Welcome to Hallyu-wood: The Addiction to Korean Dramas, and Why Big Brands Should Be Watching

/ Oct 10, 2014

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This article originally appeared on the Manatt Digital Media blog. It has been edited and reprinted here with the author’s permission.

By Eunice Shin

Hallyu-lujah! The Korean drama is the perfect case for the new globalization of content.

For the vast majority of global citizens participating in this social world, we are all too familiar with the phrase “oh-bba Gangnam style.” Psy’s Gangnam Style video is one of the most globally viewed videos of all time with over 2 billion views. Yet to grasp scale, Psy’s popularity is only a very small portion of the overall Hallyu movement — the VIS_Psyterm referred to the Korean Wave or Korean Fever; the global fascination with South Korean pop culture and media known as K-Pop. Hallyu emerged in the 1990s in other parts of Asia, but the movement has been propelled into a true international market with the global growth of online and mobile content consumption.

The two strongest areas of interest in K-Pop are in music and TV content. The popularity of K-Pop music is often covered and well known. And now, TV drama series known as “K-Dramas” are grabbing the attention. The typical K-Drama is most similar to what we know as a mini-series in the US. They often tell a complete story in one series that’s self-contained, typically in 16-24 episodes. With dozens of new shows produced each year, with a constantly revolving list of featured multi-media talent, there is no shortage of K-Drama fandom.

With a deeply engaged and loyal audience, KPop is widely consumed not just in South Korea and throughout Asia, but has rapidly growing interest from Latin America and the United States.  In the US, English subtitled K-Dramas are most popular on YouTube and streaming sites DramaFever, Crunchyroll (KDrama), Viki, and Mnet America, as well as select content available on Hulu, Netflix, Amazon and iTunes. K-Dramas are more popular than ever with millennials, especially with 18- to 24-year-old American women who are not of Korean heritage. DramaFever reports that 85% of their audience is non-Asian, with 45% being Caucasian and 25% being Latino.

No surprise that this premium content has sparked the interest of global investors, romanced by that growing, global, and loyal fan base.

In December 2013, The Chernin Group acquired a majority stake in Crunchyroll, an anime and Asian drama streaming site, for roughly $100 million. In the months that followed, Crunchyroll spun-off a Korean entertainment focused site called KDrama, featuring a library of top K-Dramas, as well as variety and music shows. Then in May 2014, Crunchy Roll acquired Soompi, a K-Pop news publisher and community website. And in recent days, it was announced that KDrama and Soompi would rebrand to form SoompiTV. Currently, most of SoompiTV’s content is only licensed for the US and Canada, but they are working on gaining licensing rights to the global audience. Impressively, Crunchyroll and SoompiTV — distributors of K-Pop and other Asian content — are part of the first few video services invested in and managed by the highly anticipated and highly regarded Otter Media, which is joint venture from The Chernin Group and AT&T.

In September of 2013, Japan’s Internet e-commerce giant Rakuten purchased Viki, a premium video streaming service run out of Singapore, featuring Korean dramas and other Asian content. That deal was rumored to be at $200 million.

dramafeverWith close to $20 million in revenue this past year and a very global audience, DramaFever is another leader in the K-Pop/K-Drama media space. With a rumored valuation near $120-140 million, Drama Fever is being pursued and courted aggressively. To date, DramaFever has raised $11.5 million from investors that include AMC Networks, Bertelsmann, NALA, and SoftBank.

These are some serious bets being placed on the global value of K-Dramas as a major media asset. Here’s why more media companies and brands will be addicted:

1) Deeply engaged and fiercely loyal global audience

Not too long ago, before many of the streaming sites had international licensing rights, K-Dramas had limited availability outside of South Korea, and pirated videos made its way around the world fueled by the crowd-sourced, multi-language subtitling of popular series. A large community of fans were dedicated to making this content available, and the loyalty and following of audiences is still reflected in the ongoing virality of what many would deem as obscure, foreign content. Today, subtitling is still crowd-sourced on sites like Viki and YouTube, with the more popular K-Dramas subtitled in over a dozen different languages.

Throughout Asia, the content has cross-generation appeal, with both men and women. Earlier this year, a very popular series, “My Love from the Star,” debuted in Korea and had an average viewership of 24% in Korea. It then sold rights to China where it’s been viewed online through iQiyi, a Chinese video streaming platform, over 14.5 billion times. The series finale was so widely anticipated and watched by all ages, that Chinese news outlets covered people calling in sick and taking time off to watch the finale and alluded to the high probability that the national productivity of China was impacted by the fandom around that show.

