Analysis: Streaming wars could hurt local players, not Netflix
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Local players declare bid for OTT services, yet unlikely to leave a mark in Netflix-Disney Plus battle
By Park Han-sol
The year 2020, which was engulfed by the COVID-19 pandemic, proved to be a boon for streaming services. Social distancing led to an unprecedented mix of movie theater shutdowns and an ever-increasing thirst for entertainment among those spending more time at home ― a perfect combination to allow over-the-top (OTT) providers to thrive.
But this hint of success has attracted a number of both established and aspiring players to the industry, resulting in fierce competition. With many global OTT platforms now inching closer to enter the Korean market after Netflix, watchers are unsure whether domestic streaming services can survive the battle and make their mark.
Currently, the most notable local players in Korea's OTT market include Watcha Play; entertainment behemoth CJ ENM's TVING; Wavve which is co-operated by three major broadcasters MBC, SBS, KBS and telecommunications firm SK Telecom; and Kakao TV operated by leading messenger and portal provider Kakao.
Since Netflix arrived in Korea in 2016, the competition took the form of Netflix dominating the market while the rest of the pie was shared by local players, particularly Wavve and TVING. As of August last year, Netflix was leading the industry with a market share of 40 percent, followed by Wavve (21 percent) and TVING (14 percent), according to Nielsen Koreanclick.
Some speculate that the launch of Disney Plus this year could be a game changer. Other global players ― Apple TV Plus, WarnerMedia's HBO Max and Amazon Prime Video ― are likely to follow suit, although their official announcements are yet to come.
But experts noted that despite Disney's capital, networking and production capabilities, Netflix's No. 1 position in Korea's OTT industry will remain largely unaffected, citing the benefit of early entrants.
“Unlike the traditional, offline content production and distribution environment, the digital and mobile domain largely depends on user loyalty. And in this aspect, we can't ignore how Netflix has secured its place in the market and retains a huge loyal fan base,” pop culture expert Kim Hern-sik said.
He added that Disney Plus, with its strength lying in content targeting children and young viewers, will need to devise differentiated strategies from Netflix.
But regardless of whether Netflix or Disney Plus will come out on top, more and more local players are gearing up for the already fierce competition that will become more heated than ever.
In a move to acquire more competitive original content, Watcha secured 36 billion won worth of investments in December, while Wavve set up a plan to invest 300 billion won in content production by 2023.
CJ ENM also announced this month that it is partnering with the production company JTBC Studios for the operation of TVING.
A new local player has also entered the OTT market: e-commerce giant Coupang's Coupang Play. For millions of users subscribed to its premium membership, the unlimited video streaming is available at no extra cost.
Cho Jun-hyoung, a senior researcher at the Korean Film Archive, warned of self-destructive, bloody competition among local players with a flurry of new OTT service providers.
“I think TVING will be relatively unaffected as it has its original content,” he said. “But the story for Watcha Play could be different. It may fall behind because it has no original series.”
Cho went on to say that the nature of competition between local OTT services and Netflix or Disney Plus is not exactly mutually exclusive, considering the lack of overlap in the main content they provide.
Kim deemed it could be beneficial for various local companies to make such entries into the OTT market and attempt to produce original content, because they may be able to produce niche content overlooked by the global giants.
“For platforms like Netflix and Disney Plus, because their business model aims at markets in nearly 200 countries, their content has to be more universal, meaning that their narratives and sensibilities are not as detailed. They instead focus more on scale and visual and special effects,” Kim said.
“So, local players could try to produce content reflecting more localized values and cultural peculiarities such as comedy and trendy entertainment shows as well as those targeting older viewers who are now more familiar with streaming services.”
Shim Doo-bo, a professor of media and communication at Sungshin Women's University, was more skeptical of the domestic platforms' ability to conduct market research and analyze viewers' consumption patterns and preferences in comparison to their global counterparts.
Instead, he highlighted the importance of each player to increase their size. “They would need to carry out mergers, so that there are only around two OTT providers left in the end. Ultimately, it all comes down offering competitive prices and strengthening their detailed, user-oriented service.”
In regards to the relationship between the OTT platforms and theaters in the post-pandemic era, Shim stated the former multiplex-based industry will change as OTT becomes a major method of consumption.
Kim echoed the sentiment, adding that the OTT platforms will not be completely replacing the theater-going experience.
“In the post-pandemic era, films surpassing 10 million viewers in theaters may be harder to come by. But that doesn't mean theaters will die out. It means that they will need to be more careful with their budgets. I think in the future, the films released in theaters will be more on the low-budget end while more expensive ones will transition to OTT platforms.”