[Exclusive] IPTV 3 Companies Raise 300 Billion Won to Produce Original Dramas

Finding Breakthroughs Amid Changes in the Media Ecosystem

[Asia Economy Reporters Hye-seon Lim and Min-young Cha] The three Internet TV (IPTV) providers?SK Broadband, KT, and LG Uplus?are joining forces to strengthen their competitiveness.

According to industry sources on the 7th, the three IPTV companies will each contribute 100 billion KRW, creating a joint business fund totaling 300 billion KRW. As the media ecosystem shifts toward online video services (OTT), the IPTV industry, feeling a sense of crisis, has decided to collaborate to prevent subscriber churn.

The fund will be used to secure intellectual property (IP), including producing original dramas. Since OTT platforms have expanded the market through large-scale content investments and partnerships, IPTV providers plan to enhance their competitiveness by producing original exclusive content.

The three IPTV companies will also cooperate to increase the supply of movie video-on-demand (VOD). In South Korea, the movie content market consists of theaters, transactional video-on-demand (TVOD), and subscription video-on-demand (SVOD) services. VOD is considered a major cash cow for IPTV. Traditionally, movies have been screened in theaters first, then offered on IPTV’s TVOD after the holdback period, and finally on SVOD services. However, as OTT platforms aggressively invest to secure exclusive content, IPTV’s VOD revenues have sharply declined.

The IPTV providers’ search for a new breakthrough stems from this sense of crisis. Although the domestic IPTV market had seen subscriber growth for several years, the net increase in subscribers sharply slowed last year, raising warning signs. As of December last year, the cumulative number of subscribers reached 19.69 million, with a net increase of only 370,000 compared to the end of the first half of the year. This is about half the increase of 600,000 to 700,000 subscribers seen in previous first halves.

The explosive popularity of OTT services like Netflix during the COVID-19 pandemic has signaled changes in the media market. A broadcasting industry official analyzed, "Since entering the era of 30 million pay-TV subscribers in 2017, the market has become saturated and growth has slowed. Meanwhile, OTT platforms have increased their influence in the market by promoting original content, causing IPTV to fall behind in the content ownership competition."

There is also an aim to reduce the burden of retransmission fees (CPS). IPTV providers receive content from terrestrial broadcasters and pay CPS as compensation. CPS is priced per pay-TV subscriber household. Terrestrial broadcasters have continuously and excessively demanded CPS increases, raising concerns about the growing burden on IPTV providers. IPTV companies pay about 25% of their basic channel subscription revenue as basic channel program usage fees.