In a significant industry development, global streaming giant Netflix, South Korean broadband operator SK Broadband, and telecommunications leader SK Telecom have unveiled a strategic collaboration, effectively concluding a prolonged three-year litigation.
The collaboration aims to enhance customer experiences by offering convenient viewing options and flexible payment methods across various platforms, including smartphones and IPTV. The partnership also includes the preparation of diverse bundle plans and introducing Netflix on SKTelecom’s “T Universe,” an AI-enabled product providing Conversational UX and Personalized Recommendation Technologies. Moreover, a version of SK broadband bundled with ad-supported Netflix is part of the strategy to offer top-tier communication and streaming services.
Partnership Terms and Goals
The joint press release from Netflix and SK emphasized their commitment to prioritizing customer value, seeking to create an enhanced media service environment. The collaboration suggests a future model where Netflix users on SK network can purchase Netflix through their broadband subscription, enabling appropriate cost coverage for SK’s network usage.
This mutually beneficial arrangement implies a revenue share agreement, allowing SK to offer an enhanced Netflix experience while preserving larger policy goals for competition. The inclusion of ad-supported Netflix underscores a commitment to affordability and diverse product offerings.
Market Impact and Future Rollout
With Netflix’s substantial growth in South Korea, boasting approximately 6 million customers, the new products resulting from this partnership are expected to launch in early 2024. Anticipated similar bundled products from KT and LGP U+ will further intensify market competition, offering consumers a broader range of options and features. Although specific usage payment details were not outlined in the releases, estimates suggest Netflix could potentially be liable for up to 40 billion won or $30 million, according to Strand Consult.
Policy Implications and Political Response
The litigation and subsequent resolution have spurred a critical policy discussion about network use and cost recovery in South Korea, a global leader in broadband technology. Representatives in the National Assembly emphasized the need for fundamental institutional improvements to ensure fair network use and level the playing field for all market participants. The ongoing discourse highlights the necessity for continued efforts to refine laws and systems, addressing challenges posed by dominant global entities operating within the Korean ICT market.
Background on Litigation
The partnership and resolution come after a prolonged legal battle initiated by SK Broadband, triggered by a significant surge in network traffic from Netflix. The streaming platform’s traffic grew exponentially, accounting for a substantial portion of South Korea’s overall data traffic. Despite attempts by SK Broadband to negotiate cost recovery, Netflix resisted, resulting in litigation. The court’s ruling favored SK Broadband, emphasizing the importance of negotiated terms for data exchange in a two-sided market. The resolution signifies a crucial step forward in defining equitable network use agreements and sets a precedent for similar cases in the future.
