[Namsan Stroll] Systems Tailored to Content Drive Content Growth

Not long ago, the commuter seat bus I take for work was replaced with a new model. The problem was the stop bell installed near the ceiling. While this may have been efficient from the installer’s perspective, it seems little consideration was given to passengers who need to remain seated during their commute.

A demand-centered approach is extremely important when designing policies and systems. For content that aims to compete in the global market to be produced continuously, various policy supports that foster a virtuous cycle of investment and production are essential. However, one of the major challenges felt on the ground is that core policies, including the tax system, do not sufficiently reflect the unique characteristics of the content industry.

Content is the product of a combination of disparate traits—culture and economics. Since the "market" determines the success of creativity, which is difficult to quantify or evaluate, there are limits to applying systems developed for general industries. For example, in automobiles or semiconductors, increasing production facilities allows the same products to be manufactured repeatedly, and process innovation can improve productivity. Even in service industries like restaurants, having skilled personnel and an efficient operating system can maintain consistent quality and stable revenue. In contrast, content cannot be mass-produced in the same way, nor can creativity be standardized.

Supporting the content industry ultimately means creating greater value by buffering against uncertainty. Recently, it has become common for drama production costs to exceed 3 billion won per episode, and according to a survey by the Korea Creative Content Agency, the average expenditure on game development has risen by more than 400% over the past four years. Most production costs are incurred before any revenue is generated. Investing more in production does not guarantee a higher price. If a project fails to succeed, the resulting losses fall entirely on the company. For large-scale content investments that involve a risk of failure, partial reimbursement of costs through tax support systems is an important mechanism for encouraging innovation.

Of course, there are tax support systems that apply universally across all industries, and content companies can also benefit from them. The special tax deduction for small and medium-sized enterprises and the R&D tax credit for new service development are notable examples. However, the use of these programs by content companies is limited. In a Korea Creative Content Agency survey of game companies, 13.5% responded that they had applied for the special tax deduction for small and medium-sized businesses, and about 23% had applied for the R&D tax credit. The average utilization rate of R&D tax credits in general industries is about 30–40%, and is known to be 50–60% for technology manufacturing. This demonstrates that, compared to general companies, it is difficult for content companies to meet the eligibility criteria. The biggest reason is that the concept of R&D is still designed around technology.

For content, every process prior to "release"—planning, development, production, such as design, character creation, and scenario composition—should be recognized as R&D. However, it is difficult for content planning to be acknowledged from an R&D perspective, and tax credits are not applied to outsourced personnel, who make up a substantial portion of the workforce. Recently, some physical requirements have been relaxed, but criteria such as establishing a dedicated creative research center, assigning specialized personnel, and maintaining research notes still impose a considerable burden on small and medium-sized content companies.

If there are clear limitations in applying policies designed for general manufacturing to the content industry, where planning and creative processes themselves are the core competitive edge, it is necessary to shift the focus to "production costs" as a form of preemptive investment for future success. This is why the current production cost tax credit, which is partially applied to video and webtoon sectors, should be considered for expansion to other content areas such as games and music.

If content is not produced in a factory, then policy standards must also be adapted to fit the content industry. Supporting the content industry is not about providing preferential treatment to a particular sector; it is an investment in the growth engine and soft power of the Republic of Korea.

Song Jin, Head of Content Industry Policy Research Center, Korea Creative Content Agency

This content was produced with the assistance of AI translation services.