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ED Netflix's predominance

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  • Published Apr 25, 2021 2:00 pm KST
  • Updated Apr 25, 2021 6:01 pm KST

Video streaming giant eating away at Korean market rapidly

Netflix has made public its financial performance in Korea for the first time. The video streaming giant recorded sales of 415.46 billion won ($356 million) and an operating profit of 8.82 billion won last year, up 123.5 percent and 295 percent, respectively, from 2019. This was the first time for the company to disclose its financial statement since it started offering services in Korea in 2016.

The Korean offshoot is not a joint-stock corporation but a limited liability company that had no disclosure obligations until 2019. That year, the government revised related laws, forcing all companies with annual sales of 50 billion or more to undergo external audits.

That change immediately raised the issue of taxation. The company's lower-than-expected profitability caused criticism about tax-avoidance. Netflix paid 2.18 billion won in corporate tax last year, a far smaller amount compared to Korean companies with similar sales, prompting an investigation by the National Tax Service. If Netflix evaded taxes illegally, it should pay the due price, and, if the tax-dodging was intentional, harsh punishment, including additional penalties, will be inevitable. If enterprises adhere to making money while neglecting their social responsibility, they deserve condemnation.

All this notwithstanding, Netflix's success here needs to be studied. Since its debut, the company has run far ahead of its competitors. Last year, it easily beat out three domestic ones ― Wavve, Tving and Watcha whose 2020 sales stood at 180.2 billion won, 15.4 billion won and 38 billion won, respectively. Their combined revenue was half that of Netflix. The U.S. based firm is rapidly chasing the three major TV networks here, whose combined sales totaled 888.6 billion won last year, down 16.7 percent from 2019.

In just four years, Netflix has narrowed the gap to the combined sales of those three major TV networks to half. Moreover, Netflix achieved this result through user streaming fees without any advertisements. The “Netflix zeal” in Korea could end up as a temporary phenomenon, however, it still holds sway on the global video streaming market. Its domestic competitors should start from the ground up. If they keep lowering their guard, they might end up giving away the entire market to the foreign competitor.