A key upshot of the state visit of South Korea’s President, Yoon Suk Yeol, to the United States around the end of April was the announcement by Netflix CEO Ted Sarandos of the investment by the live streaming giant of $2.5 billion over four years in South Korean content for one of the world’s top content aggregators.
AFP reported from Seoul on April 25, what could be the largest commitment of Netflix in content development and is expected to further accelerate the transformation of the television/video industry. But perhaps more important is that the Netflix commitment will also affirm, per AFP, the enviable role of South Korea as a “global cultural powerhouse in recent years.” AFP gives some of the credit for this “explosive success” to the Oscar-winning film Parasite and the hit Netflix series Squid Game.
In a statement given to AFP, Sarandos said: “Netflix is delighted to confirm that we will invest $2.5 billion in Korea including the creation of Korean series, films, and unscripted shows over the next four years. The investment plan is twice the total amount Netflix has invested in the Korean market since we started our service in Korea in 2016.”
Sarandos added, “Netflix had great confidence that south Korea’s creative industry would continue to tell great stories,” pointing to the recent success of global hits such as The Glory and the reality show Physical 100. The former is the story of a vengeful woman who hatched a plan to get back at people who made life in high school hellishly unpleasant for her. Physical 100 is a reality competition show which lives true to its name of extremely demanding physical competitions.
Sarandos continues with justified bullishness to rave about what lies at the end of this gigantic deal, the importance of quality content. “It is incredible that the love towards Korean shows has led to a wider interest in Korea, thanks to the Korean creator’s compelling stories. Their stories are now at the heart of the global cultural zeitgeist.”
While Sarandos has heaped praises on Korean creativity and the latest export earner of the world’s 10th largest economy, what is clearly the reason for this huge investment is “we’re in the market for content. And extraordinary content is what television, newspapers, magazines and all media are all after.”
Netflix reports that Korean content, whether K-dramas or game shows, has taken the world by storm with over 60% of Netflix viewers watching a Korean show in 2022, which the AFP states are company data.
As the Korean example obviously shows, content is key to value creation. That’s a reality. But hand in hand with that reality is the fact that, as pointed out by John Hall in the Forbes article “From TV to Digital Media: How Technology Changes Development,” “Today’s content consumers make up some of the most powerful audiences that most brands have ever seen. They dictate the content, where you publish it and how you distribute it… Technology has empowered audiences to take control of conversations and the messaging. They have the power to research, advocate, share ideas and hold leaders and brands accountable.”
The power of content (which influences and is influenced by consumers) has created a situation where platform does not make that much difference.
To have a better understanding of the evolution of content and how it has achieved the position of primacy in the video/television industry, it might be informative to briefly trace the history of change of the television industry based on various accounts. One such source is “The Value of Content” by Liberty Global.com.
According to Liberty Global, content was first recorded on film, then on videotape, and later on, on digital media. Content was delivered via live broadcasts, then cable, satellite, and online platforms. Content was consumed in a variety of ways: via television sets, computers, tablets, and mobile phones. These changes have brought new players with new business models to the landscape. But through all of these changes the fundamental structure of the industry has remained relatively constant.
Liberty Global adds that the most fundamental change in the television industry was the evolution from one value chain, Free to Air (FTA), to two value chains, FTA and subscription TV. Content creators and rights holders provide programming to and package content into channels for so-called linear consumer viewing that, for most part of the day, are locked into the channel. Distributors then deliver the content to TV sets and other viewing devices. Liberty Global notes that each of these roles within the value chain has, for the most part, retained its key relationship with others and has thrived in the face of all this change.
One change stimulus is the shifting consumer landscape which is slowly being dominated by the millennials or Gen Y, traditionally identified as that portion of the world population born in the period 1982-1994 and to whom technology is said to be part of their everyday lives, and post-millennials or Gen Z (born at the turn of the century), who, according to some accounts, “arrived with a tablet and smart phones under their arms and are expected to take the lead in a few decades.” How they affect the dynamics of the video industry deserves one or more columns.
At this time, it is instructive to bear in mind that, as pointed out by Liberty Global, those who own and control content will help steer the direction (or change in the industry) from one of steady evolution but likely to a more revolutionary pace. And to stay relevant, and to continue to thrive, industry participants (networks, distributors and aggregators, etc.) need to change in fundamental and, most likely, in unfamiliar ways.
Without diminishing the role and casting aspersions on the talent and competence of network managers and strategists and studios, it may be worthwhile to be mindful of the point raised by Liberty Global, that whatever ecosystem or business model one employs, FTA, subscription TV, content will remain at the core of these ecosystems. Data from several years ago, the latest we could access, shows that 36% of total industry value went to content creators and rights holders, and 34% went to broadcast networks.
Philip Ella Juico’s areas of interest include the protection and promotion of democracy, free markets, sustainable development, social responsibility and sports as a tool for social development. He obtained his doctorate in business at De La Salle University. Dr. Juico served as secretary of Agrarian Reform during the Corazon C. Aquino administration.
