[K-Content Future]⑥ "Control Tower Changes from Platform to Production Company"

Interview with Lee Seongchun, Specialist at K Media Lab
"Global OTT Investment Continues to Increase... Distribution Channels Diversify"
"Government Support Unconditionally Welcomed, Tax Credits Should Be Expanded"
"High Potential for Success of CJ ENM and SLL's North American Localization Strategy"

This year’s key topic in K-content is business sovereignty. Despite solidifying their position through global success, they still rely on Silicon Valley giants. The rise in corporate value and spotlight are undoubtedly significant achievements. However, to bring about ultimate change, it is essential to proactively design the current and future outcomes. Deals without business sovereignty cannot last long. We met with Lee Seongchun, a specialist at K Media Lab, to ask about the possibilities and limitations of this transition.

-The belt-tightening by global OTTs has worked to the advantage of domestic production companies. Will this trend continue this year as well?

"I believe overseas capital, especially global OTT investments, will continue to increase. K-content has passed the stage of proving its competitiveness in the global market. It has also demonstrated its influence in the Asian market, where OTT subscriber growth is remarkable. It is an essential weapon in competitive strategy. With the elevated status, the environment is expected to become more specialized and branded around production companies. Domestic OTT platforms are relatively weak in competitiveness. As production costs continue to rise, content production provided to Netflix and Disney+ will be prioritized over in-house content. However, the control tower role is likely to be taken by production companies rather than platforms due to diversification of distribution channels."

-It seems to have become more pronounced recently with 'Jaebeoljip Maknae Adeul' (The Youngest Son of a Chaebol Family). The production company RaemongRaein sold domestic rights to Netflix, Disney+, TVING, and cable channels, and overseas rights to Viu.

"As distribution channels increase, the bargaining power of production companies holding high-quality content has strengthened. Consequently, the competition to secure popular intellectual property (IP), the starting point of good content, will also intensify. Naver has already acquired the web novel platform Wattpad, and Kakao purchased the web novel service Radish. Studio Dragon, Ace Story, and others are also putting all their efforts into IP development."

-Only a few production companies have the capability to secure IP. It seems the wealth gap among production companies will widen further in the future.

"Production companies are one of the players composing the content industry ecosystem. Depending on market performance, not only wealth gaps but also market exit can be determined. To build a healthy ecosystem, market participants and policymakers must minimize barriers to market entry and exit. I believe the currently active atmosphere will continue unless there is an unexpected external shock. The key is sustainability. Popular IP discovery, improvement of production quality, market expansion efforts, and government support for the content industry must be pursued simultaneously."

OSMU Ideas Shine in Disney's 1957 Business Strategy Map

-The government is implementing the largest-ever policy finance support to foster K-content. Will this be a great help?

"It has been a consistent demand from the industry. It is unconditionally welcome. As long as the principle of 'support without intervention' is maintained during the process of establishing and supporting funds, it is sufficient. However, tax credits should be further expanded. The relevant legal provision is 'Article 25-6 of the Restriction of Special Taxation Act.' It specifies that large corporations receive a 3% credit, mid-sized companies 7%, and small and medium enterprises 10% from income or corporate tax. This level is far below major advanced countries. The U.S. offers 25-35%, Australia 16-40%, and France 40%. If the bill submitted to the National Assembly (by Lee Sangheon, Bae Hyunjin, and Chu Kyung-ho) passes and the credit range expands, it will greatly benefit the content production market."

-One Source Multi Use (OSMU) is still not active domestically. When can a sufficient foundation be established?

"There are several reasons for slow progress. First, the market size is small. There is not much space to expand into secondary and tertiary markets to induce consumption. The period during which money has been spent on the content market is also short. Awareness of the importance of IP development and nurturing strategies has just begun, so there is a lack of experience in executing related strategies. Korea’s OSMU is now at the starting line. Success cases are beginning to accumulate with titles like 'Jaebeoljip Maknae Adeul,' 'Solo Leveling,' and 'True Beauty.' The practice of producing seasonal content is also taking root. Since effective OSMU methods are a 'secret' that has been shared, the IP development, investment, and nurturing process must be pursued over a long period."

-CJ ENM and SLL are acquiring U.S. companies to concretize localization strategies. How likely is success?

"There will be trial and error initially, but it will succeed in the long term. One of Netflix’s growth factors was localization. It triggered an increase in domestic users through K-content supply. Similar cases exist in K-pop. BTS expanded their global influence by releasing songs with English lyrics. Collaborations with global musicians also helped. If Korean storytelling or production techniques combine with local IP, actors, and production teams to create synergy, it is expected to provide differentiated content that locals have never experienced."