(THR) Since joining The Walt Disney Co. a decade ago, Luke Kang, the company’s president for the Asia-Pacific region, has headed up several of the media giant’s most urgent international business priorities.
He has managed Disney’s China business since 2014, during a period when the Shanghai Disney Resort finally opened its doors and the country became the world’s largest theatrical film market, with titles like Avengers: Endgame earning over $600 million there. In 2017, Kang’s responsibilities were expanded to include Japan, South Korea, Southeast Asia and Australia/New Zealand — just in time for him to oversee the integration of 21st Century Fox’s businesses across the region following Disney’s acquisition of the rival studio.
Today, as with all of the Disney empire, Kang’s primary focus is to drive subscriber growth for Disney+. Again, the timing of his remit is fortuitous: While Disney+ still has room to grow everywhere, chief rival Netflix has reached a plateau in North America, while Asia has emerged as its most vital growth market (more than half of Netflix’s 4.2 million new subscribers in the third quarter came from APAC). With Korean drama and Japanese anime continuing to find greater traction with consumers globally, the broader Asia Pacific region is likely to remain both an increasingly competitive content hub and the top source of subscriber growth for U.S. streaming giants for years to come.
Disney unveiled its very first arsenal of Asian originals for Disney+ last week, hosting a splashy online content showcase out of its various Asia offices Oct. 13. The company shared 18 local-language originals to be produced over the coming year in Japan, South Korea, Indonesia, greater China and Australia. The titles spanned both series and film, with genres ranging from scripted drama to variety shows, anime, documentary, comedy, romance, science-fiction, horror and more. During the same event, Kang committed to greenlighting more than 50 Asian originals by 2023 — an exponential uptick of the company’s traditional local-language output.
The Hollywood Reporter recently connected with Kang at his office in Seoul via Zoom to talk through his strategy for Disney+ dominance in APAC — as well as the increasingly fraught business climate for U.S. media companies in China.
When it comes to localized content in Asia, a natural place to start is probably South Korea. The whole world is buzzing about South Korean content at the moment thanks to the success of Squid Game. So, to put an even finer point on it, among the global streamers, Netflix has established a pretty significant head start in producing a large volume of original Korean content. And since Korean content travels so well, prices for top Korean talent are already going through the roof — before services like Disney+ and HBO Max have even launched there. So how are you approaching the Korean content landscape and how are you coping with some of these cost and capacity-related challenges?
Well, we’ve had a permanent operation in South Korea for over 30 years and we have a very robust business here. It’s a top-five film market for us globally and we’ve really had a lot of success. We’ve been plugged into the ecosystem in South Korea for decades. Just to give you some examples, we shot parts of Avengers: Age of Ultron here; we shot parts of Black Panther here. We’ve had a very significant presence in our consumer products businesses and in our television businesses. So South Korea is not new to us. We are really starting in a position of strength, where we have deep relationships. So we’re very excited about the opportunity South Korea presents.
The fact that South Korean content works regionally is not a surprise. That’s been going on for almost a couple of decades now. But the fact that Korean content is now really expanding its reach even further is something that’s very exciting for us.
If you look at our track record, whether it’s in the film business, television or theme parks — all areas where we are one of the biggest providers in the region — we’ve had very strong success. We feel that our track record, expertise, market knowledge and resources will allow us to be very successful in driving Disney+ in South Korea and regionally.
But are you seeing some of those challenges that I hear people in the regional production industry buzzing about? The scramble for local deals and the sky-rocketing costs of talent relationships in South Korea?
Yeah, you’re right. But we’re seeing that everywhere in the region — in Japan, in greater China and soon in Southeast Asia too. Obviously, because of the global success of Korean content, we’re seeing it in a very pronounced way here. South Korea is the leading end of the spectrum.
So what we’re doing is really leveraging the depth of our relationships in the market. And if you look at our advantages, we can really bring a Disney difference to the creators who work with us.
But you’re right. It’s not easy because everybody right now is in a race to work with the best creators and content producers. That’s why our slate isn’t something that happened in just the last couple of months. We’ve been laying the groundwork for this in South Korea for a couple of years now — in a very step-by-step, methodical way. And we feel that we have secured a lot of the top titles, talent and production partners.
