When Netflix first launched Squid Recreation, few guessed the South Korean drama would grow to be the US streaming firm’s hottest present launch ever.
Fewer nonetheless would have imagined that the flood of community visitors the present attracted would set the stage for larger web payments and video subscription charges all over the world.
Greater than 100m viewers, says Netflix, watched the dystopian show through which a gaggle of indebted folks, together with a fugitive banker and playing addict, battle it out for a $38m jackpot by enjoying youngsters’s playground video games.
However this success has additionally resulted in South Korea’s SK Broadband suing Netflix to cowl the price of the surge in community visitors. Ought to streaming teams pay a congestion cost for hit exhibits?
SK Broadband, wholly owned by South Korea’s largest cellular service SK Telecom, thinks they need to. The corporate says the visitors that Netflix generates on its community has surged to 1.2tn bits of information processed per second as of September, the month of Squid Recreation’s launch, a 24-fold improve over three years. It has needed to improve its community twice to accommodate the visitors surge attributable to the present.
Hits corresponding to Squid Recreation have made Netflix essentially the most profitable streaming service in South Korea, the place native earnings greater than doubled within the yr to 2020. Subscriptions elevated nearly two-thirds within the month of August alone, based on trade knowledge supplier WiseApp.
Native web speeds have facilitated the enlargement. South Korea has the quickest web of a significant market at 450 Mbps in 5G median obtain speeds, 11 instances sooner than the US, based on knowledge evaluation firm Speedcheck. Heavy authorities spending over the previous decade has created the infrastructure mandatory to realize this. Insurance policies additionally ban broadband corporations from charging excessive charges for web entry.
As an alternative, native legal guidelines require the heaviest customers — corporations and content material suppliers that use greater than 1 per cent of whole community visitors and have greater than 1m customers — to pay web charges to bear a share of the upkeep prices incurred by broadband suppliers.
Netflix accounted for nearly 5 per cent of every day web visitors within the fourth quarter and had greater than 1.7m paid subscribers, based on official knowledge. SK Broadband’s lawsuit claims Netflix has not paid appropriate community utilization charges it’s due for the previous three years.
Netflix sees these charges as opposite to its stance on net neutrality, which requires web service suppliers to deal with all content material on their networks equally. It has argued that SK Broadband is looking for double billing, with subscribers paying for an web connection through their Netflix subscription in addition to a direct payment for web service. It took its personal authorized motion towards SK Broadband over the fees final yr.
A district courtroom dismissed Netflix’s declare in June and dominated it should pay excellent charges to SK Broadband. Netflix has appealed towards the ruling. If it wins, it might open the door for all corporations in South Korea, each native and worldwide, that use greater than their bandwidth restrict, to problem their very own charges.
A much bigger situation is that streaming video providers have gotten extra mainstream across the globe. Video streaming accounted for 71 per cent of all downstream US web utilization in 2020, based on Comcast and about two-thirds of whole international visitors. Mixed with the growth in video conferencing utilization and knowledge intensive applied sciences corresponding to automated driving, that locations a burden on the fastened capability of web suppliers.
On the flipside, web neutrality means web suppliers have little incentive to put money into expensive upgrades and capability will increase.
Viewers threat being caught within the crossfire. Overwhelmed networks don’t solely imply decrease high quality film streams however unreliable web and communication channels generally. If revenue margins additional deteriorate, web suppliers shall be pressured to undertake onerous limits on knowledge for customers.
Ought to Netflix lose its case towards SK Broadband, the estimated charges of $84m are unlikely to depart a dent in its backside line. Nevertheless it opens the door for international web suppliers to think about charging streaming corporations for his or her heavy bandwidth hundreds.
This might imply an increase in costs for everybody as improve prices are unfold throughout subscribers as an entire and never simply firms. Subscription prices of video streaming providers might rise accordingly. Each SK Broadband’s lawsuit and Netflix’s listening to are scheduled for December. These are the showdowns viewers ought to watch after Squid Recreation.
june.yoon@ft.com
