What Is the Next Step in the OTT Industry?
What Is the Next Step in the OTT Industry?
  • Ju Kim Jiyeong ,Kim Jang Yunsun
  • 승인 2023.05.01 09:52
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Noonsong waited for the release of <Formula 1, Drive to Survive Season 5> on Netflix. It was scheduled to be released on February 24, but Korea alone has been excluded from its global release schedule. Netflix Service Korea announced that the release schedule has been delayed because the rating classification had not been completed. Noonsong was sad that she could access the content a month later than other global viewers. When she heard that a new rating classification system would be introduced soon, she was relieved that she would be able to watch the content she wanted on time.


New attempts to respond to change

The OTT industry is very influential in the media industry. Since the success of Netflix, it has rapidly come to dominate the industry with the launches of TVING, Coupang Play, and Wavve in Korea. While many companies keep an eye on the growth of the OTT industry, the domestic OTT market is currently saturated. The emergence of new free OTT platforms, such as Pluto TV, has reduced the number of users of existing platforms. The end of the pandemic has made the decline even steeper. In 2022, based on the figure at the Mobile Index Insight, App analysis service, Netflix was down 7% compared to the previous year, and TVING was down 8% during the same period. Other OTTs also decreased one after another, with Wavve down 12% and Coupang Play down 18%.1) It shows that those platforms need to devise different strategies to raise the number of users again. One example of devising strategies is that OTT services are attracting users with popular original series. There have been three recent collaborations with domestic broadcasting stations to produce dramas and movies, including documentaries and entertainment. In addition, Wavve is overcoming OTT's limitations by broadcasting the World Baseball Classic. As the OTT industry enters a transitional period, each platform is pursuing new changes for development.
In this situation, there are some factors that prevent its future development in Korea. A lack of support, tax deductions, and reproduction support are being discussed for the growth of domestic content. In addition, there have been opinions that policy improvement is needed because pending issues such as localization support necessary for overseas expansion are problematic. Among them, the biggest issue is a delayed release time from foreign countries because of the rating system. The rating time of OTT content in Korea is several times longer than that of overseas countries. Viewers say that because of this, there is a delay in the airing date in Korea even though the content has already been released overseas. On this issue, on March 5, the Korea Media Rating Board (KMRB) announced that it would implement an Independent Rating Classification system as a solution. In response, the OTT Council said, "We actively welcome the passage of the amendment to pave the way for strengthening OTT competitiveness. We hope that the government and stakeholders will continue to communicate more closely so that the introduction of this new system can establish itself as a reasonable and effective system."2) This shows that the Independent Rating Classification can help to abolish regulations that exist in the OTT industry. The introduction of a new classification system could contribute greatly to OTT growth.



Bringing positive changes

The classification of OTT content ratings in Korea was conducted by the KMRB in accordance with the Act on the Promotion of Movies and Videos. This screening process took an average of more than 12 days per item and compared to the overseas release period without related regulations, there was a wait of more than 1-2 weeks to watch the work. This release time difference has become a persistent problem for people in the domestic OTT industry who need to provide content quickly. The Independent Rating Classification, a system in which the OTT operators classify the content grade on its own, has been organized based on discussions on these issues. It could make the content be released on a date set by the producer because there is no need to go through the KMRB during the screening process. Compared to the existing system, it will be faster by at least one to two weeks. Park Bokyun, Minister of Culture, Sports and Tourism (MCST), said, "The introduction of the Independent Rating Classification is a representative example of regulatory improvement that has broken old regulations, and it will greatly increase the competitiveness of the domestic video content industry."3) It seems that the introduction of this system could pave the way for the development of the domestic OTT industry. This reduction in content release time seems to bring a positive impact to the overall domestic media content industry.
The Independent Rating Classification increases the competitiveness of the OTT industry while making the release time of domestic OTT content the same as overseas. The previous rating system put several burdens on producers. During the release delay, producers risked additional costs, and there was a possibility that the timeliness of the content could be undermined during the rating time. In addition, domestic OTT platforms and their original content were having difficulty entering overseas markets due to the problem of the release time being different from overseas. At the National Assembly in August 2022, an OTT industry official said, "At a time when the OTT platform is pioneering a new way to distribute K-content, it is necessary to revitalize the market by introducing an Independent Rating Classification in consideration of the environment in which much content is being made."4) Through the Independent Rating Classification, domestic content can more easily reach the overseas market by reducing disadvantages in the content supply process. At a time when it is thought by some that the domestic OTT industry needs to look beyond the domestic market to the overseas market, the introduction of such a system can aid growth. On the other hand, some OTT officials seem to be concerned about the idea that this Independent Rating Classification operates under a designated system rather than a reporting system. Some worry that if the fixed new classification operators are pulled in the wrong direction, it could create another restriction. As such, this system's introduction has value but could also bring some side effects.



