Squid Game Makes Huge Profits but Netflix Monopolizes... "Additional Compensation Legislation Needed"

[Asia Economy Reporter Seulgina Jo] "What good is it if the work succeeds when Netflix takes it all."

Despite the unprecedented success of the Korean original content 'Ojingeo Game (Squid Game)', concerns have been raised that additional compensation measures need to be legislated to improve the 'intellectual property (IP) monopoly structure' where Netflix virtually monopolizes the profits. It is estimated that Ojingeo Game, which had a production cost of 2.8 billion KRW per episode, generated over 1 trillion KRW in revenue, but the domestic production companies only received about 10% of the profits. If this continues, there are growing concerns that even if the second or third Ojingeo Game is produced, the Korean content industry could be reduced to a 'global production subcontracting base.'

On the 7th, the National Assembly Legislative Research Office stated in its report titled "Legislative and Policy Improvement Tasks for Global OTTs such as Netflix" that "the domestic content market could become dependent on global operators as global online video services (OTT) like Netflix monopolize the copyright revenues of domestic content," and emphasized that "fair compensation systems and fund imposition plans should be reviewed."

The report suggested that regulations should be designed from the perspective of fostering the content industry while simultaneously drawing out win-win measures that allow global OTTs to invest in the domestic content industry infrastructure.

Regarding copyrights, it pointed out the need for legislative review on additional compensation measures after contracts between businesses are concluded. Legislative Researcher Choi Jin-eung stated, "Basically, while respecting the principle of market autonomy, we need to encourage the expansion of overseas capital investment," and added, "Referring to the European Union (EU) directives, measures should be considered to share revenue-related information and guarantee additional profits so that domestic content producers can receive fair compensation even after copyright contracts are signed."

Currently, Netflix pays domestic production companies the contracted production costs in advance during the original content production process but then sweeps up all IP, distribution rights, and overseas distribution rights afterward. It is a structure that monopolizes even secondary copyright rights. After the success of Ojingeo Game, this IP monopoly controversy came under scrutiny, and Netflix expressed its intention to discuss additional compensation, but this is only a one-time compensation. In the EU, the 'Digital Single Market Copyright Directive' stipulates that member states must ensure that authors receive appropriate and proportionate compensation when copyrights are transferred.

There was also a proposal to legislate measures so that global OTTs, which generate enormous sales worldwide with Korean content, can contribute to public funds such as funds for the development of the domestic content industry. This is not unrelated to criticism that global OTTs enjoy the benefits while ignoring legal and institutional responsibilities and obligations in Korea. In France, for example, YouTube, Netflix, and others are currently subject to a video tax on their domestic revenues, which is used for the Film Support Fund (FSA).

The report mentioned that if OTTs are considered subject to the film development fund levy, it should be limited to paid services based on user bases, and operators with small market shares should be excluded from the levy, similar to the EU. It also proposed that when considering the broadcasting and communications development fund levy, only value-added telecommunications operators meeting certain criteria such as domestic user numbers and sales should be included.

The 21st National Assembly is also continuing related discussions. The previously proposed "Copyright Act Amendment" stipulates that the comprehensive transfer of copyright property rights for future works is invalid, and that contract parties may terminate the contract five years after the contract is signed. Additionally, in cases like Ojingeo Game, if the compensation for the transfer of copyright property rights is not fair compared to the revenue generated from copyright use, the author can claim additional compensation and request necessary information for the compensation claim.