Netflix strikes back as content king

By Park Hyong-ki

The world did not care too much, nor did it show concern in the beginning when Netflix came out with its DVD movie mail-order rental service.

No one projected its rise in power until Blockbuster, a brick-and-mortar movie rental franchise, went bust and Netflix ignited the trend of binge watching through streaming technology.

Even when it was trying to launch its service here, it faced a negative outlook. Some, like the Korea Creative Content Agency, said Netflix did not stand a chance in this market because of the telecom companies’ IPTV, and Koreans were not used to its paid-content service.

But Netflix has become a content powerhouse and disruptor with a $70 billion market value and more than 52 million global subscribers outside the U.S.

Despite resistance from traditional movie theatres and studios, and a rise in subscription fees, the number of its customers exceeded market expectations. Its U.S. subscribers amount to 51.92 million.

The company now stands almost next to NASDAQ-listed giants such as Apple, Google and Facebook, making Korea’s Pooq and Tving look tiny.

Netflix’s global subscription announcement pushed the U.S. tech index to a record high.

It is no secret that behind its success, in addition to reinventing the human resource system, was its huge investment in acquiring existing content and in projects of both well-known and independent filmmakers.

Wherever there is content, Netflix has been shown to spare no expense to go to places like Iran or Korea to buy or invest in them. This is the reason it has a negative cash flow.

Netflix has become a new revenue source for movie and television studios, but also a hopeful distribution platform for filmmakers who could not secure funding from traditional studios.

“Okja,” a science fiction movie about a “super pig,” directed by Korean auteur Bong Joon-ho and produced by Netflix and Brad Pitt is a case in point.

CJ CGV, Korea’s biggest movie theatre chain, refused to distribute and screen the movie because Netflix was releasing it on its platform at the same time.

Normally, studios and theatres seek about a two-month window for a movie to become available on other media platforms for extra revenue after it completes its showing on the silver screen. In some cases, films are released immediately on other platforms when they flop at the box office.

CJ CGV’s second-quarter earnings look dim. It is expected to perform below expectations due to a few hits over the past three months.

“Its sales were weak as there weren’t any hit Korean films,” said Sung Joon-won, an analyst at Shinhan Financial Investment.

Netflix’s investment in original shows includes “House of Cards” and director Martin Scorsese’s “The Irishman” starring Robert De Niro and Al Pacino.

With its content acquisition and investment, and recommendation algorithm, Netflix has the potential to attract more subscribers as it is changing the way people consume content, analysts say.

The question it is raising is: Why go to theatres, sit in uncomfortable seats when people can watch movies at home at ease anytime?

To counter home theatres, studios have been coming out with bigger and special effects-centric blockbusters starring top actors and actresses playing mostly superheroes.

But as digital television screens are getting bigger, clearer and more affordable, those movies can also be viewed with the same experience at home.

Netflix recently raised the possibility of the end of movies that can generate $1 billion box office ticket sales.

“It is disrupting the cable industry, and now theatres, as Netflix is boosting the amount of quality content, which is also enlarging the market for streaming videos,” said Hwang Seung-taek, an analyst at Hana Financial Investment.

“Given that it has announced its plan to invest $6 billion in content next year, the number of its subscribers is expected to further increase.”