Although Netflix recorded its first-ever annual domestic revenue exceeding 1 trillion won last year, it was found that 81% of this amount was paid to its U.S. headquarters. The operating profit of the domestic entity was 20.3 billion won, falling short of even 2% of its revenue.
The office of Han Jun-ho, a member of the Democratic Party of Korea and a member of the National Assembly’s Science, Technology, Information and Communications Committee, announced on the 14th that an analysis of Netflix Service Korea’s audit report showed Netflix’s domestic revenue last year totaled 1.0542 trillion won. This represents a 66.9% increase over the 631.7 billion won recorded in 2021, marking growth achieved within four years.
Of its total revenue last year, Netflix paid 853.9 billion won to its U.S. headquarters, Netflix Inc., under the name of “consideration for subscription membership purchases.” This accounted for 81.0% of total revenue. Consequently, the domestic entity’s operating profit was limited to 20.3 billion won, with an operating profit margin of just 1.9%.
However, the entire amount paid to headquarters cannot be viewed as net income. Netflix invests in content production and service operations on a global scale, while the domestic entity provides subscription services based on contracts with headquarters. The payments to headquarters reflect costs associated with this business structure.
Netflix’s influence in the domestic OTT (Online Video Service) market is overwhelming. According to the “2025 Broadcasting Media Usage Behavior Survey” by the Broadcasting and Communications Commission, Netflix’s paid usage rate was 46.7%, reaching 3.6 times that of second-place Tving (13.0%). In contrast, domestic OTT companies have failed to turn a profit. Last year, Tving recorded an operating loss of 69.8 billion won, and Wave recorded an operating loss of 12.2 billion won.
The revenue distribution structure for domestic content production companies that contributed to Netflix’s growth has also emerged as a point of contention. Netflix primarily signs contracts in which it bears the full cost of producing original content in exchange for securing intellectual property (IP) rights. Production companies receive an amount equal to production costs plus a certain margin, but under this structure, it is difficult to obtain additional revenue even if a work becomes a hit.
A representative example is “Squid Game.” With a combined view count of 603 million across Seasons 1 through 3, it ranked as the number one title in Netflix’s TV category history, but the IP is held by Netflix. Han (Rep.) pointed out that the margin returning to domestic production companies remains at a level of 3% to 10% of production costs.
Of course, since Netflix bears the production costs and assumes the risk of box office failure, it is difficult to criticize the contracts themselves for securing IP rights. However, voices are emerging that argue production companies need additional compensation based on performance, given that Korean content is driving global hits.
Han (Rep.) stated, “Netflix has become a service watched by nearly half of the population who pay for it, yet while 80% of its 1 trillion won in domestic revenue was paid to headquarters, the domestic entity’s operating profit amounted to only 20.3 billion won.” He added, “K-content is what made Netflix number one domestically, but in reality, production companies that created this content receive a margin of only 3% to 10% of production costs, regardless of box office success,” emphasizing that “responsibilities commensurate with its influence, such as additional compensation based on hit performance, must follow.”
in TECH
