Netflix provided a rare snapshot of its business fundamentals in South Korea this week — a new requirement for all large companies based there under local law. The results show the global streaming giant building a robust business in the East Asian country despite steadily escalating content spending.
Netflix’s South Korean business unit saw its revenue climb to $356 million (415.45 billion won), a surge of 123.5 percent compared with 2019. Operating profit, meanwhile, reached $7.5 million (8.82 billion won), up 295 percent, according to the filing.
Netflix has operated its service in South Korea since 2016, but this is the first time it has disclosed a profit and loss statement in the country. The Seoul government introduced a new law — the External Audit Act — in November, requiring all limited companies with assets or annual sales greater than 50 billion won ($43 million) to publicly report earnings. Although headquartered in Los Gatos, California, Netflix operates its South Korean business unit as Netflix Services Korea Ltd.
The vast majority of Netflix’s 2020 South Korean revenue — 398.8 billion won, or 96 percent of the total — came from subscription fees, although the company also released a number of its original films theatrically with local exhibition partners.
The financial snapshot provides greater clarity on the rationale behind the streamer’s enormous content spending in South Korea. In February, Netflix pledged to spend more than $500 million on films and series just this year. To date, Netflix has produced more than 80 original Korean shows and films, building off the early smash success of its very first original from the country, Kim Eun-hee’s period zombie thriller Kingdom.
The company’s modest 2020 profit indicates that such investments are locally justified, while the impressive international popularity of South Korean drama and film comes as an additional bonus.
Netflix said it reached 3.8 million paid subscribers in South Korea as of the end of last year. Regional regional consultancy Media Partners Asia has projected that Netflix would end 2021 with approximately 5.3 million Korean subscribers, with revenue climbing to $575 million.
In January, Netflix announced that it had signed leases on two large production facilities outside of Seoul so that it can “feed the demand” of subscribers around the world who are “eager to watch more original Korean series and films.”