‘Squid Game’ Success Earns Netflix a Lawsuit From Korea’s SK Broadband

The global success of Netflix’s Korean survival drama series “Squid Game” has given Korean internet service provider SK Broadband a new opportunity to press claims for network usage fees. On Friday, the ISP said that it had begun legal action against the streamer.

Netflix, which has previously argued that SK already gets paid by corporate and individual users, said that it will review the claim.

“We believe in a collaborative relationship between content providers and ISPs, with each providing the best experience to our mutual consumers. We are investing heavily in bringing great K-content to our audiences around the world,” said a Netflix spokesman in a statement emailed to Variety. “Despite ongoing litigation, we will continue to seek open dialogue with SK Broadband so consumers can continue to enjoy high-quality content streaming at fast speeds,”

The streaming giant has found global success with Korean shows that it has either produced as originals or to which it licensed rights outside the home country. This has led it to take long term studio leases in the country and to commit spending close to $500 million on Korean content this calendar year.

The strong local content policy in Korea has also made Netflix the most successful streamer in the country. Data released last month by industry tracker WiseApp showed that Netflix earned revenues of $68 million in Korea in August, a 78% year-on-year-increase. WiseApp estimated that Netflix’s subscription base in Korea has now reached 5.14 million, compared with 3.16 million a year earlier.

But such conspicuous success by a foreign entity has not sat easily in Korean business circles, where family-controlled conglomerates known as chaebols dominate the industrial landscape and are used to holding sway with government.

In recent years, Korea’s ISPs have pushed government ministries — such as the Korea Communications Commission (KCC) and the Ministry of Science and ICT (MSIT) — to introduce legislation and guidelines which will help them pressure foreign streaming services into paying usage fees.

In 2020, the National Assembly passed legislation obliging those content providers which account for over one million users and 1% of traffic, to provide “service stability” guarantees. The intention was for the ISPs to be able to claim for shared cost payments from streaming services. While the decree defining the details of the service stability regulation ended up not obliging the streamers to pay network fees, the Korean ISPs saw the law as a precedent and an encouragement to press harder.

Netflix last year launched its own legal action against SK Broadband in order to test the fees question in court. In June, a Seoul District Court found against Netflix and ruled that SK is providing a service at cost and that it would be reasonable for Netflix to pay “something in return.” SK is understood to have argues that Netflix needed to pay it close to $23 million for 2020 carriage alone. Netflix’s appeal against the decision is scheduled for December.

Netflix has also offered a hardware solution, called Open Connect Appliances, to help ISPs route traffic efficiently through local data centers which are quicker and cheaper than accessing overseas servers. But it says that SK Broadband has not taken up its offer. “We provide Open Connect Appliances (OCAs) free-of-charge, which have proven to help ISPs significantly reduce traffic while lowering their costs,” said the spokesman.

Meanwhile, Netflix co-CEO and content chief Ted Sarandos recently suggested that “Squid Game” could become the company’s most successful non-English-language show of all time. The series director Hwang Dong-hyuk remains coy about a series sequel.

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