The Dark Side of Rapid Growth: Collapsing Production Base [Cracks in the Webtoon Industry]

① Production Field Struggling to Keep Up with Growth
Market Expands, but Soaring Production Costs and Disrupted Reinvestment
Segmented Processes and Fixed Cost Burden... Shaking the Ecosystem

Visitors in front of the Webtoon Entertainment Exhibition Hall at New York Comic Con Photo by Yonhap News

The domestic webtoon industry has been the fastest-growing content sector over the past six years. The market size has expanded from 379.9 billion won in 2017 to over 2 trillion won last year. With platforms expanding overseas, Korean webtoons have attracted a global readership, and the creation of secondary works such as videos and games has also gained momentum.

On the surface, Korean webtoons are already a globally competitive export industry. In 2023, comic exports reached 177.95 million dollars, a 63% increase from the previous year. Korean companies secured a solid market share, accounting for more than half of global industry profits.

However, the production field-the foundation of the industry-has not kept pace with this growth. The main reason is the bloated production cost structure. Webtoon production has shifted from a model where a single creator handled most of the work to a segmented process involving coloring, backgrounds, 3D modeling, and story development. As a result, the required workforce and costs have increased accordingly.

With the process becoming more complex, production periods have lengthened from 6 months to a year, to 1 to 2 years. Approximately 90% of total costs now consist of labor and outsourcing expenses.

Because it is difficult to predict which webtoons will become hits, larger production costs inevitably make investors more cautious. The fact that most production costs are fixed and hard to recover makes the situation even more challenging. One production company CEO stated, "As production costs rise, planning itself becomes more constrained. Even for basic processes, the number of people required has increased, adding to the burden. Readers' expectations have also risen, so the essential costs themselves have changed."

The industry's weak production base further compounds these challenges. 63% of domestic webtoon companies have annual sales of less than 1 billion won, and 88% have less than 10 billion won. Most operate at a loss and are not in a position to pay corporate taxes. Even though tax credit systems exist, in reality, most companies cannot benefit from them.

Lotte World Mall Transformed into a Webtoon Exhibition Hall Yonhap News

The revenue-sharing structure also weakens the ability of production companies and creators to reinvest. When a webtoon is adapted into an OTT series, a significant portion of the original IP's revenue goes to the platform. Another production company official noted, "Even if a series is successful, the actual share we receive is so small that we can't prepare for a follow-up season."

These structural limitations are also evident in creators' working environments. Most creators are freelancers or classified as business income earners, leaving them outside the social insurance system. The risks of overwork and burnout from long-term projects are recurring issues. If a project is suspended or left incomplete, the production company bears the loss, making it difficult to try new things and ultimately causing the market to concentrate on genres with proven demand.

The first step to resolving these complex problems is to establish institutional mechanisms that support the production base. Major countries use tax support as a key policy tool.

For example, Quebec offers a refundable tax credit of up to 40%, while the UK and France provide credits of around 30%. These policies demonstrate the strategic focus on developing digital content production as an industry. Although Korean webtoons are leading the global market, the production structure and reinvestment base have not grown in tandem.

Starting next year, the government will introduce tax credits for webtoon production costs. The tax credit rate will be 10% for large and medium-sized companies and 15% for small businesses. The aim is to restore the positive reinvestment cycle disrupted by rising production costs and to prevent the industry's foundation from being shaken.

Choi Hwiyoung, Minister of Culture, Sports and Tourism, is speaking at an on-site meeting in the field of comics and webtoons held on September 19 at the National Museum of Modern and Contemporary Art, Seoul, Jongno-gu. Photo by Yonhap News

However, given the current structure in which many companies are operating at a loss, there are concerns that tax credits may not be practically applicable, highlighting the need for more effective measures. In this regard, a recent report published by the Korea Creative Content Agency, titled "A Study on Improving the Tax Support System for the Webtoon Industry," recommends considering supplementary measures such as refundable tax credits so that even small-scale production companies can benefit.

Yeom Jeongwan, Senior Researcher at the Future Policy Team of the Korea Creative Content Agency, stated, "To enhance effectiveness, refundable tax credits that supplement liquidity regardless of profitability should be implemented in parallel. This would provide immediate cash flow to small-scale production companies with unstable revenues, reducing investment risk." He added, "Tax support that stabilizes the production base is an essential condition for maintaining global competitiveness."