[K-Kcontents Future] ① Secure IP like 'Woo Young-woo'... Open New Paths through Diversifying Rights

This Year’s Global Content Market Is Tough
Production Companies Securing IPs, OSMU Full-Scale Launch Expected
Rapid Expansion Difficult... Many Still Small-Scale
Accelerating IP Diversification "Different Business Models Needed"

Editor's NoteThe Ministry of Culture, Sports and Tourism's biggest goal this year is to expand K-content exports. It is implementing the largest-ever policy financial support, including 410 billion KRW for the 'Mother Fund Cultural Account (K-Content Fund)', 220 billion KRW for completion guarantee support, and 160 billion KRW for interest support. The plan is to nurture steady growth and develop K-content as a key driver leading the manufacturing and service industries. According to the Korea Creative Content Agency, last year the content industry’s sales reached 146.9 trillion KRW, and exports amounted to 13.01 billion USD (both estimates). These figures represent growth of 7.4% and 1.5%, respectively, compared to the previous year. The latter fell short of expectations, as growth was 16.3% in 2020 and 7.5% the following year. This signals that the global content market will be challenging this year. It is time to expand outward while strengthening internal foundations.

On the 31st, citizens are visiting a booth related to the drama Strange Lawyer Woo Young-woo at the international broadcasting video market 'BCWW (BroadCast WorldWide) 2022' held at Dongdaemun Design Plaza in Seoul. / Photo by Moon Ho-nam munonam@

There are numerous factors hindering the content industry this year. Global economic growth slowed from the second quarter of last year due to Russia’s invasion of Ukraine and other influences. Interest rate hikes in various countries have increased commodity price volatility and inflationary pressures. Naturally, investment in the content industry has contracted. American media companies such as AMC Networks and Warner Bros. Discovery are not only cutting costs but also proceeding with layoffs. All have shifted their business strategies toward improving profitability. The situation is no different for domestic companies. CJ ENM undertook a major organizational restructuring at the start of the new year, a move closely related to investment contraction and cost reduction. This trend may spread across the industry in the first half of the year. Changyoung Jeon, Senior Researcher of the Information Analysis Team at the Korea Creative Content Agency, assessed, “It is a time to create new opportunities to overcome the uncertainties of a recession and a shrinking market.”

The most frequently mentioned solution is securing intellectual property rights (IP). Last year, AStory set a good precedent with the drama Extraordinary Attorney Woo. They declined Netflix’s offer and sold only the broadcasting rights. Even in the broadcasting market, they stuck to selling only broadcasting rights and partnered with the emerging channel ENA. The reason for their enthusiasm in securing IP was the regret they felt despite the success of the drama Kingdom. Except for games, all IP belonged to Netflix. Lee Sang-baek, CEO of AStory, said, “IP is the ‘cash cow’ that forms the foundation for a production company’s growth. Without it, you survive on outsourcing revenue and fall into a vicious cycle of taking on outsourcing again.” Extraordinary Attorney Woo ranked first in non-English TV series viewing hours on Netflix for nine consecutive weeks. It stayed in the top 10 for twenty-one consecutive weeks, one week longer than Squid Game. Although there was no separate revenue from its popularity, it gained opportunities to utilize the IP in various ways.

Extraordinary Attorney Woo was adapted into a webtoon on Naver and introduced to the U.S., Europe, and other regions. Early next year, EMK Musical Company will produce a musical adaptation. Crypto.com is issuing social NFTs. They are conducting a project to support autism awareness themed around the whale frequently appearing in the drama. Han Semin, President of AStory, said, “We are steadily preparing cosmetics and fashion as well,” adding, “Unusually, requests continue to come in even after the series ended.”

[Image source=Yonhap News]

The companies showing the most interest are broadcasters and production companies. At the International Broadcasting & Video Content Market (BCWW) last September, many overseas buyers inquired about broadcasting and remakes. Adam Steinman, Vice President of Format Development at Warner Bros., praised, “The story warmly moves viewers by portraying the protagonist living a full life with diverse charms,” adding, “It has competitiveness comparable to well-known North American content.” He continued, “AStory’s bold strategy of not relying on OTT production support will also be recognized as a model case for Korean production companies.”

