[K-Kontents Mirae]② Jollaman Tightening Belt in North America, Released in Korea

US Recession Deepens... Signs of OTT Cutting Appear
'Profitability First' Netflix & Disney Desperately Need K-Content
'Squid Game' Opens Shortcut to US Market

Last year, the U.S. online content platform industry experienced severe turbulence. It faced growth limitations due to the resumption of outdoor activities and the emergence of new platforms. This is not surprising. The global population is fixed, and the time and money spent on content are limited. Local consumers' spending sentiment also contracted, influenced by rapid interest rate hikes, declines in real estate, stock, and cryptocurrency values, and wage freezes. High-priced content such as musicals took a direct hit. Cord-cutting, where paid broadcast viewers cancel subscriptions and move to new platforms, also accelerated.

[Image source=Yonhap News]

Cord-cutting is clearly advantageous for the sustained popularity of Hallyu (Korean Wave). This is because K-content is rarely scheduled on local terrestrial or cable channels, allowing for increased exposure frequency. The problem is that the recession has deepened to the extent that even OTT platforms are being 'cut.' For example, Netflix saw a sharp decline of 1.3 million subscribers in Q2 last year for the first time. Joo Seong-ho, head of the Korea Creative Content Agency's U.S. Business Center, said, "The reduction in content consumption in North America is spreading to OTT cutting," adding, "There are quite a few people around who have canceled their subscriptions."

Netflix responded by raising subscription fees by $1 to $2 and tracking account sharing to improve profitability. It also introduced an ad-supported plan. Under the condition of watching 4 to 5 minutes of ads per content, it offered a cheaper price ($6.99) than the existing plans. However, it seems difficult to immediately improve profitability. Whip Media surveyed 2,460 local consumers in May last year about switching to an ad-supported subscription model. Forty-three percent responded "very unlikely," and 29% said "unlikely." Joo said, "Watching ads is a resistance factor as strong as price," diagnosing that "a reluctant compromise could ironically accelerate cancellations."

Netflix has begun focusing on strengthening its fundamentals. It laid off 450 employees and promised wise investments. This does not seem to have a significant impact on K-content. The belt-tightening is a regional choice and a matter of practicality. While subscription cancellations surged in North America, the number of subscribers in Asia increased by 1.1 million. The incentive is undoubtedly K-content, which covers Europe and South America with production costs about one-tenth of those for U.S. dramas.

Netflix has continuously increased its investment in K-content, from 550 billion won in 2021 to over 800 billion won last year. This year, it is expected to maintain at least last year's level. Joo said, "The OTT subscriber ratio in Asia has not yet reached maturity. Netflix will define it as a growth market and target it," adding, "To secure subscribers in countries like Indonesia and Vietnam, it inevitably has to continue securing K-content." He further noted, "If investment in K-content decreases, it would be a signal that the entire global OTT market is rapidly shrinking."

Great interest is also detected in competitor Disney+. This year, it plans to release twelve shows including the drama 'Casino' and various entertainment programs. A Walt Disney Company Korea official said, "Multiple works may be added." Kim So-yeon, CEO of Walt Disney Company Korea, stated, "We plan to continuously expand the Korean content lineup," adding, "We will collaborate with domestic creators and discover excellent storytelling to showcase on the global stage."

The effect they expect from K-content is not limited to Asia. They hope to captivate North American subscribers as well, like with 'Squid Game.' Last year's results were somewhat disappointing. For Netflix, none of its titles ranked in the top 10 in viewing rankings compiled until October. Although shows like 'Extraordinary Attorney Woo' performed well, their success was limited to non-English-speaking countries.

This is by no means a red light. On the contrary, the approach may become easier. 'Squid Game' broke down invisible barriers. Last year, it won six Emmy Awards, including Best Director (Hwang Dong-hyuk) and Best Actor (Lee Jung-jae). Joo diagnosed, "This is evidence that it was recognized as domestic content in the U.S. market," explaining as follows: "The word 'international' at American award ceremonies implies minority, niche, or non-mainstream. Until now, K-content was treated only as a strong contender on the international stage. Now that 'Squid Game' has won major Emmy awards, it is different. It is recognized as part of North American content. The trophies have accelerated changes in local perceptions."