Netflix debuts in Korea
Netflix CEO Reed Hastings gives a keynote address at the CES 2016 Consumer Electronics Show in Las Vegas, Wednesday. / AFP-Yonhap
Discussions with local carriers stalled over profit sharing
By Kim Yoo-chul, Lee Min-hyung
SEOUL/LAS VEGAS ― Netflix, the world’s leading Internet network service firm, made its official debut in Korea in what media experts say is a plan to diversify its sales channels to fill in the voids being made by other countries.
“Today, I’m delighted to announce that while we have been on stage here at CES, we switched Netflix in South Korea .. in more than 130 countries,” the company’s co-founder and chief executive Reed Hastings said in a keynote speech on the sidelines of this year’s CES, Las Vegas, Thursday (KST).
Netflix is the world’s leading Internet television network with over 70 million members in over 190 countries enjoying more than 125 million hours of TV shows and movies per day, including original series, documentaries and feature films.
The CEO said that it has identified Korea as one of its key markets as the video streaming giant added Korean as one of its supported language.
“You are witnessing the birth of a new global Internet TV network. Today, we’re offering consumers around the world a Netflix global catalog that includes our original content plus the films and series we have licensed globally. We’ve also added Korean,” said the CEO.
The Korea Times was the first to report Netflix’s business plan in Korea in September last year, which Netflix later admitted without specifying details about its plans. (https://www.koreatimes.co.kr/www/news/tech/2015/09/133_186304.html).
For Netflix, it seems evident that the situation is favorable given the country’s strong network infrastructure, with most homes having access to broadband Internet and mobile devices. If Netflix could partner with carriers, then it would allow cheaper and easier content delivery.
Korean users could experience Netflix’ media content via tablets, samrtphones, game consoles and smart TVs. Basic service fees will start with about 9,000 won monthly, after a one-month free-trial.
Netflix is talking with KT, LG Uplus and SK Telecom to sell its rich media content via Internet TVs operated by local carriers; however, the developments of discussions with them were recently stalled as Netflix differed in its views over the decision of profit sharing with the local carriers.
Netflix is reportedly asking local carriers to sign a 90:10 profit sharing contract and for them to offer free use of Internet Data Centers (IDCs).
Currently, Internet TV service firms contract with local content providers with a 35:65 portion of profit sharing with additional payments for using IDCs.
A spokesman at KT, the country’s dominant fixed-line operator which is also regarded as the best candidate for Netflix’s Korean partner, declined to comment.
“If we partner with Netflix, then we should sell the very latest overseas media content to our customers such as House of Cards and other Netflix-managed blockbuster films. But Netflix is asking too much on the profit sharing deal and it’s questionable whether Netflix’s content can truly be competitive with the local terrestrial broadcasters,” an official at KT said wishing to be unidentified.
An official at SK said it was looking over the advantages of its partnership with Netflix. “If you want to lead rivals in pay-TV services, then you should form an exclusive partnership with Netflix; however, this seems quite risky,” said an official at SK.
Since February last year, LG Uplus has been providing new media content via HBO of the United States to its pay-TV customers; however, the number of new customers that LG Uplus clinched for such services was not many.
Some officials say Netflix has stronger intentions of boosting partnerships with Korean film and culture companies for licenses to promote Hallyu content given the widespread of media content in the local black markets.
“Korea tries to sell Hallyu content, globally, Netflix could be a good distribution channel to sell more Hallyu content. We should use it in a practical way,” Ha Joo-yong, a media professor at Inha University, said.
“A huge dependence on the Neflix channel seems risky; however, local terrestrial broadcasters and telecom companies may gain know-how about Netflix’s management in big data such as selling customized content by analyzing consumer preferences and patterns. Netflix has been doing well in offering customized content upon consumer request,” said the professor.