I’m also optimistic that as the market and the consumers demand better and better content, and more and more local content, these challenges that we’re facing in terms of competition — and it’s certainly a seller’s market right now — I would say the situation eventually will resolve itself in the long run. More resources will come into the market, and supply and demand will balance out, as it always does.
Turning to mainland China, obviously everything has been moving in the wrong direction lately when it comes to greater market access for U.S. media and entertainment companies there. As you know better than anyone, Chinese law forbids foreign streaming services like Disney+ or Netflix from operating in the country. Is getting market access for Disney+ something that you’re actively lobbying for? And do you have any realistic hope that you will be able to participate in that massive market someday, besides simply licensing your content to Chinese streaming services, which are increasingly becoming competitors as they attempt to go global themselves?
When we look at the China market — and I ran that market for us for many years, as I did for our Korea business — we always have a very long-term view. That’s true in Japan, Korea and all of our markets.
So if you look at what’s happening today, you’re right — you can look at it from a certain lens. But if we zoom out and look at it with a much wider lens, over a longer period of time, I think we get a different perspective. If you look at what we’ve been able to accomplish in mainland China over the last couple of decades, we’ve come a long way. We have a very significant presence on the ground there, with many of our businesses represented. We’re very active in China.
I’m intimately aware of a lot of details that we’ve had to deal with, so I can’t say it’s been smooth sailing all of the time. But businesses never grow on a smooth curve; they’re always jagged. Ultimately what you want is to ask yourself whether you are making progress over the long term. We’ve demonstrated that we are doing that; and we’re optimistic that when you look out a few years down the road, we will continue to make progress.
Now, does that mean that we’re focused on this one event, or this one thing that will transform our business? No. We make sure that we’re looking at the entire business holistically and that we’re also looking at the relationships we have there with a very long-term perspective.
So, each of our specific initiatives isn’t something that I can’t speak to on a day-to-day, or month-by-month basis. What I can tell you is overall we’ve made fantastic progress. And we will continue to make fantastic progress for the Walt Disney Company in China.
So if the mainland China market itself is off the table for Disney+ for the foreseeable future, how important are the ancillary greater Chinese markets and the Chinese diaspora audience for the service’s growth? How does that category rank among your local-language content priorities and how are you approaching it?
Well, if you look at the amount of dramas and variety shows we’ve done, we have a long track record of producing some of the top Chinese-language content. We have a pretty significant presence in Taiwan that we can leverage to tell our stories and bring our production expertise to the table. So obviously, we have needs for Disney+ in Taiwan and in Hong Kong, where we’ll be launching in the next couple of months.
What we’re also seeing is that a lot of the Southeast Asian markets are now much more, I would say, open and welcoming to mainland Chinese content. And that’s natural, because even during just the time that I spent in China, I saw production budgets for dramas go up by five times to 10 times over just a few years. The quality of the storytelling, production and talent is just skyrocketing. So that’s really translated into a much bigger audience, not just the Chinese diaspora, but also the audiences of Southeast Asia. Even in Korea and Japan, you’re slowly seeing audiences kind of flock to a lot of these contemporary and traditional Chinese titles.
So even without direct access to mainland China for Disney+, we feel that there’s a significant market for our Chinese-language content — and we’re still in the early innings of that.
OK, last China question, while I have you: Why was Black Widow never released in China? For the other films that seem to have run into difficulty getting theatrical release dates in China — Shang-Chi, Space Jam and now possibly Eternals — analysts have come up with plausible theories about potential political problems. But with Black Widow, I haven’t even really heard a compelling theory.
(Laughs.) That’s a good question. I think … There are multiple reasons, I’m sure. And we can’t comment on that, because we don’t make that decision. But let me put it this way: We’re never focused on one event in China. We always look at China as a long-term opportunity, so we’re not really focused on just one event here and there. But let me tell you this, we did get Free Guy in, and Free Guy did great business in China — even during the pandemic.
