KT mulls partnering with Netflix

By Kim Hyun-bin

KT, the country's second-largest mobile carrier, is considering partnering with U.S.-based content giant Netflix. Reports said an announcement could possibly be made sometime in the second half of this year.

According to telecom industry insiders, KT has been reviewing the possibility of partnering with Netflix and leaning towards inking the deal in September. In a recent closed-door meeting with senior KT officials and financial analysts, Kang Kook-hyun, head of KT's customer business group, hinted the company is seeking to partner up with the U.S.-based firm.

"We are in negotiations with Netflix. But nothing has been confirmed," a KT official said. "It is not just Netflix but also with HBO and Disney Plus, it is becoming a content war (between telecom companies)."

If the KT-Netflix partnership is finalized, KT will benefit as its chief rival LG Uplus' exclusive two-year contract with Netflix led to a drastic increase in its subscriber base. Since November 2018, Netflix and LG have been under a two-year exclusive contract, which is set to expire in late October. KT is seeking to ink the deal with Netflix a month before the contract expires.

KT CEO Ku Hyeon-mo

LG saw its IPTV subscriber base increase by 15 percent within the contract term, accounting for 4.6 million subscribers as of the end of the first quarter of this year.

SK Telecom, KT and LG all have been engaging in fierce competition for a larger share in internet protocol TV (IPTV) and the over-the-top (OTT) platforms in recent years, but are under pressure to differentiate each of their products in order to increase their appeal with their prospective customer bases.

Netflix, on the other hand, obtains endless global content and through it has become a great means for local telecom companies to attract customers and gain a competitive edge in the market. Netflix's success in the country is attributed to the scores of Korean original content, which has been able to swiftly seize the local OTT market.

As of March, there were 2.72 million Netflix subscribers, an increase of tenfold in the last two years. Considering a single Netflix account allows up to four people to sign in simultaneously, the total users in the country are expected to exceed 6 million.

Netflix CEO Reed Hastings

The monthly active users, which accumulates the monthly user rate, also shows Netflix's dominance over its competitors. Netflix users for May accounted for 6.37 million views more than doubling its viewership from the same period last year. In the same month, SK Telecom OTT platform Wavve's viewership was reduced by 10 percent, while CJ ENM's "Tving" and KT's "Seezn" recorded 2.54 and 2.36 million views respectively.

KT currently leads the IPTV market by a small margin and it's in its best interest to widen the gap through partnerships with global content providers such as Netflix and Disney+. In June, KT led the IPTV market with 31.52 percent followed by LG with 24.91 percent and SK Broadband with 24.17 percent. However, depending on the acquisition of local content providers such as Hyundai HCN, DLive and CMB, which are currently underway will increase their market share and easily able to overturn the rankings.

On a related note, the country's top mobile carrier SK is also seeking to ink a partnership deal with Netflix, but is stuck in an awkward position as Netflix and SK Broadband an affiliate of SK are in a legal battle over the network use fees. SK was reportedly sent its intention to Disney+, which recently launched its services in Japan, for content contract; however, industry watchers believe it is too early to consider Disney+ as it is uncertain when the U.S. content provider will enter the Korean market.

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