Netflix’s dominance in Korea is indicating the impending bankruptcy of multiple domestic online streaming services (OTT).
According to the industry on May 30th, Watcha is facing difficulties due to failed negotiations. LG Uplus attempted to acquire the management rights of Watcha and held negotiations, but officially declared withdrawal of the acquisition due to Watcha’s continued deficit.
Previously, like Netflix, Watcha poured massive production costs and collaborated with famous actors to create original content.
Watcha introduced various genres of content such as “Recipe For Farewell,” “The King of the Desert,” “The New Employee” and attracted attention by successfully casting top actors Han Suk Kyu and Kim Seo Hyung in “Recipe For Farewell.”
However, Watcha could not withstand the onslaught of original content from competing companies such as Netflix, which had massive capital support.
Experts attribute the increasing deficit of Watcha to the phenomenon caused by the increase in production costs of content.
According to the Financial Supervisory Service’s electronic disclosure, Watcha recorded an operating loss of over 55.5 billion won based on consolidated standards last year. This is more than double the deficit of 24.8 billion won in the previous year.
Watcha’s corporate value, which was once valued at over 300 billion won, has now fallen to around 20 billion won due to continuous operating deficits and a decline in content competitiveness.
In addition, Watcha recorded the lowest number of monthly users among OTT platforms in Korea as it fell below one million recently.
Currently, Netflix dominates Korea’s OTT market with a market share of 52.7%, followed by TVING (23.9%), Wavve (17.8%), Disney Plus (3.2%), and Watcha (2.4%).
Not only Watcha but other domestic OTT platforms are also facing facing financial difficulties. TVING experienced operating losses of 6.1 billion won, 76.2 billion won, and 119.1 billion won from 2020 to 2022.
Similarly, during the same period, Wavve incurred deficits of 16.9 billion won, 55.8 billion won, and 121.3 billion won, resulting in an increasing deficit for domestic OTT.
In response to this, the industry is calling for government support, such as an increase in the domestic content tax deduction rate.