Netflix and Disney Expand 'OTT Battle' Overseas... K-Content Also in Spotlight

Reed Hastings, CEO of Netflix, is giving a presentation at the 2019 Korea-ASEAN Special Summit 'Cultural Innovation Forum' held last November at BEXCO Exhibition Hall 2 in Busan.
[Image source=Yonhap News]

[Asia Economy Reporter Kim Heung-soon] Netflix, the world's largest online video service (OTT), continued its upward trend last year by surpassing 167 million cumulative paid subscribers. While growth slowed in the U.S. market, responses were strong in overseas markets such as Asia, Europe, and Latin America. This year, Disney Plus, regarded as a major challenger in the OTT industry, plans to actively expand overseas, intensifying the global market dominance battle.

◆ Netflix Faces Limits in the U.S. Market = Netflix announced its Q4 2019 earnings on the 22nd (Korean time). Quarterly revenue increased 30.6% year-over-year to $5.5 billion, and paid subscribers grew 21% year-over-year to 167 million. However, the increase of 550,000 paid subscribers in the U.S. was below market expectations of 589,000. This is attributed to the impact of Disney's OTT platform Disney Plus, which launched in the U.S. in November last year. Disney Plus caused a sensation by gathering 24 million subscribers in less than a month after its launch. An industry insider said, "The U.S. OTT market, once led by Netflix, has already reached saturation, slowing the growth rate of paid subscribers compared to before," adding, "With competitors like Disney Plus increasing, it will be difficult to expect new demand going forward." Netflix evaluated, "Considering that streaming services in the U.S. started about 10 years earlier than other regions in 2007 and that competing services have been launched one after another, the steady growth is encouraging."

◆ Maintaining OTT No.1 Status Overseas = Unlike in the U.S., Netflix performed well overseas. It recorded about 8.2 million paid subscribers, significantly exceeding the market expectation of 7.17 million. In Europe, the Middle East, and Africa (EMEA), paid subscribers increased by 4.42 million from the previous quarter, and Latin America (LATAM) grew by 2.04 million. The Asia-Pacific (APAC) region also added 1.75 million subscribers. Thanks to this, the number of paid subscribers outside the U.S. surpassed 100 million for the first time. As of last year, Netflix's paid subscribers were highest in North America with 67.66 million, followed by EMEA with 51.78 million, LATAM with 31.42 million, and APAC with 16.23 million. Netflix self-assessed, "The overseas paid subscriber growth rate was the highest among all Q4s in history," adding, "This is the result of continuously delivering diverse and high-quality content that satisfies members worldwide every month."

Photo by Netflix

◆ "OTT War, The Real Battle Is This Year" = From this year, fierce competition among global OTT companies to gain dominance in markets outside the U.S. is expected. Streaming players such as Disney Plus, Apple’s Apple TV Plus, WarnerMedia’s HBO Max, and Comcast’s Peacock are expected to fiercely chase Netflix. In particular, Disney Plus plans to expand its service to Western Europe in March, a week earlier than originally planned, and enter India and Southeast Asia in June, and Eastern Europe and Latin America in October. It could land in Asian markets including South Korea as early as this year. Its vast content library accumulated through existing movies and animations and a cheaper base price (Netflix $8.99, Disney Plus $6.99) are its weapons. The U.S. economic media Forbes predicted, "Netflix has not been seriously threatened in the fierce streaming war so far, but it will face tough times from now on."

◆ Counterattack with Content... Eyeing 'K-Content' = Global market research firm BMO Capital analyzed that Netflix will invest $17.3 billion (about 20.05 trillion KRW) in content this year and is expected to continuously increase investment annually, reaching $26.3 billion (30.48 trillion KRW) by 2028. This is interpreted as an attempt to gain an edge over global OTT competitors with differentiated content. Reed Hastings, Netflix CEO, said, "Netflix has so far listened to members’ voices and strategized by considering what content and products can bring joy to everyone," emphasizing, "We will continue the same strategy for the next 10 years."

He also showed affection for Korean works known as K-content. Netflix included extensive content about Korea and Korean content in its 'Investor Letter' issued to global investors. Netflix analyzed in the letter that regional original content, including Korea, was greatly loved last year and stated, "We will continue to invest heavily in K-content." Ted Sarandos, Netflix Chief Content Officer (CCO), said, "Korean content is loved not only in Asia but worldwide," and expressed expectations that "high-quality content, including the global hit 'Kingdom,' which will soon release a new season, will exert tremendous influence."