|A scene from the dystopian Netflix series "Squid Game" / Courtesy of Netflix|
New book untangles how Netflix pays studios and why Korean creators cannot amass fortunes despite global success
By Kang Hyun-kyung
|Book cover for "Content Will be All the More Important in 2022" by Mirae Books|
Sharing his thoughts about the implications of the Korean drama's unprecedented global success, Won Dong-yeon, president of the Seoul-based film studio, Real Rise, which released the mega-hit, "Along with the Gods" movies, compared "Squid Game" to "an underpaid Major League Baseball slugger who hit 40 home runs in his debut season."
"What is likely to happen in the near future is that the clubs (referring metaphorically to the U.S.-based streaming giants) will seek out another talented Korean baseball player (similar to the 'Squid Game') and court South Koreans by proposing more financially lucrative deals to work with them," he wrote.
Won's social media post was made public amid local media reports about the relatively disappointing revenue Siren Pictures studio received from Netflix. Although the series reportedly helped Netflix create an estimated $900 million in value as reported in Bloomberg News in October, the South Korean studio is believed to have earned merely $1.7 million, according to a newly released book, tentatively translated into English as, "Content Will be All the More Important in 2022," published last week by Mirae Books.
Netflix didn't disclose the details of the deal, so there's no way for The Korea Times to confirm whether or not this information revealed by the co-authors is indeed true.
The authors, however, obtained the South Korean studio's earning figures from "Squid Game" based on information that Netflix usually gives 10 percent to 20 percent of the total budget to the studio that produced the series, according to the book.
What the "Squid Game" team allegedly received from Netflix, if true, is just a fifth of the revenue that a South Korean film with over 10 million tickets sold in Korea would have been given.
In "Content Will be All the More Important in 2022," the four co-authors revisit Won's social media post and claim that what he said is a reflection of the overall frustrating sentiment in the Korean entertainment industry about Netflix's allegedly stingy payments to Korean studios and creators.
"I think his intention was that 'Squid Game's global success is obviously a great thing for Korean creators and because of its mega success, global over-the-top (OTT) service providers will contemplate more business partnerships with Korean studios, and if this happens, more Korean content creators will benefit from it," Noh Ga-yeong (also known as Carolyn Noh), one of the four co-authors, says in Chapter 1 of the book.
Thus, Noh claims that she believes Won's social media post is meant as a means of encouragement, telling Korean studios and creators to be far-sighted about their future, rather than being stuck in frustration over Netflix's revenue model, which rarely reflects their products' global success.
The three other co-authors are Lee Jeong-hoon, Park Jeong-yeop and Hur Youn-joo.
Noh said that Korean studios' relatively disappointing earnings originate from the nature of the contracts they sign with Netflix.
"The deal is based on an original design manufacturing (ODM) system. Under the scheme, Korean studios do everything from planning to casting to filming, and then sell their finished work to Netflix. In return, they will receive money equivalent to 10 percent to 20 percent of the total budget used to film the piece as a margin," she wrote.
Under ODM-based contracts, she went on to say, creators are given a great deal of freedom to produce films or dramas as they wish without interruptions from the streaming giants. But, at the same time, she said such deals also result in them earning limited revenue.
Noh said that Netflix's practice of giving only 10 percent to 20 percent to the studio is still stingy, compared to U.S. athletic shoes and apparel maker Nike's revenue model, under which local suppliers get 30 percent as a margin.
She notes that Netflix and Nike work with their partners under different contracts. According to her, Nike's local suppliers have the status of original equipment manufacturers (OEM) and unlike Netflix's ODM, Nike's OEMs only manufacture products following the design and other guidelines that are set by Nike headquarters. "But Nike partners still earn a higher portion than that of Netflix's local partners, even though the former does much more simplified work than Netflix's local content partners do," Noh said.
|The four co-authors of a new book, tentatively translated into English as, "Content Will be All the More Important in 2022," published by Mirae Books, pose in this undated photo. From left are Lee Jeong-hoon, Park Jeong-yeop, Hur Youn-joo and Noh Ga-yeong. Courtesy of Mirae Books|
In the book, the four experts review how the pandemic has affected the Korean entertainment industry and preview what will happen next year for hallyu, OTT and other content platforms, and who will be the winners and losers in the battle between local and global streaming giants that have been launched in Korea.
The book presents an optimistic view about the future of hallyu. Among others, the book says viewers will come back to theaters for movies, rebuffing skepticism about the future of cinema.
It says the dismal box office records since the outbreak of the COVID-19 pandemic are more to do with a lack of blockbuster movies, rather than a reflection of moviegoers having stopped going to theaters because of the pandemic.
Several star filmmakers had to reschedule or postpone the screenings of their movies, and as a result there were few great movies screened during the pandemic, the authors note.
Director Ryoo Seung-wan's action film, "Escape from Mogadishu," attracted 3.6 million of viewers to theaters, although it was screened earlier this year when over a thousand virus cases were being reported daily across the country. The authors argue that this fact proves that the star filmmaker's return to cinema created a big buzz and that his entertaining film encouraged audiences to come to theaters despite the pandemic.
|A scene from "Squid Game" / Courtesy of Netflix|