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The Profit Structure of OTT Services, Focusing on “Squid Game”
  • 정승혜 기자
  • 등록 2022-03-15 08:43:31
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 From the fact that Netflix's ‘Squid Game’, which was a hit worldwide, and Disney starting to provide an OTT service called ‘Disney Plus’, it can be seen that OTT service is a major trend these days. What type of revenue structure do various popular OTT services such as Disney Plus, Netflix, Watcha, and TVING utilize? The revenue structure of the drama producers, actors, and Netflix, which distributed the popular show ‘Squid Game’, is as follows.


Q. How does the revenue structure of an OTT service operate?
A. Overall, regardless of the success of the movie or drama, production companies receive only about 20% of the profits. Each actor's rate of return may vary due to their fame, but they do not receive additional revenue from successful works. The production cost of the box office hit 'Squid Game' was about 24.9 billion won, but the profit is expected to be 1.67 trillion won. As the controversy over incentives for the work arose, Netflix paid the producers and cast of Squid Game a one-time incentive. However, in principle, they would not have been able to receive this unless there had been controversy.

Q. Why do dramas and film production companies use the OTT platform despite this profit structure?
A. The reason producers give copyrights to OTT services like Netflix is because of the advantage of stably receiving production investments. Since there is no risk of losing the invested money, this method is preferred because they can produce dramas or movies without fear of losing money. In particular, film companies are currently in a difficult situation to make a box office success because people are not visiting theaters due to COVID-19. This is because, in a situation where many films lead to debt, production costs can be covered by using the OTT platform to produce a film.

Q. What is the reason for Netflix not providing incentives?
A. Copyright is the biggest factor that influences the structure of revenue. First of all, since Netflix owns the copyright, the producer cannot make remakes or spin-offs. The copyright of 'Crash Landing on You', which was funded by Netflix, will be owned by Netflix. However, there are cases where Netflix only has the broadcasting rights, such as with 'Sky Castle'. Netflix explained that it has been difficult to provide incentives so far because there are no factors that can determine the success or failure of a work. In addition, Netflix mentioned that whether it succeeds or fails, Netflix will bear both profit and loss because Netflix provides 100% of the production cost. In the future, it was announced that it would have an internal discussion on the incentive issue.




 "Incentives are needed if the movie or drama is a huge hit, such as with ‘Squid Game.’ However, from the Netflix side, it seems that it will take a lot of time to decide on the issue of incentives because the content side that has suffered losses must also be held responsible. As many KGU students use OTT services, we must understand the principle of copyright and become viewers who consume content in the right direction."



76th Reporter • JEONG SEUNG HYE • nora28@naver.com

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