KT·LG Uplus Undercover War
Disney Plus Continues Negotiations
Service Launch Predicted Last Year Delayed to Q3 This Year
Key Issues: Revenue Sharing and New Subscriber Acquisition Conditions
Expected to Follow Netflix Precedent
[Asia Economy Reporter Cha Min-young] As the powerful global online video service (OTT) Disney Plus, considered a 'Netflix rival,' prepares to launch in Korea, the telecommunications industry is fiercely competing to secure partnerships. This is because partnering with Disney Plus, which possesses a rich intellectual property (IP) portfolio ranging from movies to TV shows and kids' content, offers a strong incentive to gain an advantage in the home market hierarchy.
According to industry sources on the 5th, KT and LG Uplus are in the final stages of negotiations to attract Disney Plus, which is scheduled to launch in Korea in the third quarter of this year, to their own Internet Protocol Television (IPTV) services. As Disney Plus continues behind-the-scenes talks to secure favorable terms, the service launch date, initially expected as early as the end of last year, has been repeatedly delayed.
The key issues are revenue-sharing terms and strategies for acquiring new subscribers. LG Uplus, which signed the first contract with Netflix in 2018, is known to have secured terms including a 9:1 revenue split, free network usage, and conditions for acquiring a certain scale of new subscribers. Disney Plus is also reported to secure advantageous terms by contracting with second and third-tier latecomers during its global market expansion. This is why it is expected to follow Netflix's precedent in Korea.
Despite the near 'bullying' contract terms imposed by global OTTs, the telecommunications industry is in a difficult position. In the already saturated domestic IPTV market, OTT service partnerships provide a strong incentive to attract new subscribers. After partnering with Netflix in 2018, LG Uplus saw a 12% increase in paid broadcasting subscribers in 2019 compared to the previous year. KT, which initially did not sign a contract with Netflix due to unfavorable revenue terms, later formed a partnership to prevent customer churn.
However, SK Telecom, the number one player in the telecommunications industry, has drawn a line on the possibility of partnering with Disney Plus. On March 25, after the 37th SK Telecom shareholders' meeting, CEO Park Jung-ho said in response to questions about a potential partnership with Disney Plus, "Disney sees Wavve as a competitor," adding, "However, the Netflix CEO told me to meet if I have time."
Some in the market speculate that SK Telecom may leverage Amazon's 'Amazon Prime' service, with which it has established a close cooperative relationship. As part of its non-telecom strategy, SK Telecom declared strategic collaboration with Amazon last year. Following cooperation with 11st, its commerce division, there are expectations for synergy in the content sector as well.
Disney Plus's move to enter Korea is interpreted as a judgment that Korean consumers have significant potential in the global OTT market. Competitor Netflix earned 400 billion KRW in revenue in Korea last year alone. According to Netflix Services Korea's audit report, last year's revenue was 415.45 billion KRW, with an operating profit of 8.82 billion KRW. Considering the OTT market trend of increasing self-produced content, Korea is also an excellent stage for content production.
Disney Plus has also made changes to its leadership structure in Korea. In February, Walt Disney Company Asia Pacific (APAC) appointed Oh Sang-ho, former executive director of Disney Studio Business Division, as the new head of Walt Disney Company Korea. CEO Oh oversees Disney's strategy and overall business in Korea. Kim So-yeon, former director of the Consumer Products Division, was appointed head of the Direct-to-Consumer (DTC) division. Kim is responsible for optimizing the operation of domestic DTC business, including Disney Plus, and leading consumer strategy.
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