Abstract
International streaming services such as Netflix are expanding aggressively across national borders and, in the process, changing local television ecosystems around the world with respect to production, distribution, and audience. Studies of the global media industry study have documented this phenomenon, and there has been considerable recent interest in the distribution practices of Netflix as it penetrates new regional markets. This study contributes a case study of South Korea (hereafter simply “Korea”), which is the largest exporter of television programming in East Asia. After Netflix’s arrival in Korea in 2016, it is introducing new ways of collaboration with existing media companies. I investigate the production budget structure of the television series Mr. Sunshine which received an unprecedented scale of investment by Netflix. Specifically, my research question concerns how the direct investment by Netflix in production houses is changing the conventional business model for Korean production companies. My focus is in particular on Netflix’s recent acquisition of “originals” from a newly conglomerated Korean production house known as Studio Dragon. My approach involves aggregating cost and profit data in order to compare and contrast the conventional business model for independent production studios with Studio Dragon’s sales model for partnering with Netflix. My evidence suggest a stark contrast between the conventional business practice of the independent Korean production studios on the one hand and the recent development of Studio Dragon on the other in terms of growth in scale and sales. I argue that Netflix’s direct investment in local production studios is subverting the power relations between legacy television and production studios, thus changing production companies’ status in the Korean media structure. The goal of this chapter is to shed light on the newly introduced business practices of Netflix and analyse its cultural implications of US company’s global media influence on the production culture in Korea.
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Notes
- 1.
All financial figures in this chapter are in US dollars (USD) unless otherwise specified.
- 2.
Large family-owned industrial conglomerates in South Korea.
- 3.
Korea’s largest conglomerate entertainment company, with business in cable, music, advertising, digital platforms, and film, CJ ENM owns a 91% of share of Studio Dragon (Cho 2018).
- 4.
By “Hallyu-scale,” I refer to large-scale Korean TV series produced with international audiences in mind, meaning that a substantial portion of the production costs is covered by international sales or co-productions.
- 5.
The implementation of rules by the US Federal Communications Commission in 1970 prohibiting financial interest in television programs beyond their first run and the creation of in-house syndication arms, especially in the domestic market, limited the amount of prime-time programming that networks could produce themselves. The aim was to increase programming diversity and limit the market control of the three broadcast television networks; see http://people.stern.nyu.edu/wgreene/entertainmentandmedia/FIN-SYN-RULES.pdf.
- 6.
The general “must carry” channels on pay television were launched in December 2011 as part of the broadcasting deregulation effort to allow news companies to own television channels. The four channels granted licensing were JTBC, Channel A, MBN, and TV Chosun.
- 7.
E.g., the 2016 ban on Korean cultural products in China and “Hyum (Hate) Hallyu” in Japan.
- 8.
The Nielsen data for Mr. Sunshine (tvN, 2018) are: pilot 8.9%, finale 18.1%; for Guardian: The Lonely and Great God (tvN, 2016~2017): pilot 6.3%, finale 20.5%; for Descendants of the Sun (KBS, 2016): pilot 14.3%, finale 38.8%.
- 9.
International Financial Reporting Standards, which include published accounting data for IPOs.
- 10.
The ban was intended to retaliate against Korea for deploying the US THAAD missile system as a defense against North Korea, which China interpreted as a threat, in July 2016 (한한령, 限韓令).
- 11.
Bae Yong-joon’s role in Winter Sonata made him immensely popular in Japan and one of the first Hallyu stars.
- 12.
Youku Tudou (Alibaba), iQiyi (of which Baidu owns 17%), and Tencent account for 70% of China’s OTT market (Yeolil 2018).
- 13.
An incentive payment that, usually, gives actors a percentage of ticket sales after a film breaks even; in this case, the additional licence fee paid to NEW depended on the viewership numbers on iQiyi.
- 14.
NEW and KGCS (a KBS affiliate) joined forces to found Special Purpose Company (SPC) Descendants of the Sun Culture Business Company (태양의 후예 문화 산업 전문 회사) and split the profits 60 (NEW)/40 (KGCS) (Ha 2016).
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Noh, Hj.S. (2022). Reconfiguring the K-Drama Business Model: The Co-production of Mr. Sunshine by Netflix and Studio Dragon. In: Samuel, M., Mitchell, L. (eds) Streaming and Screen Culture in Asia-Pacific. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-09374-6_4
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