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[Exclusive] Entertainment

Disney Plus' S.Korea launch delayed after Netflix's court loss

Netflix is appealing against a Seoul court ruling that backs ISPs' demand for network usage fees

By Jul 20, 2021 (Gmt+09:00)

Disney Plus' S.Korea launch delayed after Netflix's court loss

Disney Plus, a global over-the-top (OTT) streaming service provider, has pushed back its South Korean service launch by about a quarter to the end of this year, assessing the impact of a recent Seoul court ruling against Netflix Inc. over a dispute with a domestic internet service provider (ISP).

Last month, the Seoul Central District Court rejected Netflix's complaint against SK Broadband Co. in relation to the ISP's demand that the streaming platform pay for network use in South Korea. The court ruled that the dispute needs to be settled through negotiations between the parties involved.

The court verdict provides a legal ground for domestic ISPs to charge OTT platforms for internet traffic, at a time when other global OTT players, including Disney Plus, Apple TV Plus, Amazon Prime and HBO Max, were preparing to land in South Korea. 

"Now that Disney is closely monitoring the domestic market trends including the court decision and working on response plans, contract signing is getting delayed," said a broadcasting service industry source.

"Its service launch (in South Korea) was originally scheduled for September, but it will be delayed by about a quarter."

The OTT platform of The Walt Disney Company is understood to have picked LG Uplus Corp. as its Korean IPTV partner. IPTV, or internet protocol television, delivers media content, videos and live TV shows over the internet.

For mobile devices-based services, Disney Plus is said to be in exclusive talks with KT Corp.

LG Uplus, KT and SK Broadband are the country's three major internet service providers. Among them, LG Uplus has been the most aggressive to secure a content deal from Disney Plus. After it struck an exclusive contract with Netflix in 2018, it had enjoyed a 20% surge in the subscriber number over a period of two years.  

Earlier this month, LG Uplus CEO Hwang Hyeon-sik told a news conference that he believed LG was in an advantageous position over other domestic ISPs in winning a content deal from Disney Plus.

Disney Plus' S.Korea launch delayed after Netflix's court loss

ESTIMATED BILL FOR NETFLIX

Following the June court verdict, SK Broadband is planning to charge Netflix about 27 billion won ($23 million) per year for network use. If KT and LG follow suit, Netflix may face over 80 billion won in combined annual fees from the three Korean ISPs.

Netflix decided on July 15 to appeal to a higher court. In South Korea, it boasts around 4.1 million paid subscribers with a share of 4.8%.  

CONTENT DELIVERY NETWORKS

To avoid such a legal dispute with Korean ISPs, Disney Plus suggested it use third-party content delivery networks (CDNs) and pay them, instead of transferring content directly through the ISPs' networks.

Then the CDN operators such as Amazon Cloudfront and Fastly will pay directly to ISPs. A CDN is a network of proxy servers that provide content from the server located closest to the end-user to make quick delivery.

Disney Plus' S.Korea launch delayed after Netflix's court loss

"Disney Plus sticks to the stance that it will not use CDNs directly run by ISPs, and instead will make a lum-sump payment indirectly to the three ISPs for network usage," said a telecom industry source.   

But another telecom industry source cautioned that the proposed indirect payment through CDN operators may not protect Disney Plus from a possible legal dispute with domestic ISPs.

"That's why it is delaying its service launch, listening to the industry officials' feedback and monitoring the industry trends," he said.

Launched in 2019, Disney Plus landed in the UK, Germany and Japan in 2020. It offers an extensive array of content from Disney and its subsidiaries, including Pixar, National Geographic and Marvel Entertainment. 

Write to Han-Gyeol Seon at always@hankyung.com

Yeonhee Kim edited this article.

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