
After disrupting the market for entertainment in the United States, Netflix is looking to do the same in South Korea. And domestic competitors are beginning to take notice.

Originally a DVD mail service designed to allow customers to order movies online and return them from the convenience of home, Netflix disrupted the traditional home video model that had sustained Blockbuster and other video rental stores. In time, it transitioned to streaming movies and television, disrupting how content was consumed and establishing itself as a major platform and producer of content.

Having succeeded in the United States, Netflix set off to expand abroad. It entered the South Korean market in 2016 and in a relatively short period of time has become a growing force in the domestic South Korean market, where it is reshaping media.

Its presence, however, hasn’t necessarily been welcomed by the local entertainment industry. Similar to its initial growth in the United States, Netflix works to license local content when it enters a new market. In South Korea, major players such as CJ E&M and SK Telecom, which controls the current dominant streaming service, turned down partnership requests, hoping to prevent Netflix from becoming a major player by denying it access to local content that South Koreans might want to stream.

This is similar to the tactic Naver took to keep Google at bay by making its content unsearchable by Google’s crawlers. While that worked in maintaining Naver’s dominance in South Korea, it remains a minor player in global search.

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However, not all South Korean entertainment firms refused to license content to Netflix. JTBC, for example, has licensed shows such as Man x Man, which runs on Netflix an hour after it airs on JTBC, and others such as Chef and My Fridge and Abnormal Summit, which air the next day. LG Plus, a local mobile carrier, has also partnered with Netflix in the hopes of increasing subscribers as South Koreans increasingly transition to consuming movies and dramas on mobile devises.

Despite these obstacles, Netflix has begun to take off in South Korea. According to recent data, subscriptions have grown rapidly over the last year, from less than a million to 2.4 million. With 200,000 to 300,000 subscribers signing up every quarter, Netflix it is projected to reach nearly 4 million subscribers as soon as next year and eventually become the largest streaming platform in South Korea.

Netflix’s success is being driven by its catalog of content, but also by the development of original Korean content, something local artists find appealing. Unlike many U.S. firms, which might try to adapt a show for the U.S. market, Netflix is committed to making shows for foreign domestic markets that are domestically authentic and then promoting those shows abroad. Some of the initial efforts include the international hit series Kingdom, a zombie series set during the Joseon dynasty, the variety show Busted, and Love Alarm, which is based on a popular South Korean comic strip.


But Netflix is also reshaping Korean dramas in another way – helping to promote Hallyu abroad in a way that perhaps no South Korean firm could. According to Kim Min-young, the director for original Korean content at Netflix, “Netflix is trying to become a channel to introduce Korean content to people around the world.”

With nearly global reach – China, Syria, and North Korea are the only markets not served by Netflix – it is helping to boost the global demographic reach of South Korean content. Based on one study that looked at films shown on Netflix, South Korea is the country with the 11th largest relative advantage from content being hosted by Netflix.

Platforms like Netflix help to boost the consumption of Korean movies and dramas by making them more accessible to foreign audiences. Unlike movie theaters, there is no barrier to Norwegians, Brazilians, or others sampling Korean movies, since all that is required is a subscription rather than the purchase of a movie ticket to see a Korean film in the theater. The algorithms used by Netflix will also help to develop new fans. Viewers who watch Mad Men, for example, might be recommended the Netflix original movie Okja because it’s in the same “taste cluster.”

Watching Korean content on Netflix for non-Koreans could become even easier in the future. Thanks to technological innovation, Netflix introduced a new translation program with the release of Kingdom that has improved the translation of Korean into other languages.

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Beyond making Korean content more readily available overseas, Netflix is looking to expand the boundary of what Korean content is domestically and internationally. In South Korea, Netflix is working to introduce standup comedy, while internationally it’s hoping to expand the perception of Korean dramas beyond romantic comedies to new genres such as mystery thrillers.

With Netflix beginning to take off domestically, local entertainment companies are taking steps to address the increased competition. KT, for example, is considering partnering with Japanese carrier NTT Docomo to take advantage of its ties to Disney, while also increasing its content of children’s programing and previously unreleased U.S. movies.

The biggest change, however, may be an attempt by some of the major firms to band together and present a united front to Netflix. SK Telecom, the Korean Broadcasting System, the Seoul Broadcasting System, and Munhwa Broadcasting Corporation are merging the two largest existing streaming services into what they hope will become the “Netflix of Asia.” The combined service will have 13 million subscribers in South Korea.

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Fending off Netflix, let alone becoming a regional player, will require a continued shift by South Korean producers into more and higher quality content. Prior to the merger, the largest of the two streaming services, Oksusu, only spent $10 million on original content. In contrast, Netflix spent $1.78 million for each episode of Kingdom. 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 entertainment industry in South Korea may blunt Netflix’s ambitions as successfully as Naver has Google’s, but it might also be against the long-run interest of the spread of Korean dramas more generally. It is the strong competitive threat from Netflix that has pushed the entertainment industry into committing more funding for the development of original streaming content. However, if they are successful in blunting Netflix, the dominance of a single streaming site in South Korea would likely lead to less creative Korean content rather than more.