Netflix has had great success in Korea. But recently, the streaming giant has run into some political troubles in the country.
This week the Korean People Power Party, whose candidate recently won the Presidential election, took aim at Netflix.
The People Power Party claims the company is causing an outflow of Korean “national wealth” by overstating its sales cost. And party leaders say that Netflix is “free-riding on domestic networks,” according to local news outlets, such as Business Korea.
New Street Research analyst Chris Hoare said in a note that lawmakers in Korea are concerned that overseas content providers such as Netflix and Google generate around 80% of all internet traffic in Korea, and they are not paying for this, with the majority of the streaming services’ profits flowing overseas.
“There appears to be strong bipartisan consensus on this issue in Korea, and multiple bills have been tabled in parliament to restrict, or make OTTs pay for, network use,” wrote Hoare. “Many lawmakers are pushing for the swift passage of these laws.”
Netflix has also been involved in a court battle with SK Broadband over whether it should pay fees to internet service providers due to its streaming application’s heavy usage on their networks. A Seoul court ruled that Netflix must pay SK Broadband more than $22 million for 2020 alone. But Netflix Korea is appealing the ruling.
Netflix first launched in Korea in 2016. Since then, it has made more than 80 shows and films.
The company’s success in Korea has recently been catapulted by the show “Squid Game,” which even made it to #1 on Netflix U.S. Squid Game is a survival drama series where 456 players, all of whom are in deep financial debt, risk their lives to play a series of deadly games for the chance to win a massive monetary prize.
In a blog last September, Netflix points out that its involvement in Korea helps the country’s economy.
“To get an accurate third-party assessment, we partnered with global consulting firm Deloitte to estimate the socio-economic impact of Netflix on the Korean creative ecosystem since we started in 2016,” said the blog.
According to the Deloitte report, Netflix’s investment in content production in Korea has contributed almost KRW 5.6 trillion won (about $4 billion) to the country’s GDP across related fields, from publishing, to webtoons to consumer goods. In addition, the report found that Netflix helped create more than 16,000 jobs.
In terms of Netflix paying for use of Korean networks, New Street Research believes that other Asian countries are following the debate closely, and could propose laws to make OTTs pay for network access in their countries.
While this is bad news for Netflix, Hoare wrote, “Clearly any movement to break net neutrality or make OTTs pay broadband networks for network access would be very positive from a telco perspective.”