some industry insiders have expressed concern about the supremacy of capital in the current content industry, despite the need for novel content ideas and series production capabilities.

Shows like Tving’s “Work Later, Drink Now” started out with small-potatoes funding — but when they turn into breakout hits, the costs of a season two go up, with the actors’ guarantees doubling or tripling.

“The costs of supplying Korean and overseas content have risen by four to five times compared with two or three years ago,” said a key official at one streaming business.

“On top of that, you have this accelerating trend in original series production. As the competition for content intensifies, you could end up with a streaming market slump if the steep rise in production costs ends up faster than overall market growth,” they predicted.

It’s a warning against simply piling on more content in an attempt to battle the global services.

The market situation is taking on an element of hyper-competition, with even South Korea’s terrestrial networks now cutting back on producing series for television and using the money to prepare for streaming service investment.

“Instead of a money game, we need people who are trying to create a new model for content production,” the streaming service official said.

Meanwhile, others are calling for a more sustainable production system on the front lines. In particular, they’re stressing the need to investigate new content material and production techniques to avoid missing out on transforming trends as the streaming market undergoes such rapid growth.

Industry insiders also suggested that with the rise in the amount and per-episode costs of original content, policies for “sustainable shared growth” will be crucial — such as a system where not only streaming businesses but also domestic production companies channel a portion of their earnings back into content.

By Nam Ji-eun, staff reporter

Please direct questions or comments to [english@hani.co.kr]