Kakao, Naver to emulate Netflix's business model

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Kakao, Naver to emulate Netflix's business model


Two Korean IT firms to produce own video content and platform

By Jun Ji-hye

Naver and Kakao are looking to emulate Netflix's business model by producing their own entertainment content and setting up their own distribution channels to reach users, according to industry analysts Friday.

The analysts say the new business model sought by the Korean IT firms seems to be similar to that of Netflix, rather than that of YouTube, which puts together and offers content produced by businesses and individuals.

Netflix, the U.S.-based video service provider, has secured loyal customers by exclusively distributing its own content through its own platform, in addition to other movies, dramas and documentaries. The U.S. firm currently boasts more than 125 million members in 190 countries around the globe.

Kwak Kyu-tae, a professor of global culture business at Soon Chun Hyang University, said expanding into the content business was an inevitable choice for IT companies amid increased competition on mobile platforms.

"Companies have been aware of the fact that more and more users want an easier way to consume video content," he said. "In order to secure sufficient content, they cannot just buy it but need to produce their own. So they have no choice but to use strategies to produce this in addition to buying licenses from others, as Netflix does."

The professor added the strategy of Naver and Kakao were similar to those of Netflix as it will be difficult for them to attract user attention without original content.

In an effort to secure the resources necessary to produce its own content, Kakao has recently acquired shares of several entertainment management agencies of many big stars.

These include BH Entertainment, which manages actor Lee Byung-hun and actresses Han Ga-in and Han Ji-min; and Soop Entertainment whose roster includes actor Gong Yoo and actresses Jeon Do-yeon and Gong Hyo-jin.

The acquisition of these shares brings Kakao many influential actors and actresses. The company is seeking to additionally bring directors and writers to the firm to complete a system to produce its own content.

The company has also reorganized its content distribution platform by changing the name of its mobile content subsidiary from Podotree to Kakao Page.

Kakao Page, which entered the video on demand business in January, plans to actively explore new webtoons and web novels, and produce movies and dramas based on the intellectual copyright of popular webtoons.

"As the possibilities for content are infinite, we are looking at various methods," a Kakao official said. "When producing movies and dramas based on popular webtoons, business risks will be significantly reduced as well."

Naver is also focusing its capacity on video content, planning to launch a company dedicated to producing movies utilizing webtoons within the year.

"A new company will help an artist's intention be better reflected in a movie," a Naver official said, noting that it will also help create synergy between original content and movie production.

The nation's largest portal operator is also working to realign its Nstore unit in charge of content distribution.

The firm originally planned to spin off Nstore and merge it with Naver Webtoon, but reversed the plan July 27, saying, "We suspended the process to merge Nstore with Naver Webtoon in order to explore additional opportunities to create synergy and secure plans for a more flexible organization integration."

Instead, Naver is considering spinning off several businesses from Nstore, except for the e-book business, and establishing an independent company in November. Then, Naver will consider merging the new company with other subsidiaries.



Two Korean IT firms to produce own video content and platform

By Jun Ji-hye

Naver and Kakao are looking to emulate Netflix's business model by producing their own entertainment content and setting up their own distribution channels to reach users, according to industry analysts Friday.

The analysts say the new business model sought by the Korean IT firms seems to be similar to that of Netflix, rather than that of YouTube, which puts together and offers content produced by businesses and individuals.

Netflix, the U.S.-based video service provider, has secured loyal customers by exclusively distributing its own content through its own platform, in addition to other movies, dramas and documentaries. The U.S. firm currently boasts more than 125 million members in 190 countries around the globe.

Kwak Kyu-tae, a professor of global culture business at Soon Chun Hyang University, said expanding into the content business was an inevitable choice for IT companies amid increased competition on mobile platforms.

"Companies have been aware of the fact that more and more users want an easier way to consume video content," he said. "In order to secure sufficient content, they cannot just buy it but need to produce their own. So they have no choice but to use strategies to produce this in addition to buying licenses from others, as Netflix does."

The professor added the strategy of Naver and Kakao were similar to those of Netflix as it will be difficult for them to attract user attention without original content.

In an effort to secure the resources necessary to produce its own content, Kakao has recently acquired shares of several entertainment management agencies of many big stars.

These include BH Entertainment, which manages actor Lee Byung-hun and actresses Han Ga-in and Han Ji-min; and Soop Entertainment whose roster includes actor Gong Yoo and actresses Jeon Do-yeon and Gong Hyo-jin.

The acquisition of these shares brings Kakao many influential actors and actresses. The company is seeking to additionally bring directors and writers to the firm to complete a system to produce its own content.

The company has also reorganized its content distribution platform by changing the name of its mobile content subsidiary from Podotree to Kakao Page.

Kakao Page, which entered the video on demand business in January, plans to actively explore new webtoons and web novels, and produce movies and dramas based on the intellectual copyright of popular webtoons.

"As the possibilities for content are infinite, we are looking at various methods," a Kakao official said. "When producing movies and dramas based on popular webtoons, business risks will be significantly reduced as well."

Naver is also focusing its capacity on video content, planning to launch a company dedicated to producing movies utilizing webtoons within the year.

"A new company will help an artist's intention be better reflected in a movie," a Naver official said, noting that it will also help create synergy between original content and movie production.

The nation's largest portal operator is also working to realign its Nstore unit in charge of content distribution.

The firm originally planned to spin off Nstore and merge it with Naver Webtoon, but reversed the plan July 27, saying, "We suspended the process to merge Nstore with Naver Webtoon in order to explore additional opportunities to create synergy and secure plans for a more flexible organization integration."

Instead, Naver is considering spinning off several businesses from Nstore, except for the e-book business, and establishing an independent company in November. Then, Naver will consider merging the new company with other subsidiaries.



Jun Ji-hye jjh@koreatimes.co.kr
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