2) Deep library of addictive, binge-watching worthy content

With the soap-opera like cliff-hangers commonly written into each episode, coupled with the availability and ease for online and mobile consumption, K-Dramas are ideal for binge-watching through the series. I’d argue that K-Dramas were the original binge-watching type of content. There are hundreds of past K-Drama titles, with constant, year-round production of new content. With this rich library, DramaFever reports that its subscribers watch on average 54 hours (3,234 minutes) per month. In comparison, subscribers on Netflix and Hulu are reportedly at averaging 644 minutes and 223 minutes per month, respectively.

3) Growing interest in the K-Pop Lifestyle

This past summer at the KCON conference, an annual K-Pop convention held in Los Angeles, attendance doubled from the previous year to over 42,000, with nearly 40% coming from outside California. Most of the attendees were female,  and less than 10% of the attendees were of Korean heritage. K-Pop is not only relevant in music, TV, and film, but it is making significant plays in fashion lines, and even skincare and makeup. There is also a very large global following of Korean beauty content creators on YouTube, furthering the allure and appeal of the K-Pop lifestyle with a highly engaged audience.

However, there are some significant challenges that K-Drama creators and distributors need to overcome to fully optimize and monetize assets.

  • The ads vs. subscription models. Currently, the majority of content distribution is supported via ad revenue. On subscription sites like DramaFever and Viki, audiences can subscribe to avoid ads. But given the well-known work-arounds (hint: use Apple TV to watch ad-free) and fans used to dealing with irrelevant ads, it’s going to take more sophisticated features and services to convert a larger number of people to a paid subscription model. Additionally, there is an opportunity for more sophisticated and targeted advertising. On one of the more popular streaming sites, with use of my Facebook login, it repeatedly rolled a 15-second spot from a utilities company, three times in a row to make up the 45-second block of inventory. Perhaps the right brands and advertisers just haven’t come yet. Or perhaps it was a strategy to drive me to subscribe to avoid the annoying, irrelevant ads. Either way, this is a clear opportunity for both brands and streaming platforms.
  • Content discovery. Just like the rest of online content, discovery of premium content among the crowded and confusing space is often a barrier to entry for K-Dramas. Many rely on social community boards for recommendations and reviews. An interesting feature for one of the streaming services could be to curate and recommend shows based on interest. Perhaps that could be a friendly suggestion for the subscription model feature.
  • Crossover appeal of K-Pop talent. Fans of K-Pop stars in Asia are rabid. Simply put, they make the Beliebers look harmless. (Just don’t tell them I wrote that!) The most popular KPop stars are singers, dancers, and actors, with numerous endorsement deals in Asia. However, the artists themselves have yet to make as strong of a crossover to English-speaking fans as they have in Asia. Perhaps it’s because many of the stars haven’t mastered the English language yet, or perhaps it’s because the management companies who control their careers are not able to monetize on the global market.
  • Product placements and brand integration is seen with every series:. But it is obvious that most of those brands are still just aimed at that first Korean audience, not considering the global market thereafter.   This should spark the interest of global brands. It’s a clear opportunity for the industry as a whole and a definitive growth area for further monetization.
  • Lastly, many of the distribution rights and licensing deals are still less than sophisticated and strategic. For example, “My Lovely Girl” (aka She’s So Lovable), a highly anticipated new series starring Rain, is available in the US on DramaFever, SoompiTV, Viki, and on YouTube. Streaming services are fighting for the same audience often with the same content. For streaming services to differentiate, service features may not be enough. Licensing deals are bound to evolve. At the same time, building a licensing model with restricted access will be a challenge, especially for content that got its catapult from bootstrapping, resourceful, rabid fans.

As seen with the industry and ecosystem around K-Dramas, the growth and monetization of global content is still in its infancy, with great opportunities for distribution licensing/rights, brand integration, advertising, and subscription models to advance. Welcome to Hallyu-wood!

Fun fact: Korean management companies are run much like the old studio system, where the studio contracted talent, and only made movies around those contracted artists. Similarly, Korean management companies target and manage talent, often with the triple-threat formula in singing, dancing, and acting. Many of the K-Dramas are cast with stars who are solo artists or a member of a group, who are trained, cast, produced, and promoted by the same major management company. Korean management companies constantly scout and train new talent, and are often seen as cut-throat, talent factories. Implied criticism of this system comes as no surprise. 

Eunice Shin is a director at Manatt Digital Media (MDM), a deeply connected and entrepreneurial team, providing unparalleled, multi-disciplined services in business development and acceleration.  Eunice is a seasoned industry executive, with over 18 years of consulting experience in the media and entertainment industry, passionate in partnering with innovative and transformational companies to accelerate business, creating competitive advantage and growth opportunities.

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