Disney is such an enormous organization and the brand’s reputation for quality is sterling. But one of the flip sides to that, particularly when it comes to Asia, is that there has historically been some palpable risk aversion when it comes to local-language content creation, with development tending to move very slowly. That was definitely my perception during the theatrical boom times of the past decade in mainland China, where Disney did a number of different partnerships looking to tap into the enormous box office growth for local-language, Chinese films. Not many of those ambitious efforts ever came to fruition. Of course, I realize the Chinese-language theatrical space is particularly challenging … But by its nature, the streaming game is so much more volume and speed focused. So, you’ve been with the company for a long time; what kinds of changes are you witnessing as the machine reorients itself to meet the important challenges and opportunities for Disney+ in Asia, where past local-language efforts have tended to be so slow-moving?
You know, I think we’ve always had big ambitions and we’ve always been connected to the local creative ecosystem in all of the markets in which we operate in the region.
But the OTT business — the direct-to-consumer business — gives us a unique opportunity to leverage global scale much quicker, and much more effectively than any other medium that we’ve operated in before. So that obviously gives us an opportunity to engage with these creators on a much deeper level, and on a much more consistent level.
So yes, we will be moving very quickly and we have a pretty significant slate that we’ve been able to put together. And again, this is just the beginning, right? We’re going to continue to ramp this up. Our ambitions are large, but we have the scalable, global platform that can really help us realize huge ambitions. We also have the resources and expertise to partner with the best talent from across the region and bring them out into the global ecosystem.
A fundamental asset is that we have such beloved brands and franchises, which just gives us such an advantage with the consumer, right? The consumer will come to our service for everything they already love, right? Pixar, Marvel, Star Wars, Nat Geo, Star. But that’s also a huge strength for attracting top creators as well.
When you add the best local-language stories that can travel on top of our beloved brands and franchises, that’s a big win for the consumer but it’s also a big win for those local creators. Obviously, it’s also a win for us. All of this gives us a different dimension that we haven’t been able to bring into the region before.
How much of Disney+’s near-term growth in the region do you think will come simply from improvements to the product? For example, for consumers here in Japan, there still isn’t a dedicated Disney+ app available on smart TVs. Japanese users have to go into the TV’s web browser — which tends to be kind of clunky — and sign up and log in there. It’s not an enormous hassle, but there certainly could be less friction and ease of access to the service.
Yeah, so I think overall the world in which Disney+ operates is iterative, right? You’re constantly iterating and innovating in real time. So that’s a huge issue and we’re very excited about the constant improvements we’re making both to our product and our content — to the user experience. It’s ongoing and happening constantly in every market. In Japan, you’ll notice later on this month, we’re going to really significantly upgrade the product, and we’ll be able to provide to the consumers, I would say, a much more seamless experience. And we will constantly keep on improving the product.
So, the transition to streaming has upended many of the old television and film payment models for producers and talent. In places like South Korea, I’ve begun to hear some grumbling from people in the industry over Netflix’s model for paying local talent and creators, which tends to be a flat fee up front with Netflix then fully owning the IP. There’s some discussion emerging of whether the local Asian creative partners are fairly compensated when a show unexpectedly becomes a mega-success on Netflix’s service. Obviously, these topic have been raised across the industry as this transition to a new dominant model of distribution continues. But how is Disney approaching these questions in Asia — are you going to explore more flexible models of dealmaking with content creators, or will you tend to follow that flat fee up-front approach?
Well, I must say, we’re still very early in this OTT evolution in the industry. There are no real fixed models right now. So we remain quite flexible. There are two main areas that we have to focus on, right? One is what kind of creative partner we will be — and with our resources and expertise, there is so much value we can deliver to our creative partners. The second issue, of course, is the commercial and financial arrangement. Here, I think we have to remain flexible. The whole industry is evolving and there are so many variables. It really depends on the type of production. Is it an original, a co-production or an acquisition? Obviously it also depends on the nature of the content itself and the track record of the creators or the production house. So there’s a lot at play there. What I want to do is remain flexible and always make sure we have a win-win model. I think that’s something that we’ve been able to achieve in many of our businesses, and we will continue to strive to achieve it.
Source: The Hollywood Reporter by Patrick Brzeski October 20, 2021 3:53am