Expansion of OTT Influence in the Broadcasting Market... Average of 5 Subscriptions

KCC Announces 2022 Broadcasting Market Competition Status Evaluation

[Asia Economy Reporter Oh Su-yeon] As online video service (OTT) sales, usage rates, and paid usage generally increased, their impact on the broadcasting market also grew. OTT users reported using an average of five services, with Netflix being the most subscribed.

The Korea Communications Commission announced the results of the '2022 Broadcasting Market Competition Status Evaluation' on the 28th.

This evaluation assessed the competitive situation of the 2021 broadcasting market by segmenting the market into paid broadcasting market, broadcasting channel trading market, broadcasting program trading market, and broadcasting advertising market.

IPTV 3 Companies Account for 86% of Paid Broadcasting Market

In 2021, the number of paid broadcasting subscribers was 35.76 million (based on terminal count, hereafter the same), a 2.9% increase from the previous year. Internet TV (IPTV) subscribers continued to rise, reaching 19.89 million (17.13 million in 2019 → 18.54 million in 2020 → 19.89 million in 2021). Conversely, SO subscribers decreased to 12.88 million (13.48 million in 2019 → 13.13 million in 2020 → 12.88 million in 2021).

By market, digital paid broadcasting subscribers increased to 29.99 million (27.88 million in 2019 → 28.91 million in 2020 → 29.99 million in 2021). 8VSB subscribers continued to decline, totaling 5.77 million (5.87 million in 2019 → 5.84 million in 2020 → 5.77 million in 2021).

Due to mergers and acquisitions among paid broadcasting companies, the IPTV 3-company group accounted for 86% of total paid broadcasting subscribers, indicating a high market concentration.

Total channel provision revenue in 2021 was 1.3008 trillion KRW, a 7.5% increase from the previous year (1.2099 trillion KRW). PP channel provision revenue rose 10.2% year-on-year to 892.8 billion KRW, maintaining an upward trend (753.9 billion KRW in 2019 → 810.0 billion KRW in 2020 → 892.8 billion KRW in 2021). Terrestrial broadcasting channel retransmission revenue also slightly increased by 2.0% to 407.9 billion KRW (361.3 billion KRW in 2019 → 399.9 billion KRW in 2020 → 407.9 billion KRW in 2021).

In the paid broadcasting channel trading market, the market share of CJ-affiliated PP, the top operator, remained steady at 28.3%. The market share of general programming channel (GPC) affiliated PP increased to 20.1% from 18.3% the previous year, while terrestrial-affiliated PP market share decreased to 14.6% from 15.7%.

Broadcast Advertising Market Rebounds...Mid-roll Ads and COVID-19 Impact

The 2021 broadcast advertising market reversed its previous decline, increasing 19.6% from the previous year (2.5015 trillion KRW) to 2.991 trillion KRW. Sponsorship revenue also rose 16.2% year-on-year to 837.7 billion KRW from 720.8 billion KRW.

The Korea Communications Commission analyzed that the growth in the broadcast advertising market was influenced by the implementation of mid-roll ads on terrestrial channels and the resumption of delayed advertising executions due to COVID-19. The broadcast advertising revenue of the three terrestrial broadcasters (including affiliated PPs) grew 21.9% year-on-year to 1.2937 trillion KRW. General programming channel PPs grew 11.9% to 517.2 billion KRW, and CJ-affiliated PPs grew 27% to 464.7 billion KRW, showing notable growth of about 20% or more for CJ-affiliated PPs and the three terrestrial broadcasters.

Market concentration based on advertising revenue in the broadcast advertising market slightly increased but remained low. Considering the decline in broadcast advertising share within the overall advertising market and the increasing similarity of advertising products between terrestrial and paid broadcasting channels, competition in the broadcast advertising market remains intense.

OTT Influence Expands...Average of 5 Subscriptions

Regarding OTT influence, OTT operator sales, usage rates, and paid user ratios all increased overall, expanding their impact on the entire broadcasting market, including the paid broadcasting market.

As of this year, OTT usage rate was 72.0% (66.3% in 2020 → 69.5% in 2021 → 72.0% in 2022), showing continuous growth. The paid subscription user ratio was 55.9%.

A survey of OTT users found that they use an average of five OTT services, with subscription-based OTTs averaging 2.7 services.

As of June this year, Netflix's monthly users reached 11.18 million, a 9.5% increase compared to the same month last year, making it the OTT with the highest number of subscribers, although its growth rate slowed (45.5% in 2021). During the same period, Wavve's monthly users decreased 8.6% to 4.24 million, while TVING's monthly users increased 26.7% to 4.02 million. Disney Plus, launched domestically in November 2021, reached 2 million users within about a month of launch but decreased to 1.68 million users as of June this year.

In the paid broadcasting market, although subscribers and revenue are increasing, growth rate slowdown and decreases in video-on-demand (VOD) revenue indicate rising competitive pressure due to OTT influence. In the broadcasting channel trading market, changes in the bargaining power of channel suppliers (PPs) due to OTT are anticipated. The Korea Communications Commission expressed concerns that while paid broadcasting operators' bargaining power for popular channels needed to compete with OTT may increase, the bargaining power of small and medium-sized channels focusing on non-original content may further decline.

In the broadcasting program trading market, the expansion of OTT original content competition has increased program demand, strengthening the bargaining power of content providers such as drama production companies. In the broadcast advertising market, the entry of global OTT operators into the advertising market may eventually expand to domestic OTT operators in the long term.

Under Article 35-5 of the Broadcasting Act, the Korea Communications Commission has conducted annual broadcasting market competition evaluations since 2012 to create an efficient and fair competitive environment in the broadcasting market and reports the results to the National Assembly. The '2022 Broadcasting Market Competition Status Evaluation' report, along with key data and graphic files, will be made available on the Korea Communications Commission website and the Broadcasting Statistics Portal.