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Netflix effects in the local OTT platform industry

Netflix’s influence can be identified in the local OTT platform industry itself. Due to the increasing role of Netflix, telecommunications and cultural firms in many parts of the world have developed their own local distribution and exhibition systems, including OTT services and collaborations with global OTT platforms, which fundamentally shift the traditional norms of cultural distribution and exhibition. With Netflix beginning to take off domestically, local entertainment companies are taking steps to address the increased competition (Stangarone, 2019).

Local OTT services pay attention to the fact that Netflix has been at the forefront of algorithmically powered recommendations. Since House of Cards, the OTT giant Netflix has developed an increasingly complex stack of machine-learning algorithms, including an open source tool, to enhance system recommendations. There is no doubt that the most successful startup cultural firms, including local OTT platforms begin with Netflix-style algorithmic programming built into their software architecture from the outset. Al is in their DNA (Tercek, 2019). Netflix is at the forefront of applied Al in video delivery. Netflix utilizes Al to monitor bandwidth in the network. It also uses Al to monitor whether any particular subscribers share their

Netflix transforming global cultural norms 89 passwords with others like friends and relatives. Furthermore, Al is able to aid monetization of video by improving the environment for advertising (Tercek, 2019).

In the Korean OTT market, as Netflix-funded cultural products, including Okja (2017) and Kingdom (2019), achieved tangible successes and visibility, the local OTT industry has faced a steep battle against Netflix. In Korea, a handful of firms, such as POOQ (owned by three network channels, KBS, MBC, and SBS), Tving (owned by CJ E&M), and Oksusu (owned by SK Broadband) were the major players until recent years (Lee and Song, 2019). Due to Netflix’s rapid penetration in the local market, however, these corporations, under favorable government policy, decided to make a big OTT firm, challenging global streaming giants, including Netflix in 2019, which consequently drove the merger of POOQ and Oksusu.

Regardless of the concern of market monopoly, the Korea Fair Trade Commission allowed the merger of these two local OTTs in August 2019. The name of the new service Wavve, partially symbolizes the Korean Wave. Wavve might have 14 million customers (Kim, M.G., 2019). This new OTT platform focuses on Al-driven services, while investing much money to secure cultural content in order to compete against Netflix. Wavve announced that it incorporates new digital technologies, such as 5G, Al, and big data. For example, Wavve provides a multi-view function to watch several scenes with no interruption, which means that it develops the quality of visual images and audience-oriented recommendation services with the help of Al and algorithms (Lim, J.H., 2019). One of the major stakeholders of Wavve is SK Broadband, which has developed several Al-related new technologies, and therefore, Wavve is expected to offer immersive media services based on SK Telecom’s advanced VR and Al technologies to customers (Choi, M.H., 2019). Locally based OTT platforms influenced by Netflix “turn to advanced computer science to help their customers more easily find movies and television shows they like to enjoy.” Consequently, “an advanced user interface requires the power of Al and machine learning, or applying Al to give systems the ability to learn and improve from their experiences without specifically programming them” (Frankel, 2018, 10).

The biggest change after Netflix’s surge in Korea is an attempt made by some of the big content firms to band together and present a united front to Netflix. Fending off Netflix, let alone becoming a regional player, requires a continued shift by Korean producers into content of better and higher quality. Prior to the merger, the larger of the two streaming services, Oksusu, spent only $10 million on original content. The hope for the new joint venture is to increase the amount spent on streaming content to $180 million. In the end, a united front by the Korean entertainment industry blunts Netflix’s ambitions; however, in the long run, it might be against the spread of Korean content more generally (Stangarone, 2019).

