South Korea’s OTT “Watcha” denied rumors of the sale of management rights and said, “We are mindful of various possibilities such as attracting investment.” The crisis is emerging as the investment market situation is not good due to recent inflation and competition in the OTT industry has intensified. The reduction of manpower is also underway. Huh Seung, director of Watcha, said on Media Today on the 28th, “We are in the stage of attracting investment from various angles,” adding, “It is not true that we are pushing for the sale, and I think this story came out in the situation of attracting investment.” Director Huh said, “We are making efforts to improve Watcha’s financial structure and achieve a break-even point by reorganizing Watcha’s business structure,” adding, “We are discussing various things, and the official position will be concluded and revealed.” Watcha recently announced its “Watcha 2.0” project by reorganizing its business structure and tried to expand its services to webtoons and music, but said it will focus on existing businesses. Watcha started as a content recommendation and evaluation service in 2012, introduced the OTT service “Watcha Play” in 2016, and changed its service name to “Watcha” in 2020. Watcha is an early operator among domestic OTTs, but it is suffering from intensifying competition in the domestic OTT industry such as Wave, TVing, and Coupang Play as well as overseas OTT platform operators such as Netflix and Disney Plus. The number of OTT users in Korea is 11.17 million on Netflix, 4.23 million on Wave, 4.01 million on TV, 3.73 million on Coupang Play, 1.68 million on Disney Plus, 1.56 million on the season, and 1.08 million on Watcha. Domestic OTT, excluding Netflix, operating loss even if sales increase
Looking at OTT sales in Korea last year, Netflix had 631.7 billion won in sales and 17.1 billion won in operating profit. On the other hand, domestic OTTs such as Wave, TVing, and Watcha recorded operating losses, not operating profits, although sales were high. According to the Financial Supervisory Service’s electronic disclosure system, Wave had sales of $20 million, but lost $5 million in operating losses, and Tving also lost $1.3 million, while Watcha had sales of $70 million, but lost $20 million. Netflix, the largest OTT platform, also announced that it will introduce a “no account sharing” policy or an “advertising model” within this year as subscribers have recently decreased. Like existing broadcasters, OTT also judged that advertising revenue other than subscription fees is needed.
Domestic OTT industries have expressed concerns that the perception of OTT operators is represented by the perception of Netflix, which is more focused on regulatory policies than support. In terms of OTT industry policy, it was also unclear whether the government would draw up a policy centered on the global market, which is conscious of Netflix, or the domestic market. South Korean OTT industries have said they have been under pressure from users to use fees and investment in content production at the same time. Along with the pressure to lower subscription fees, the OTT promotion policy is insufficient within the demand to distribute more profits to creators. An OTT platform official in Korea said, “It has been two to three years since there are disagreements between ministries and direct support, but it is necessary to find a sustainable content business model,” adding, “For example, tax support, which the government puts forward as an OTT support policy, is mainly applied to manufacturers and platforms.”
SOPHIA KIM
ASIA JOURNAL
