{"id":2206689,"date":"2024-10-04T11:55:31","date_gmt":"2024-10-04T02:55:31","guid":{"rendered":"https:\/\/koreapro.org\/?p=2206689"},"modified":"2024-10-07T18:51:28","modified_gmt":"2024-10-07T09:51:28","slug":"south-korean-dramas-face-rising-costs-as-streaming-giants-dominate","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2024\/10\/south-korean-dramas-face-rising-costs-as-streaming-giants-dominate\/","title":{"rendered":"South Korean dramas face rising costs as streaming giants dominate"},"content":{"rendered":"

Even before Netflix\u2019s global hit \u201cSquid Game,\u201d South Korean dramas (K-dramas) had been enhancing the country\u2019s cultural influence internationally. However, despite their rising popularity, the industry has faced a sharp production decline, sparking concerns about its sustainability.<\/span><\/p>\n

Media experts warn that the rigidity of drama production and the disruptive influence of over-the-top (OTT) platforms \u2014 media services that deliver content directly over the internet \u2014 could lead to further instability in the industry.<\/span><\/p>\n

PRODUCTION DECLINE IN 2023<\/b><\/p>\n

In 2023, the K-drama production sector experienced a downturn, reversing years of growth. According to the Korean Drama Production Association, 141 dramas were produced in 2022, but that number <\/span>dropped<\/span><\/a> to 123 in 2023, raising alarms about the industry\u2019s health.<\/span><\/p>\n

Yoo Su-jung, a researcher from the KBS Media Research Center, noted that while the media industry has grown compared to a decade ago, many see the drop in production as a crisis. The growing influence of OTT platforms has only added to the challenges faced by traditional broadcasters.<\/span><\/p>\n

\u201cBack in the 1990s, there was only terrestrial broadcasting. But then we saw the emergence of cable TV and IPTV, and they\u2019ve all expanded Korea\u2019s broadcasting industry significantly,\u201d Lee Yong-suk, a former producer at broadcaster SBS, told <\/span>Korea Pro<\/span><\/i>.<\/span><\/p>\n

Lee added that Japan and China initially played a key role in financing Korean dramas, with the latter <\/span>investing<\/span><\/a> to secure <\/span>overseas distribution rights<\/span><\/a> and for product placement advertisements.<\/span><\/p>\n

However, Chinese support waned after diplomatic tensions, such as in 2017 when Beijing imposed <\/span>unofficial sanctions<\/span><\/a> on Seoul for agreeing to host U.S. Terminal High Altitude Area Defense anti-missile batteries.<\/span><\/p>\n

That was when OTT platforms like Netflix stepped in, offering critical financial support. Lee pointed out that OTT platforms, including Netflix, became significant investors in Korean content as broadcasters struggled with reduced advertising revenue.<\/span><\/p>\n

Lee noted that while these partnerships have provided essential funding, they\u2019ve also driven up production costs, which has reduced the number of dramas produced annually and limited job opportunities for industry professionals.<\/span><\/p>\n

\"\"

An illustration of a movie set | Image: Korea Pro<\/em><\/p><\/div>\n

IMPACT OF RISING COSTS<\/b><\/p>\n

As OTT platforms poured money into K-drama production, costs escalated. Yoo of the KBS Media Research Center told <\/span>Korea Pro<\/span><\/i> that while revenues from dramas cover production expenses, profits remain minimal.<\/span><\/p>\n

The shift in the advertising market has worsened this issue. Advertising revenue, the primary income source for broadcasters, has fallen dramatically. According to Yoo\u2019s <\/span>findings<\/span><\/a>, terrestrial advertising sales dropped to about $701 million (927.3 billion won) in 2023, down from over $756 million (1 trillion won) the previous year.<\/span><\/p>\n

The broadcasting industry, which grew at an average rate of 2.8% since 2014, saw revenue fall by $710.8 million (940.3 billion won) last year.<\/span><\/p>\n

Yoo added that <\/span>production costs<\/span><\/a> for high-quality dramas can reach up to $529 million (700 billion won) per series, a figure not matched by declining advertising revenues. Traditional broadcasters are particularly affected, with terrestrial broadcaster revenues dropping by 10.2% in 2023. This has led to a growing reliance on digital platforms like Netflix and Disney+ to secure funding.<\/span><\/p>\n

However, this growing reliance on OTT platforms for funding has come with its own set of challenges.<\/span><\/p>\n

Lee explained that the cost of producing dramas has skyrocketed, driven in part by the influence of OTT platforms. The migration of audiences to such platforms has further eroded traditional broadcasters\u2019 advertising revenues.<\/span><\/p>\n

As more viewers switch to digital platforms, advertising income from traditional media continues to shrink.<\/span><\/p>\n

