[Cinema in Crisis④] As Director Bong Joon-ho Predicted 6 Years Ago... OTT Collaboration Becomes Visible

Netflix and Disney+ Explore Diversifying Content Revenue
Holdback Periods Blocking Theatrical Releases... Recent Changes in Landscape
Lotte Cinema: "Collaboration Possible Without Restrictions"
Megabox: "OTT Is a Good Partner," CGV...

Netflix's subscriber count for the second quarter reached 238.4 million, an increase of 5.89 million compared to the same period last year. Revenue also rose by 2.7% to $8.187 billion. However, it fell short of the $8.3 billion forecasted by Bloomberg and others due to a decrease in average revenue per subscriber. Netflix stated, "We have made steady progress, but there is more work to do to accelerate growth." This is not a signal of bold content investment but rather a commitment to tighten belts and expand profitability. The company plans to cut spending by $300 million this year and concretize various business strategies such as banning account sharing and introducing ad-supported plans.

Director Bong Joon-ho is attending a press conference for the film 'Okja' at the Four Seasons Hotel in Jongno-gu, Seoul on the afternoon of the 15th, answering questions. Photo by Yonhap News

Disney's strategy is no different. Disney+ had 146.1 million subscribers in the second quarter, a 7.4% decrease from the same period last year. The company had to be satisfied with a reduction in losses due to cost-cutting. Disney is pursuing profitability expansion through price increases and the introduction of ad-supported plans. In South Korea, from November, it will raise existing membership prices by 4,000 won and introduce a lower-tier membership. CEO Bob Iger said, "The company has completely changed in the eight months since my return," adding, "We will restore creativity centered on business and manage costs efficiently to achieve savings."

The breakthrough both companies are newly envisioning is diversification of content revenue. Disney is significantly reducing the number and budget of productions for Marvel Studios and the Star Wars series. At the same time, it seeks strategic partners that can help content achieve low cost and high efficiency. Netflix, which has invested $60 billion in content over the past five years, is also actively exploring new revenue streams. With a certain cyclical loop established and growth slowing, concerns about content utilization have become inevitable.

The most prominently discussed approach is collaboration with movie theaters. Since theaters generate the most revenue, Netflix has long sought distribution partnerships. Netflix's 2017 film "Okja" is a representative example. It was released simultaneously on the online service and in theaters, breaking the convention of first releasing in theaters and then online after a certain period. The three multiplex chains (CGV, Lotte Cinema, Megabox) strongly opposed this. At the time, a CGV official stated, "Netflix is luring customers to its own platform and ignoring the film industry ecosystem," adding, "If there is no holdback period (the time between content rights transferring from one platform to another), we will not screen the film." Lotte Cinema and Megabox agreed, so "Okja" was only shown in small theaters.

The chilly atmosphere did not last long. In 2019, Megabox became the first multiplex to screen a Netflix film, "The King: Henry V," starring Timoth?e Chalamet. This was made possible by adjusting the holdback period. Previously, Netflix released "Roma" on its platform two days after its small-theater release. "The King: Henry V" was streamed eight days after its theatrical release. Other anticipated titles set holdback periods as well: "The Irishman" for one week, and "Marriage Story" and "The Two Popes" for eight days. At the time, Netflix stated, "This decision reflects the demands of both creators and viewers," explaining, "The former can introduce content to audiences in diverse ways, and the latter can extend the movie-watching experience to the big screen."

The COVID-19 pandemic caused a severe crisis for movie theaters, changing the landscape. CGV, which had maintained a 2-3 week holdback, relented. In April 2021, it allowed the simultaneous release of the film "Seobok" on TVING and in theaters. CGV was unable to voice any objections during negotiations because it desperately needed films to screen. At that time, three re-released films ("The Lord of the Rings: The Two Towers," "The Lord of the Rings: The Return of the King," and "Chungking Express") were in the top 10 box office rankings. By September of that year, CGV screened many Korean films already released on OTT platforms, including "Time to Hunt," "Call," "Cha In-pyo," "Space Sweepers," "Night in Paradise," "Sweet & Sour," and "The 8th Night." This reluctant screening caused the loss of justification to legally enforce holdback periods.

The difficult situation improved considerably this year with the endemic phase. OTT films are not being ignored. However, cumulative audience numbers remain far below pre-COVID-19 levels. Korean film investors have suffered significant losses over the past three years and are gradually withdrawing, potentially leading to a long drought around 2025. Many OTT and movie theater officials agreed, saying, "Both theaters and OTT platforms urgently need new revenue streams," and "Conflicts over holdbacks and other issues could surprisingly be resolved smoothly."

Prime Minister Han Duck-soo is meeting with Ted Sarandos, Co-CEO of Netflix, at the Government Seoul Office in Jongno-gu, Seoul on the 22nd. Photo by Dongju Yoon doso7@

Some predict, "Since multiplexes have recently screened live performances and sports broadcasts, they could also embrace OTT dramas." Indeed, Lotte Cinema has enjoyed great success by screening dramas such as "Chernobyl," "Pachinko," and "Luck" as special events. An official said, "We are willing to collaborate with OTT platforms in various ways without significant restrictions," adding, "There are actually contents under discussion." A Megabox official also said, "We always keep collaboration with OTT in mind. Since we aim for high-quality content, our directions are similar," adding, "If OTT provides content that requires large screens and optimal sound quality, we could be good partners." A CGV official expressed a positive attitude toward collaboration with OTT but said, "Some adjustment of the holdback period is necessary first."

Director Bong Joon-ho foresaw this trend early when releasing "Okja." He said, "I signed the contract with Netflix with the agreement that the film would be released in theaters, so I was reassured," adding, "(Although there were incidents such as the Cannes Film Festival establishing a principle that films entering the festival must be distributed in French theaters,) eventually, everything will coexist." Ted Sarandos, current Netflix co-CEO who was present, shared the same view: "It is most important to give movie lovers various choices through both theaters and OTT. (OTT and theaters) are not mutually exclusive."