Why is the Korean Drama industry poor? (Class 9)

Hello. This is AKIA Talking now from Korea. As a non-Korean viewer who has only experienced Korea via Korean dramas, you may have an image of the Korean Drama industry as this glamorous scene.  Even if you have had enough experience within the fandom to know the difficult working conditions in the industry, you may still think that the industry is making money since you from a foreign land are watching Korean dramas in a foreign land.

This thing is that is the Korean Drama industry poor! Pretty poor!
For example, Kim Jong-hak, the PD of faith (2012), commit suicide resulting from bankruptcy because of that show.
How could this be?
Well… This is a complicated thing with many moving parts to it. I’ll try to give you as much information regarding this as I have albeit it is not that large.

The history of subcontracting/outsourcing of Korean Dramas
The core of the problems with the industry can be placed on the TV networks and the history of its control of the drama industry. For most of its life, the broadcast market was controlled and essentially run by the government. First, there is KBS network which is a government/public company which is run on Tax money and also ad revenue. As with most government/public companies, the management was assigned using the GREAT system of “Golden parachutes” that dropped former civil servants as explosive payloads .

I’m sarcastic if you haven’t noticed.

Next came the MBC network which was intended to be a private company but ended up somewhat mixed. It also used a lot of “Golden parachutes”. Next,  there came the SBS network which was more private than the other two. These are the main networks in Korea which create of the large portion of the Korean dramas being aired especially on the Top levels.

My view on government/public companies in Korea and general is not positive. There is so much evidence especially in Korea of the poor management via the pseudo “civil servants” that run those companies.  This is also true for the TV networks as they tend to viewed as very poorly run with low profitability. This is the same across the board with no exceptions. Even the least public SBS network could not avoid this fate.

Because of this lack of management capability, up until the 21st century, everything was done in-house. This includes the production of Korean dramas. This means that the writers, actors, directors, the technicians were all employed by the network. In order words, it was the traditional studio system.

In the olden days prior to the mid 1990s, this worked to a degree because of the constrained market as the result of the dictatorship government’s control. There was not much competition within the market and the cost was kept relatively down as everything was done in house. No one got really rich from the Korean drama business but most of the people who worked in the industry got paid.

However, this changed after the mid 1990s. The dictatorship government was gone and the market started heating up and the networks started engaging aggressive popular programming This is the birth of the modern Korean dramas which you, the reader of this editorial, know.

Competition is good.
It is good for the consumer.
However, it is not good for the producer if that producer is incompetent.

And the Korean TV networks were and still are incompetent in running a business. There were consequences of this high level of competition that they did not seem to be able to handle in the proper manner. One of those was the drastic increase in cost of producing a show. This includes both actors’ salaries and other production costs.

Have you noticed how many outdoor scenes and scene changes there are in a Korea drama?
That all costs money. There is a reason for U.S. shows favoring sets.
Also, in regarding to sets, Korean dramas do not properly utilize the sets they actually build. Too much waste!

So, how did they handle the cost increase?  This is where the poverty of the Korean drama industry comes into play. After entering the 21st century, the networks started to outsource the production of dramas. If this was exactly true, there would be less of a problem. However, it is more accurate to say they subcontracted portions of the production process.

Outsource or subcontract…. Its shitty either way.
If you have seen “On air” (2008), you may have noticed something weird. The show is one of the more accurate reflections of how a Korean drama is made. Here is a link to my review of the show.

What is weird do you ask? Even though the show within the show is being produced by an external production company for the TV network, there does not seem as much separation between the two entities as you may expect by the term outsourcing. The PD, the director, and the crew seems to be controlled by the network whole the talent which includes the actors and the writer is linked to the production company. This is not a strict case of outsourcing.

The "Korean drama" form of outsourcing is to subcontract portions of the production process to external production company while also shouldering them with most of the high risk. The reason for the low risk on the part of the network is because they utilize their existing crew, equipment, and post production facilities for a drama. This means that these are all fixed and predictable costs. This also means that the network controls a lot of the production process.

On the other hand, the external production company deals with the more volatile part of the process which involves a lot of flexible labor costs. This includes actors. So, basically, the external production company handles concept creation, talent management, and other stuff that the network does not want to handle. It is a dirty job but, if this was just it, it would not be too hard for the external production company to stay afloat. However, there is more.

The common statistic regarding the cost of production is that only 80% of the expenses incurred by the external production company are paid by the TV network. And this payment does not change whether or not the show gets high rating or the show goes over budget. Just imagine, you are hired to paint a house and you are only paid 80% of the cost of the paint you used. 

Before proceeding, one thing that you have to take into account is that Koreans are notorious for cooking the numbers for statistics and this number of 80% is fishy when you get into details. I have heard that it is closer to 70% in reality.

The other costs incurred by the production company have to be paid via other sources such as product placement but not including intellectual property rights. The copy rights and intellectual property rights are taken by the network is most cases. On average, 17% of the production company's cost is paid via product placement with aftermarket cable broadcast rights only making up 2% of the costs. This comes to the conclusion that, at best, you end up breaking even and not making profit.

On a side note, the foreign broadcast rights stay with the TV network in more than 90% of the cases. This means that, if you want to bitch about why the quality of the video on your streaming services is crappy, you should aim your venom towards the network in most cases.

At the end
Korean drama industry is poor because the network controls most of the revenue streams and production control while leaving little for the external production companies. While people tend to use the large salaries of the actors as a problem, this is not the main reason. If a show cannot pay for the actor, they could just pass if they actually had control over it. However, this is not possible because the network has control over this factor while not being bothered to take responsibility for it.

As a side note, there is a reason for the cost of actors in Korea being high-ish. There is no residual payment concept in Korean drama. As an actor, you have no ownership of your performance after it has aired. So the one time you are paid, you should get enough.  

The conclusion is that there is no real chance you will make money in the long run as a Korean drama external production company in Korea. The question is then why would Koreans keep doing this stupid thing. It is like being the Wile E. Coyote in a “Wile E. Coyote and The Road Runner”. Why keep chasing the road runner when you have never been successful? Why do it when there is overwhelming evidence to the contrary?

Well… mostly because the people who run the external production companies are not real business people. Most of them are former remnants of the studio system left to fend for themselves. While they have passion, they have NO business sense.  This seems to be  a common condition for Koreans if taking in the huge number of small business that are created and fail every year in Korea.

So, that is the situation in Korean drama. Well more accurately for the Major networks. There is not enough information regarding the cable shows to give an opinion about that area.  

Enjoy your Korean drama. It is a show of beautiful suicides.  

Click Below

All of the pictures and videos here are used for criticism and references purposes. They are not mine. Only the article itself is my property!


Post a Comment