GUEST COLUMN: South Korea creating synergy between cinema and VOD

In the early 2000s, the South Korean entertainment industry, including music and films, experienced a slump.  But, as the years have progressed, both sectors have grown steadily to become global superpowers in their own rights, experiencing unprecedented levels in sales and developing an audience base all around the world.

Today, South Korea has established a reputation as a leading innovator in both technology and creativity. Aside from top technology brands like Samsung and LG, the country has successfully exported K-Pop and K-drama to millions of households internationally.

So what can we learn from Korean innovation, especially with regard to the film industry? Well for one thing, South Korea could be considered a leader in demonstrating how a symbiotic relationship can exist between traditional cinemas and online day-and-date releases.

The Korean film industry has experienced a rapidly growing digital online market, with IPTV and VOD (video-on-demand) consumption growing from $87.5m in 2009 to $263.7m by the end of 2013, according to the Korean Film Council (KOFIC).

The Korean VOD market, which was previously an ancillary market for film distribution, has successfully stepped up to be recognised as an equally important distribution channel as theatrical release in terms of marketing and distribution.

Production companies and distributors saw the ripening of this previously ancillary market to a full bloom commercial arena for growth and new untapped opportunities.

One such opportunity was the possibility of providing increased integrated market data, including information on revenue from digital distribution, which increasingly helps production companies to better plan their next project and to direct their marketing strategies.

South Korea VOD

“The top three Korean VOD service providers are KT, SKT and LG U+, with joint sales of $266 million”

The rapid growth rate of the Korean VOD market became even more apparent in 2015, as total subscriber numbers for TV VOD and internet VOD increased to 19.22 million, which is made up of 11.62 million for IPTV (internet protocol TV) and 7.6 million for cable TV respectively. The top three Korean VOD service providers are KT, SKT and LG U+, with joint sales of $266m, 67.7% of which is from the VOD sales and 32.3% from cable TV VOD.

Although cinemas continue to be a strong distribution channel, popularity in VOD among mass Korean consumers is on the rise. In 2014 to 2015, at 217 million people, the number of cinema attendees in South Korea increased by 1%. It is the highest on record and reached over 200 million patrons three years in a row. In the same year, 68 Korean films were released through IPTV, increasing by 51.1% over 2014.  Foreign films released via IPTV also increased by 18.1% with 533 films on record. In total, IPTV providers served 12.49 million subscribers and this was estimated to increase to 13 million by March 2016.

In particular, the popularity of content on VOD can be seen as dependent on the price and genre. Day-and-date releases, whereby a film is released online the same day as or shortly after its release in cinemas, are approximately priced at $10 per film in Korea. The price gradually decreases to around $4 per film a year after its cinema release. Generally, Korean day-and-date releases tend to happen four to six weeks after its cinema release and whilst the film is still playing in 50 screens or more.

Interestingly, Korean VOD sales and theatrical hits are still closely intertwined. KOFIC stated that in 2013, films that received over 3 million cinema admissions still accounted for 29% of VOD sales, up from 23.9% the year before. Similarly, in 2013, films that received between 1 million to 3 million cinema admissions accounted for 23.6% of VOD sales, a fall from 26% in the previous year. Whilst South Korean box office results still strongly impact the VOD market, this indicates there is still clearly more room for online distribution to serve as the channel to showcase the diversity of content from around the world.

“Amidst the ongoing global outcries of cinemas facing threats from VOD, South Korea has been an exemplary leader at showing how both channels can co-exist side by side.”

The Drivers Behind the Success of Korean VOD

A driving factor behind the success of the Korean VOD industry has been its innovative mobile technologies and connectivity, as a country with one of the best bandwidth infrastructures and fastest internet speeds in the world. South Korea boasts nearly 99% coverage for Long Term Evolution (LTE) networks. Commuters in Seoul can seamlessly stream and surf content on their mobile devices.

The shift to cloud-based apps and services have had a huge effect on Korean networks as demand for data increased. This demand has pushed Korean telecom networks to create Long Term Evolution Advanced technology known otherwise as LTE A, which carries 10 MHz and 20 MHz bandwidth using two carriers. This advanced mobile innovation allows for a maximum download speed of 225 Mbps. It takes a Korean viewer only 28 seconds to download a full-length movie on their mobile devices.

Another important factor has been the increased crackdown on illegal online activities in South Korea, particularly since the enforcement of the Three Strikes Copyright Law in 2009. In 2013, 468,446 users were served takedown notices in total and this resulted in the shutdown of 408 website accounts. The initial target of the Three Strikes policy was only 1,000 people who engaged in massive volumes of illegal downloading.

Since then internet users and human rights activists have come out to criticise these laws as abusive to a user’s basic rights to culture and information. Although the South Korean regulatory environment must still get the balance right between decreasing illegal online activities and protecting basic rights, without doubt, these tightened measures have resulted in a public turning toward legal channels to access their content.

Emulating South Korean Synergy Between Cinema and VOD

Amidst the ongoing global outcries of cinemas facing threats from VOD, South Korea has been an exemplary leader at showing how both channels can co-exist side by side. South Korean filmmakers and distributors have demonstrated that they are able to capitalize on this online trend. Increasingly, there are South Korean VOD releases of films that never received theatrical releases generating strong profit.

South Korea has taught us that digital distribution does not have to be seen as a disruptive change or as a threat. With the right infrastructure support and regulatory frameworks, and an understanding of how cinema and VOD have the potential to reach different types of audiences, South Korea is leading the way in showing how a synergetic and not just symbiotic relationship can exist between cinema and digital distribution.

Weerada Sucharitkul is co-founder of global VOD platform FilmDoo, which streams movies from all over the world:

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Chime’s interview with Weerada: FilmDoo co-founder, Weerada Sucharitkul