According to a filing released Friday, Netflix’s South Korean arm made 631.7 billion won ($513 million) in revenue through 2021, up 52 percent from the previous year.
The platform’s success in Korea reflects its growing clout in the Korean streaming service market, thanks in part to Korean-language hits like “Squid Game” and “Hellbound.” It does, however, draw attention to the “network usage fee” debate in Korean courts and legislatures.
Netflix Services Korea earned over 99 percent of its revenue from monthly subscription fees, excluding value added tax, according to a filing with the Financial Supervisory Service.
The profit margin of the content provider, on the other hand, remained narrow because the majority of the earnings went to its parent in the form of distribution fees. According to the filing, such payments totaled 516.6 billion won, accounting for nearly all of the cost of goods sold. The figure for 2021 increased by more than 60% year over year.
As a result, Neflix’s Korean operating profit was 17.1 billion won. Profit increased by nearly 95% year over year and accounted for 2% of total revenue.
Netflix’s successful year comes as it fights a legal battle with SK Broadband, a local internet service provider, over whether the streaming service, which is responsible for a lot of network traffic, should pay for it.
In June 2021, a Korean district court gave SK Broadband the upper hand in the world’s first ruling on who is responsible for cost spikes caused by network bottlenecks. The appeals trial in the Netflix-SK Broadband case began in March at the Seoul High Court.
Furthermore, the National Assembly may pass legislation requiring global content providers such as Google, Netflix, and Meta to pay for the high network traffic they generate. According to a government study released in 2020, the three global internet behemoths were responsible for a third of all network traffic in Korea. If passed, the revision will be the first of its kind in the world.
The revision of the Telecommunications Business Act would standardize content providers’ obligations to pay network fees both at home and abroad. Korean content providers, such as Naver and Kakao, are obligated to pay such fees to internet service providers in this country.
A revision bill is expected to be introduced next week by the National Assembly’s standing committee on science and communications.
Dean Garfield, Netflix’s vice president of public policy, recently cancelled his trip to Korea in order to meet with lawmakers here.