Recently, RaemongRaein, which produced the drama Reborn Rich, took responsibility for half of the investment, 17.6 billion KRW, securing 50% of the IP. Domestic rights were sold to Netflix, Disney+, TVING, and cable channels, while overseas rights were sold to Viu. By securing various channels, they led broadcasting in over 170 countries. This expanded the distribution channels for K-content, which had been seeking global routes relying on Netflix, while laying the foundation to maximize secondary sales revenue.

The Ministry of Culture, Sports and Tourism is establishing a new content IP fund this year to facilitate the settlement of the new system. It will invest 90 billion KRW to create a fund worth 150 billion KRW. The fund will invest in small and venture companies holding IP and projects utilizing IP. Changryeol Chae, Officer of the Cultural Industry Policy Division at the Ministry, explained, “The fund will be formed by June through Korea Venture Investment Corp. Not only drama production companies but also webtoon and web novel companies can benefit. Joint IP ownership with distributors also meets the conditions.”

Drama 'Jaebeoljip Maknae Adeul' Still Cut

Immediate balanced effects are difficult to expect. Until five to six years ago, production companies were mostly called subcontractors. They merely produced dramas for terrestrial broadcasters and earned a certain profit. Many did not even record delivery achievements. Large production companies monopolized more than two-thirds of production volume, solidifying a rich-get-richer structure. Their share of total sales steadily increased from 49.9% in 2014 to 81.3% in 2020. According to the 2022 Broadcasting and Video Industry White Paper published by the Korea Creative Content Agency on the 7th, 732 production companies recorded sales in 2021. About 10%, or seventy-three companies, recorded over 10 billion KRW. Their sales of 3.6325 trillion KRW accounted for 79.5% of the total 4.5691 trillion KRW. More than half (57.4%) did not exceed 1 billion KRW.

Repeated small-scale operations put them at a disadvantage in negotiations with OTT platforms. No matter how good the script, it is difficult to escape the subcontracting structure. CEO A of a production company said, “With the advent of OTT and the dramatic increase in drama production scale, even if the government offers various supports, funds tend to be concentrated on major production companies or webtoon and web novel companies.” CEO B said, “There is still a line of production companies wanting to collaborate with Netflix. Most are tied to fixed-price contracts specifying recovery of production costs and 5-10% profit sharing.”

Large production companies also have concerns. Dramas carry higher risks than other fields. Even with famous actors and directors, success is not guaranteed. Insisting on IP can lead to significant losses. CEO C said, “If you give up IP but solve production cost issues and secure stable profits, that can also be a stepping stone to securing future value.” CEO D added, “IP is not a universal key. Successful cases of One Source Multi Use (OSMU) in Korea are extremely rare. Except for remakes, other businesses are highly unstable.”

Bandai-produced Netflix 'Squid Game' figure
Photo by Seokwoo Son, CEO of BH Entertainment

The foundation for IP diversification could have been laid when the Korean Wave first emerged. However, shortsighted deals by broadcasters repeatedly squandered opportunities. KBS drama Winter Sonata is a representative example. It earned 27 billion KRW by selling to Japan, but Japan earned over 1.2 trillion KRW, more than forty times that amount. As the drama gained popularity, related products such as DVDs, photo books, and accessories sold like hotcakes. KBS sold additional rights together with the Japanese NHK, so they could not expect extra income.

Today, with the importance of IP emphasized, the vicious cycle is less likely to repeat. The government is also supporting settlement through various measures. For example, the 'Content IP Industry Exhibition' held by the Ministry and the Korea Creative Content Agency in November last year connected stakeholders from production, media, and platforms, fostering sustainable development potential. Kim Jeong-kyung, Deputy Head of the Broadcasting Industry Team at the Korea Creative Content Agency, who was in charge of the event, said, “There were 323 business consultations, and eight contracts were signed on the spot. Award-winning works in the ‘Story’ category of the Korea Content Awards, such as Insallah by Suryun, Bong-i, Came from Moulin Rouge, and Chipless, also opened paths for publication and adaptation.” A CEO who pioneered a new path with Extraordinary Attorney Woo emphasized, “The foundation is being laid for global super IPs like the Marvel series, Game of Thrones, and Friends to emerge domestically. As the value of K-content rises, it is necessary to create business models different from the current ones.”