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A scene from Netflix's Korean original series "Squid Game" which found worldwide success in 2021 / Courtesy of Netflix |
Overheated competition among OTTs during pandemic begins to backfire
By Lee Gyu-lee
When Netflix's Korean original series "Squid Game" became a global sensation in 2021, as well as becoming the streaming platform's biggest hit, it started a major boom in the popularity of Korean series.
However, Korea's hot streak has begun to wind down, driving the K-drama industry into crisis. Many streaming services and networks are starting to tighten their belts and hit the pause button concerning the overflow in series production, leaving many series in stasis or shelved after production.
Broadcasters and networks are not reserving weekday prime time slots for series anymore. The nation's three major broadcasters ― SBS, MBC and KBS ― all stopped airing Wednesday-Thursday series, with tvN following suit in April.
"Networks are only opening one two-day slot (per week), like Friday-Saturday or Saturday-Sunday for series, and have closed down the weekday ones. There are a lot of series that were canceled during production," a series director at a local broadcaster told The Korea Times.
"Among the projects my broadcaster is considering picking up, there are quite a few that were being developed at a different network but were canceled midway."
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A scene from Tving's original series, "Bargain" / Courtesy of Tving |
According to Korea Creative Content Agency, about 160 series were made in 2022, which was the highest number in the last three years. However, this year, only about 100 series were confirmed to proceed to the production stage.
The biggest reason for such a decline is the financial struggles that over-the-top (OTT) platforms faced. When the COVID-19 pandemic led people to turn to streaming services for entertainment, the industry hit a dramatic boom with global and local players vowing massive investment to create original content and thereby gain their footing in the market. But when the pandemic was over, the overheated competition started to recede.
"In the earlier stage of (OTT market's) growth, all OTTs made aggressive investments to compete in securing their own content. In that way, large production budgets were offered to Korea's production industry. But as the OTT competition intensified, profitability decreased," pop culture critic Ha Jae-geun said.
"So now they are put in a situation where they can't make aggressive investments like in the past. Hence, they are cutting down their budgets."
Two of the major homegrown streaming platforms, Tving and Wavve, saw substantial operating losses last year.
Tving saw about 119.2 billion won in operating losses in 2022, whereas it was a little over 76 billion won the previous year. During the first quarter of this year, the platform recorded 38.6 billion won in operating losses, which is double the figure it saw a year before ― 15.7 billion won.
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Lee Tae-hyun, right, CEO of local streaming service Wavve, speaks during a press conference for Wavve Content Lineup, in Yeouido, Seoul, in this April photo. Courtesy of Wavve |
Wavve had a 121.3 billion won operating loss last year, which is more than double the loss it saw the year before ― 55.8 billion won. The platform, which announced its 1 trillion won investment plan through 2025, said it has decided to take a more lower-budget-friendly approach in creating its content.
"We're at a time where we need to reassess our investments strategically," Wavve CEO Lee Tae-hyun said during the company's press conference in April. "We need a careful review and selection (of future content), which would be to work more cost-effectively."
Streaming services are not the only ones going through financial hiccups. Media giant CJ ENM also saw a huge deficit in its series and movie division during the first quarter of this year, leading to an operating loss of 50.3 billion won while it had 49.6 billion won in operating profit a year before. The company's music and commerce division saw a surplus in its operating profit, yet it was not enough to make up for the deficit in the media platform, series and movie business.
With streaming platforms taking a more cautious approach in spending their funding on content production, the local networks are also suffering from the fallout.
"The production cost insanely rocketed with OTTs pouring money into it. Actors' salaries went up enormously and so did the staff's," the director said. "We're in a situation that we can't afford without the investment from streaming platforms. So when the platforms downsize the funding, the networks discard the projects with which they are not sure of recouping the expenses," he said, adding that the networks are eyeing the global market as a way to profit from a series.
"Even with the same salary, actors who have more selling power abroad will get more offers (for a role) … As it became critical to recoup (the production cost) through overseas sales, the series that show lower chances to get reimbursed are being canceled."
Critic Ha explained that in order to survive the shrinking market, the players need to focus on creating better-quality series.
"There's nothing we can do about the market's reduction. So it all comes down to enhancing the quality of the content to survive," Ha said.