A Perfect Storm for Foreign Content

Doug Montgomery | Senior Analyst | June 28, 2023


Netflix recently held its third annual “Tudum” fan event in front of 11,000 people in Sao Paulo Brazil, plus 78 million views on the company’s social platforms (the latter up threefold from 2021’s 25.7 million initial views). Not so long ago, this was the type of growth numbers we expected from Netflix, but for paid subscribers.

During the same week, Ted Sarandos did a follow-up after his February meeting with President Biden and South Korean President Yoon in Washington in Seoul to announce a $2.5 billion investment in Korean content.

These two important events in different parts of the world presented an interesting dilemma for the long-time Netflix executive: Which important feel-good event should he attend? Where Mr. Sarandos was not at that time was in California, the center of the now two-month long strike by the Writer’s Guild of America (a.k.a. “The Netflix Strike”).

The Waning of American Content

The “Great Netflix Correction” of Q1.22 brought an abrupt end to the decade-long hockey-stick growth of entertainment investments. The ongoing wave of revenue optimization and cuts in content spending among SVOD providers all trace back to the GNC. As Aluma members knew was inevitable, this was the straw the broke the camel’s back; the point at which demand saturation became real and “subscriber growth at all costs” lost its luster.

Netflix is facing additional challenges. Some of the big-name deals of the last decade have run their course. For example, its 5-year $300 million relationship with Ryan Murphy is ending. With it unclear whether Netflix will renew Harry and Megan’s $100M contract, and the Obama’s new Netflix docuseries Working: What We Do All Day strongly favoring the striking writers, the net impact on the company’s SVOD content production will be negative—that is, fewer originals even as retail prices increase.

The Waxing of Foreign Content

One area of recent growth is America’s consumption of foreign content, none more pronounced than the Hallyu Wave. (“Hallyu” was coined by the Chinese to describe the new popularity of Korean content across Asia at the turn of the millennium.) Korean content began resonating more strongly with Americans during the 2010s, beginning with 2012’s Gangnam Style. (It became the first video on YouTube to reach one billion views and was the most-viewed from 2012 to 2017.) Korean film Parasite won a surprise Oscar in 2020, BTS conquered the pop music world in 2022, and Blackpink became the first Asian and first Asian all-female group to headline Coachella. The Hallyu Wave shows no signs of cresting.

The Netflix deal in Korea had a ripple effect on the broader Korean economy. Deloitte found in 2021 Netflix added $4.7 billion to the Korean economy through joint work by both the streamer and local players. Unfortunately, bickering with SK Broadband about broadband usage (known in the U.S. as the “net neutrality fight” and paying creators fair compensation stains an otherwise positive outcome for Netflix. The world notices what has happened in the US and wants to make sure the negative secondary effects do not happen there.


Also that same week, Marvel, Netflix, Sony, HBO, and Universal announced they would not participate in the San Diego Comic-Con in 2023, considered the largest fan convention in the United States. Most of the content expected to show at SDCC is American made and therefore directly related to the present WGA strike. Companies not wanting the negative press have decided to sit this year out.

Then again, two weeks before SDCC will be the 32nd version of Anime Expo up the 405 freeway in Los Angeles. For the second year in a row, the Anime Expo is sold out, which is expecting to have over 350,000 turnstile visits during the Independence Day weekend. With the majority of the content on display being Japanese, the connection between  content producers and the writers’ on strike is considerably less direct.


Going forward, SVOD content investments will be increasingly diverse, as illustrated by Netflix’s announcements in Korea, the continuing rise of Japanese anime around the world, the fact Amazon’s list of international hits is dominated by non-English titles, and Amazon’s large investments in African content.

While the Hollywood’s days as the world’s content producer may be waning, its dominance as the gatekeeper of content remains strong. As previously noted, Netflix is betting heavily on Korean content, viewership of which has international grown six fold in four years.

Other countries around the world are trying to copy Korea’s success, including Taiwan. The Taiwan Creative Content Agency, established in 2019, is collaborating with Netflix for distribution of its content to foreign markets. Should the writers’ strike continue for a long period, the door is likely to open further to new sources of content.

The next “Squid Game” can seemingly come from anywhere. As Ted Sarandos said at the event in Seoul last week, 90% of the viewers for Korean romance content were from abroad. Given that the US and Canada represent only 5% of the world’s population, foreign content, whether Korean or not, has a great future ahead.