RISING ACTOR FEES AND CONTENT DIVERSITY<\/b><\/p>\n

One of the major drivers of high production costs is the escalating fees for A-list actors. Researcher Yoo noted that lead actors often command up to half of a drama\u2019s production budget. This presents a significant challenge for domestic platforms, which find it difficult to compete with global OTT platforms willing to pay higher fees.<\/span><\/p>\n

For example, Netflix-backed productions have set new benchmarks for actor salaries, forcing domestic broadcasters to scale back their projects.<\/span><\/p>\n

These rising costs have reduced the number of dramas that are produced and limited diversity in content. Broadcasters now focus on high-budget productions with guaranteed success, leaving little room for experimental or niche dramas.<\/span><\/p>\n

Yoo pointed out that this financial pressure not only affects production numbers but also impacts content quality. The result is a \u201cwinner-takes-all\u201d market where only a few major productions thrive.<\/span><\/p>\n

\"\"

Streaming platforms installed on a smartphone, Oct. 4, 2024 | Image: Korea Pro<\/em><\/p><\/div>\n

NETWORK FEES AND REGULATORY CHALLENGES<\/b><\/p>\n

Another significant challenge is the disparity in network usage fees between domestic and international OTT platforms. Korea Communications Commission (KCC) chairman Lee Jin-sook <\/span>pointed out<\/span><\/a> that while local services like Wavve and Tving pay network fees, global players like Netflix do not.<\/span><\/p>\n

With Netflix earning significantly more revenue in South Korea (<\/span>$617.6 million<\/span><\/a> this year) compared to domestic firms which earn about $187.5 million (250 billion won) annually, this disparity has placed additional financial strain on domestic platforms.<\/span><\/p>\n

Lee of the KCC suggested that a <\/span>proposed merger<\/span><\/a> between Wavve and Tving could help ease financial pressure on the domestic industry by increasing their combined platform\u2019s monthly active users to around 9.3 million, allowing them to better compete with global giants.<\/span><\/p>\n

However, domestic platforms still face strict regulations and significant losses, limiting their ability to innovate and compete effectively.<\/span><\/p>\n

In response, some lawmakers have <\/span>proposed<\/span><\/a> amendments to require global streaming platforms to contribute to the Broadcasting Development Fund, like Democratic Party lawmaker Cho In-cheol who suggested that the Ministry of Science and ICT collect fees from major telecom companies based on their traffic or user numbers, up to 1% of their revenue from the previous year.<\/span><\/p>\n

Proponents argue that this measure would ensure these platforms contribute fairly to the local industry.<\/span><\/p>\n

FUTURE OF K-DRAMA PRODUCTION<\/b><\/p>\n

As South Korea\u2019s media industry faces rising production costs, reduced advertising revenue and regulatory challenges, the future of K-drama production remains uncertain. The increasing dominance of OTT platforms has reshaped the market but at the cost of reduced content diversity and fewer job opportunities.<\/span><\/p>\n

Strategic mergers, such as the proposed Wavve-Tving merger, offer a potential solution for domestic platforms to regain competitiveness. However, as long as global platforms continue to dominate the market, local broadcasters will need to find new ways to secure funding and manage rising costs.<\/span><\/p>\n

Both Yoo and Lee expressed concern about the sustainability of the current model. Lee warned that if the current crisis is not addressed, it could weaken the role of broadcasters in driving K-content\u2019s global success. The next few years will be critical in determining whether South Korea\u2019s media industry can adapt to these challenges or whether it will face further decline.<\/span><\/p>\n

Edited by John Lee<\/span><\/i><\/p>\n

Business & Economy<\/span><\/a>Culture & Society<\/span><\/a>Technology & Cyber<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"

Even before Netflix\u2019s global hit \u201cSquid Game,\u201d South Korean dramas (K-dramas) had been enhancing the country\u2019s cultural influence internationally. However, despite their rising popularity, the industry has faced a sharp production decline, sparking concerns about its sustainability. Media experts warn that the rigidity of drama production and the disruptive influence of over-the-top (OTT) platforms \u2014 […]<\/p>\n","protected":false},"author":10407,"featured_media":2206690,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21],"tags":[24,25,29],"class_list":["post-2206689","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis","tag-business-economy","tag-culture-society","tag-technology-cyber"],"yoast_head":"\nSouth Korean dramas face rising costs as streaming giants dominate - Korea Pro<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2024\/10\/south-korean-dramas-face-rising-costs-as-streaming-giants-dominate\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South Korean dramas face rising costs as streaming giants dominate - Korea Pro\" \/>\n<meta property=\"og:description\" content=\"Even before Netflix\u2019s global hit \u201cSquid Game,\u201d South Korean dramas (K-dramas) had been enhancing the country\u2019s cultural influence internationally. 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