Are global over-the-top platforms the destroyers of ecosystems or the catalysts of innovation?
Introduction
With the emergence of smartphones, consumers are able to enjoy a variety of content anytime and anywhere, and content consumption habits of the consumers are changing accordingly. In particular, video content consumption is soaring (Bentley et al., 2019), widely loved as a type of content suitable for modern life patterns; video content is edited to be short so that viewers can consume it in limited time at ubiquitous places, and from the user’s point of view, it does not require as much attention as text content requires. One of the major influences on this consumption pattern is the emergence of over-the-top (OTT) platforms, which are online video providers delivering video streaming content to consumers by way of the Internet (Erman et al., 2011, Sujata et al., 2015). With the advent of OTT platforms, not only broadcasting service providers but also general consumers can provide video content services in real time as long as they can access the internet. Therefore, video content consumption has become easier to access.
In addition, OTT services can transmit video content not only to a country wherein the video server is located but also to anywhere in the world because the platform of the OTT service resides on the Internet. Unlike the conventional method of transmitting contents through a broadcast frequency, OTT services easily extend their scope to many countries by simply translating the user interface into the native languages of differing countries. Global OTT platforms, which have expanded its service across various countries, have the advantage of providing more content and innovative services to consumers. On the other hand, global OTT platforms have faced criticism that local broadcasting industries will shrink, and eventually, the broadcasting industry will be subordinated to overseas operators (Davis and Zboralska, 2017, Kim et al., 2016, Turner, 2018). Therefore, this study investigates the OTT industry in South Korea to determine whether the entrance of global OTT platforms into local broadcasting markets really hinders the local broadcasting industry or whether various innovations spill over to local broadcasting markets, thereby standing to bring about positive evolution across the whole industry.
According to Acquier et al. (2017), the emergence of innovators as disruptive creators in certain industries has both positive and negative impacts on the existing landscape. Some studies say that the emergence of global OTT platforms plays a positive role, including the creation of new distribution channels, the activation of related content industries, and the spread of foreign cultures (Shankar et al., 1998, Zhang and Markman, 1998, Bass, 2004, Bondad-Brown et al., 2012). In contrast, there are also negative views, some of which state that the United States is unilaterally spreading its culture and expanding and strengthening its influence on a global scale (Shankar et al., 1998, Zhang and Markman, 1998, Bass, 2004, Bondad-Brown et al., 2012). Global OTT platforms face different situations in different countries; identifying how these differences affect the growth of related industries will help to address pertinent regulatory policies.
To this end, this study compares the influence of global OTT platforms, such as YouTube and Netflix, on the video content industry of South Korea. Specifically, this study categorizes the video content industry into sub-industries of content production and content distribution, investigating the effects of global OTT platforms on both sub-industries. For this purpose, using stochastic frontier analysis, we examine changes in the technical efficiencies of domestic video content production and distribution before and after the market entrance of YouTube and Netflix, respectively. Stochastic frontier analysis allows us to obtain data on the technical efficiencies of companies, but has the disadvantage of not being able to compare technical efficiencies between different groups using different production functions. Accordingly, this study compares technical efficiencies between each group using meta-frontier analysis. Meta-frontier analysis has been used in comparing technical efficiencies of companies in many information technology industries (e.g., eCommerce (Ryu et al., 2019), software (Lee et al., 2018), online platforms (Kim et al., 2018), and ICT startups (Chung et al., 2020).
This study is organized as follows. Section 2 reviews the existing literature and Section 3 explains our methodology and model for estimating levels of efficiency in video content industries. Section 4 describes our empirical results estimated through stochastic frontier analysis and meta-frontier analysis. Section 5 provides implications and concludes.
Section snippets
Literature review
The entrance of global OTT platforms has opened new distribution channels in the countries of the world. Global OTT platforms enable content distribution companies to implement smoother distribution, greater economies of scale, and interactive technologies (Doyle, 2010, Bennett and Strange, 2008, Roscoe, 2004). Picard et al., 2016, Ganuza and Viecens, 2013 report that entry of global OTT platforms allows domestic OTT platforms to grow through imitation and provide opportunities for growth of
Stochastic frontier analysis
Stochastic frontier analysis (SFA) first estimates the frontier production function, which represents the set of maximum outputs that can be produced using a given number of inputs. Then it calculates technical efficiency (TE) based on the frontier production function estimated. The TE of a company indicates the relative level of technology of the company in comparison to the level of best technology expressed in the form of a frontier production function. If the output level of one company
Empirical results
Table 1, Table 2 present descriptive statistics of the study samples. In both the production and distribution sectors, the average input and output of the companies involved was highest in the third period. Also, production activities were active among relatively few companies during this period. This is before and after Netflix launched in South Korea, during a time when the industry had been activated by the launch of global OTT platforms and the creation of many new domestic OTT platforms (
Discussion and conclusion
The advent of OTT platforms has changed telecommunications, broadcasting, and media industries all over the world (Gimpel, 2015, Grove and Baumann, 2012, Limbach, 2014). This study aimed to empirically analyze how global OTT platforms affect related industries upon entrance in other countries. In particular, it focused on video content distributed through OTT platforms, examining whether the domestic video content sector is an area for growth opportunity in situations where overseas content is
Declaration of Competing Interest
The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
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