US OTT Giants to Invest 136 Trillion Won Next Year

[Asia Economy Reporter Yujin Cho] Major U.S. media companies are expected to make massive investments in the online video service (OTT) business next year. To capture the suddenly expanded market due to the COVID-19 pandemic, new entrants continue to join, and companies driven into excessive competition are betting their survival on content investment as a breakthrough to overcome growth stagnation.

According to major foreign media on the 29th (local time), the top 8 U.S. media companies are expected to invest at least $115 billion (approximately 136.505 trillion KRW) in the online video service (OTT) business. This figure is based on the business reports disclosed by each company, and the total investment including securing proprietary content such as movies and TV programs as well as sports broadcasting rights is expected to reach $140 billion.

Michael Nathanson, a media analyst at MoffettNathanson, a Wall Street research firm, said, "In the fierce competition of the OTT market, the only way for companies to gain an advantageous position is to secure proprietary content."

The market leader in OTT, Netflix, is reportedly planning to spend more than $17 billion on proprietary content investment next year alone. This represents a 25% increase compared to this year's investment and a 57% increase compared to last year ($10.8 billion). Disney+, considered a rival to Netflix, is estimated to increase its content investment by 35-40% next year compared to this year. Morgan Stanley expects Disney+ to invest between $23 billion and $33 billion solely in movie and TV program production.

Last year and this year marked the first years of rapid OTT growth. Benefiting from theater closures and increased remote work due to the COVID-19 pandemic, the OTT market, which was on the rise, explosively grew, surpassing the mainstream media content market. New entrants continued to enter to capture the suddenly expanded OTT market, and companies driven into excessive competition bet their survival on mergers and acquisitions (M&A) to secure proprietary content.

This year, Amazon acquired Hollywood film production company MGM for $8.45 billion (approximately 9.5 trillion KRW), and U.S. telecommunications and media group AT&T also acquired Discovery Channel and established an OTT joint venture. These latecomers, armed with M&A and independent studio operations, have rapidly increased their subscriber base based on proprietary content.

Content investment is expected to be a major variable that changes the OTT market landscape. Currently, companies competing in the global OTT market include Netflix, the number one, followed by Amazon Prime Video and Disney+ in second and third place. Additionally, latecomers who have newly entered in the past 2-3 years such as Apple TV, Peacock, Hulu, HBO Max, and Paramount Plus are aiming to become rivals to Netflix by strengthening their proprietary content.