Korean Link : Economist
“OTT Industry Survival Strategies Amid Intensifying Competition: Content Diversification”
Recently, domestic and international Over-The-Top (OTT) service providers have been putting all their efforts into content diversification. We’re seeing various movements, such as Netflix strengthening its Korean variety show content and domestic OTTs securing broadcasting rights for baseball games and the Olympics. What’s the root cause of this phenomenon? Let’s examine the core of the OTT industry’s content diversification strategy and analyze its background and prospects.
First, intensifying global competition and content differentiation strategies are cited as major causes. As the OTT service market has grown rapidly and competition has become fierce, each platform is striving to secure viewers with differentiated content. With global giants like Netflix, Disney+, and Amazon Prime Video entering the Korean market, domestic OTT companies are also struggling to come up with survival strategies. In this situation, content diversification has become an essential survival strategy. Each OTT service is trying to build its own unique content lineup to attract viewers’ attention and secure subscribers. For example, Netflix is strengthening Korean dramas like “Squid Game” and variety shows like “Single’s Inferno” and “Physical: 100” targeting the Korean market, which are gaining popularity not only in Korea but also in the global market.
Second, it’s a strategy to respond to the diversification of user preferences. As content consumption patterns diversify, centered on the digital native generation, it has become difficult to satisfy viewers’ needs with services limited to a single genre or format. These viewers are moving away from traditional media consumption patterns and demanding content in various genres and formats. Accordingly, OTT services, which used to focus on dramas and movies, are expanding their scope to include variety shows, documentaries, sports, and animation to meet these viewers’ demands. Additionally, by providing content of various lengths, from short-form content to multi-season long series, they are broadening the options that match viewers’ situations and preferences.
Third, it’s an effort to diversify revenue models. OTT services are looking for new revenue models beyond the traditional subscription-based model. There are active movements to diversify revenue through various methods such as introducing low-cost, ad-based plans, sports broadcasting and live streaming, and providing exclusive content. This strategy aims to solve the problems of increasing content production costs and profitability by targeting various consumer segments and maximizing revenue. In particular, sports content is promoting subscriber influx through the appeal of real-time viewing, which plays an important role in increasing the profitability of OTT services.
Fourth, it’s a strategy to prevent subscriber churn and increase viewing time. A diverse content lineup is effective in preventing subscriber churn and increasing platform retention time. For example, if a user who subscribed to watch dramas or movies can also enjoy sports broadcasts or variety shows, they’re more likely to maintain their subscription. This leads to stable revenue generation for OTT services. Additionally, by providing diverse content, all family members can find content that suits their tastes, which also has the effect of increasing the subscription retention rate per household.
Fifth, there’s ongoing experimentation with new content formats. OTT services are experimenting with various forms of content beyond traditional dramas or movies. This includes content utilizing VR (Virtual Reality) and AR (Augmented Reality) technologies, interactive content, and short-form content. For example, Netflix’s “Black Mirror: Bandersnatch” provided a new viewing experience as an interactive movie where viewers could choose the story’s development. Disney+ is showcasing technological innovation by producing high-quality series like “The Mandalorian” using new VFX technologies such as virtual studios. These new content formats play an important role in providing consumers with new experiences and strengthening the differentiated competitiveness of OTT services.
Sixth, there’s the utilization of cross-platform marketing strategies. OTT services are using marketing strategies linked not only to their own platforms but also to various social media platforms such as YouTube, Instagram, and TikTok. This can increase content exposure and attract the interest of potential subscribers. For example, Netflix promotes its content in various ways, such as releasing highlight clips of popular series on YouTube or operating character accounts on Instagram. In particular, short-form content targeting the younger generation is optimized for the mobile environment, contributing to expanding the user base of OTT services.
Seventh, there’s a strategy to provide customized content for each region. Global OTT services are implementing localization strategies that reflect the cultural characteristics and consumer preferences of each region. This contributes to increasing the loyalty of local consumers and strengthening competitiveness in the global market. Netflix instructs Korean producers not to produce globally oriented content, but to produce the most Korean content or content that would be most popular in Korea. They judge that this aspect will have global competitiveness. In fact, domestically oriented content is leading globalization. This strategy can be seen as part of a true “glocal” strategy that balances global and local, beyond simply diversifying content.
However, there are also several challenges to this content diversification strategy. First, there are concerns about deteriorating profitability due to increased content investment costs. Producing or securing content in various genres and formats requires enormous costs, which can act as a financial burden on OTT services. Second, there are concerns about blurring the identity of the service. Providing too diverse content can make the unique brand image or target customer base of an OTT service ambiguous. Third, there’s the difficulty of content quality management. Focusing on quantitative expansion can lead to a decline in the quality of content, which can lead to subscriber churn in the long term.
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