Driving the system in the right direction

There is some concern that ratings may not be properly classified if OTT companies evaluate violence and sensationalism on their own. In January 2023, a mobile game "Waifu," which had been operating under its own rating classification, caused controversy as it was labeled suitable for teenagers even though it contains suggestive content for them. Google Play released it for about a week, and belatedly removed it after controversy arose. Google's late response and insufficient monitoring by the Game Rating and Administration Committee were criticized. A KMRB survey in 2022 on video classification recognition and teenagers' video usage revealed that 64.8% of respondents are concerned that OTT companies would lower their ratings to increase accessibility. Also, 65% said that strict follow-up management is needed. This indicates that many users are aware of the possible negative impact of the introduction of the system. Unlike general TV broadcasts, OTT platforms are already relatively free from regulations because they are not currently subject to the Broadcasting Deliberation Regulation and Press Arbitration Law. Therefore, if the Independent Rating Classification is implemented, the level of dangerous expression and the number of programs causing negative effects may increase. Jeong Jiyeong, secretary general of the Korea Consumer Federation, stressed, "If there are operators who can't afford to accurately categorize content on their own, harmful content problems for teenagers can occur. The operators should come up with their own protection measures for teenagers that consumers can trust."5) She claims that OTT businesses have to do more, such as reassuring viewers. The role of OTT operators seems to be more important because the more common the system becomes, the more difficult it can be to protect victims.
The Ministry of Culture, Sports and Tourism (MCST), KMRB and OTT operators are aware of these concerns. An OTT industry official said, "If it is noticed that the age rating is lowered for ratings, it will be problematic for content. So, the rating classification must be conducted carefully. As most OTT operators know how to set it up, there will be no difficulty in classifying them."6) This reveals that the operators have guidelines for classification, which are unlikely to cause the problems about which the public are concerned. The KMRB announced three steps to address these concerns. First of all, they decided to evaluate the degree of user protection when designating business operators of the system. The evaluation items for designating the businesses of the system include "appropriateness of the follow-up management plan" and "appropriateness of the teenagers' and users' protection plan." In order to be designated as a business operator of this system, it is essential for them to make careful plans for teenagers' protection. The KMRB will also introduce "visiting classification consulting" to directly transfer its classification experience and know-how and solve the difficulties they may face in the practical process. Lastly, they announced the enactment of the Regulations for Post-Management Affairs in accordance with Article 85 of the Promotion of the Motion Pictures and Video Products Act. They have the authority to change the rating or cancel the classification if content that should be rated R is given a lower rating. As such, they prepared measures in three steps: designation of the operators, process of rating classification, and follow-up management after classification. They will continue to make efforts to help OTT operators while reducing the adverse effects of the system.

A briefing session on the Independent Rating Classification of OTT services_Pre-training for OTT operators


The rating classification is now in their hands

The size of the global OTT market has grown rapidly in recent years. In line with this growth, Korea has decided to introduce the Independent Rating Classification from May to further develop the OTT industry. It has the advantage of solving the problem of delayed airing dates, but there are also concerns that provocative content can be easily accessed by teenagers. The MCST and OTT industries are considering ways to minimize the side effects in order to fulfill their responsibilities suitable for their expanded influence. Users are also required to continuously monitor the Independent Rating Classification to ensure that it is maintained correctly.

Prior education for content rating classification for OTT operators


1) Lee Minju, "'Survive on Red Ocean' the Inside Story About Subscriber Capture Competition Among OTT Companies", Ilyo Ilbo, July 28, 2022

2) Shin Heekang, "Before the Introduction of the 'Autonomous Rating System', the OTT Industry Is 'Half-Anticipation and Half-Concern'", New Daily, September 13, 2022

3) Yoo Dongju, "OTT's Own Rating System Will Be Implemented From Today", MoneyToday, March 28, 2023

4) Seo Jungyoon, "OTT Industry "The Independent Rating Classification Need to Be Discussed at the Subcommittee of MCST's Bill"", ZDNet Korea, August 17, 2022

5) Kim Baekgyeom, "The 'OTT Independent Rating Classification' Will Be Introduced Next Year. How Is 'R-rated' Managed?", Voice of the People, September 8, 2022

6) Lee Eunho, "'15+', '19+'... From This Year, OTT Will Decide It by Itself", KUKINEWS, February 28, 2023


Ju Kim Jiyeong / Editor-in-Chief
Kim Jang Yunsun / Culture Section Editor


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