CJ E&M also teamed up with broadcaster JTBC to introduce an OTT media service in September 2019. The decision was made a day before the official launch of the homegrown OTT platform Wavve. CJ will be the majority shareholder, and JTBC becomes the second-largest shareholder of the joint venture. The service, which is scheduled to launch in early 2020, will offer content from two companies (Jin, MJ., 2019). Consequently, as of September 2020, several local OTT platforms, including Watcha, Wavve, CJ E&M’s Tving, and Korea Telecom (KT)’s Seezn, are competing against each other in the domestic cultural market. The new move explained above is crucial, as content producers and distributors need to

form a virtuous cycle of reinvesting profits earned from various platforms on new content. The recent series of collaborations reflect domestic companies’ growing recognition of online streaming service on back of the growing influence of global media giants like Netflix.

(Jin, MJ„ 2019)

Of course, the conglomeration of domestic OTT platforms supported by the Korean government has not beaten Netflix, as this global OTT platform has continued to increase subscribers.

Under this circumstance, the Korean government wants domestic OTT service platforms to join forces and collaborate as much as they can to fight global video platforms. As part of this plan, in August 2020, Korea Communications Commission (KCC) chairman Han Sang-hyuk had a meeting with four local platforms and stated, “At this point, when foreign OTT platforms are establishing a strong presence in domestic market, cooperation among local companies is strongly needed. We should work together on a K-OTT that’s backed by strong support from the government.” Although the government did not force a merger among local platforms, it clearly signaled local platforms to merge to secure a better position against Netflix (Kim, J.M., 2020).

However, the recent mergers of local OTTs have brought new concerns in the Korean cultural industry, as this trend results in a lack of diverse voices. The existing OTTs, again, like POOQ, owned by three network channels, KBS, MBC, and SBS; Tving, owned by CJ E&M; and Oksusu, owned by SK Broadband, were already big giants, as they were owned and operated by the biggest players in Korean broadcasting and telecommunication. With the recent mergers, the local OTT market certainly represents an oligopoly, which hurts diversity. As the newly established mega OTTs will focus on a few commercial genres in both production and distribution, locally produced genres focusing on culture, history, and general people’s struggles will not be emphasized. As Kulesz (2018b, 83) points out, again,

The rise of big platforms may represent a risk for diversity, while also causing a growing drought of data in the creative ecosystem, which may seriously affect decision making on public policies and leave local creative actors defenceless—due to, among other things, the advance of Al, a tool that is beyond their reach.

In this light, it is not dicey to argue that Netflix’s recent rush in the Korean cultural industries works as a double-edged sword for many cultural producers. It is certainly good news for local entertainment firms, as they are able to find necessary funds from global digital platforms. However, it is not always positive, because it implies the possibility of the subordination of the Korean cultural industries to Netflix. America’s invasion in the OTT industry will continue, as other digital platforms, including Amazon Prime, Disney-!-, and Apple Play vehemently target the Korean market. In the U.S., the number of moviegoers in terms of admissions per capita has decreased, from 4.3 in 2009 to 3.7 in 2018 (Motion Picture Association of America, 2019), partially because of OTT services, including Netflix. The Korean exhibition industry has transformed its structure to make multiplex cinemas as is the case in the U.S.; however, as American multiplex cinemas have continuously lost their audiences, the Korean market will likely show a similar trend in the near future.

As such, Netflix has become one of the largest and most important OTTs for the non-Western countries’ cultural industries. The American platform influences the entire chain of audio-visual industries, and the local cultural industries’ fortunes have severely fluctuated in the early 21st century. The local cultural industry is fragile and shaky due to Netflix. Only a few years after its launch in Latin America and Asia, Netflix has already become a formidable force as a global OTT platform, causing local cultural industries to wobble. Netflix is not only shifting people’s watching habits, as people enjoy cultural content on mobile-based OTT services anytime instead of watching television programs when they air on TV for the first time, but it is also destroying the traditional norm of the local cultural industry. As Evens and Donders (2018, 1) argue, platforms have become “the dominant infrastructural and/or economic model in media, electronic communications and information, communication and technology (ICT) sectors,” and Netflix has certainly played a leading role in this platformization. Netflix has controlled the entire circle of the cultural industry, from production to distribution to exhibition, on a large scale to actualize its status as a global empire, which fundamentally transforms the local cultural industry.

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