|Netflix has a strategy to acquire more Korean content. Screen captured from Netflix|
By Lee Gyu-lee
While the Korean TV drama industry is witnessing a rapid change in its success formula ― shifting its emphasis from the domestic scene to the global market ― streaming giant Netflix is playing a major role, offering lucrative deals and a doorway to international traction that local production studios cannot resist.
And local viewership is no longer a key metric.
|Actor Lee Min-ho from "The King: Eternal Monarch." / Courtesy of SBS|
The 32 billion won ($26.8 million) budget series reportedly recouped its total production cost from the broadcast deal with the SBS network and the overseas licensing agreement with Netflix, relieving pressure on the viewership rating in Korea.
"Netflix approaches with undeniably good deals, so probably most of the production studios want to work with the company," a local production company official told The Korea Times, asking not to be named.
Netflix launched in Korea in 2016 and has implemented aggressive investment strategies to expand local content and market penetration. Industry tracker WiseApp estimated that Netflix had 3.28 million subscribers in April ― up from 1.42 million in April last year.
In an effort to restrain Netflix from entering the domestic market, major terrestrial networks ― MBC, SBS and KBS ― made an informal agreement not to sell newly aired TV series to Netflix.
But the arrangement ended in 2018 when SBS Content Hub sold the streaming rights for "Hymn of Death" to Netflix, as advertisement revenue for the three-part miniseries was hard to generate. The series became available on the platform worldwide on the same day it aired on SBS.
Since then, Netflix has secured shows from a number of broadcasters, paying a big portion of the series' production costs through global licensing deals.
Netflix covered at least 65 percent of the 43 billion won ($36 million) production cost for tvN's 2018 blockbuster series "Mr. Sunshine." SBS's "Vagabond" collected about half its 25 billion won ($21 million) budget from Netflix while MBC's "Rookie Historian Goo Hae-ryung" received its entire 13 billion won ($11 million) budget from the company last year.
Korean media outfit CJ ENM and its subsidiary Studio Dragon even inked a three-year production and distribution agreement with Netflix to provide over 20 series and produce original series starting this year.
JTBC subsidiary JTBC studios also signed a distribution partnership with Netflix under similar conditions.
"Netflix values the power of storytelling as we believe it appeals beyond borders and across genres," Netflix told The Korea Times. "So, we intend to continue to deliver Korea's high-quality storytelling to our audiences worldwide."
|Netflix picked up tvN's "It's Okay to Not Be Okay" to release on its platform on the same day as it was broadcast. Courtesy of tvN|
And in doing so, the platform has become the most sought-after company to work with among local production companies.
The production company official said Netflix's generous payments offer significant relief for the production.
"When we produce a series, making the budget is always hard for many reasons, especially with a low viewership rating," the official said. "So when Netflix purchases the license, it means we can just get on track with the production."
Thanks to Netflix, the production studios now have another source of earnings, rather than solely relying on the networks. This frees the studios from tension with the local broadcasters and changes the dynamic of TV productions, says drama critic Yun Suk-jin, who is also a Korean literature professor at Chungbuk National University.
"The networks always dominated the production process as they are the ones assigning the timeslot," Yun said.
He added that this gave broadcasters the power to alter details, storylines, or even the concept of a series. "Dramas would only go into production if proposals were approved by the network, so (production companies) had limitations as they had no choice but to accept the network's demands," he explained.
This freedom from the pressures of the networks also creates better-quality dramas, according to the professor.
He said that since the networks cover only a portion of the production cost, ad revenue used to be another primary funding source for the studios.
"Especially, small productions will put in an excessive amount of product placement to make a profit, which will downgrade the quality of the series," Yun said.
|JTBC's "Itaewon Class," left, and tvN's "Crash Landing on You" are streamed worldwide on Netflix. Courtesy of JTBC and tvN|
Another factor that makes Netflix popular is worldwide streaming. This offers a series the chance to gain international traction and shortens the tedious export process.
"Being a global streaming giant has a substantial advantage in the market," pop culture critic Kim Hern-sik said, adding that it opens up a new model for content exports.
"In the past, the network or production company went 'door-to-door' with each overseas network to export a TV series," he said. "So it would take years and sometimes would fall apart along the way, which would just be a waste of time and money."
As Netflix is available in over 190 countries, the network can now utilize it to appeal to other markets, which will have a "great impact on possible deals for remakes overseas."
However, as the platform takes Korea by storm, its growing presence is also raising some concerns of excessive control over the local content market.
"Netflix receives so many content proposals, so they get to review and select which to work on and turn down," the production company official said.
The deep-pocketed company is likely to become the dominant source that monitors and selects the content available to audiences, shaping the market.
Netflix has also been accused of "freeloading" in Korea's OTT (over-the-top) ecosystem for refusing to pay local telecom companies for network service use in Korea. This is seen as an unfair advantage as other local streaming services ― such as Seezn, Wavve and Watcha ― are required to pay.
|A scene from tvN's drama "Hotel Del Luna," which will be remade in the U.S. Courtesy of tvN|
Meanwhile, Studio Dragon is seeking to go beyond Netflix to secure its foothold in the global market. The company launched a U.S. branch earlier this year, becoming the first Korean production company to do so.
It inked a co-production partnership deal with the American production company Skydance in February, announcing their first project, a U.S. remake of "Hotel Del Luna."
"With the success of 'Hotel Del Luna,' we hope to leap forward in becoming a global premium drama studio," Studio Dragon said.