[Initial Insight] 'On the Edge' Native OTT Platforms Must Unite to Survive

"It is a total crisis. It is difficult to survive under the current system."

The assessment of the current status of native online video services (OTT) by an OTT CEO was harsh. Another media expert diagnosed, "The OTT market is dominated by Netflix," and "Native OTTs cannot surpass Netflix." Native OTTs such as TVING, Wavve, and Watcha have never made a profit since their establishment in 2019. The three companies posted a combined loss of 286.9 billion KRW last year alone. The deficit widened due to the burden of content production costs and a slowdown in subscriber growth. It is now difficult to endure large-scale losses any longer. On the other hand, Netflix recorded sales of 773.2 billion KRW and an operating profit of 14.2 billion KRW in the Korean market last year. Its monthly active users (MAU) reached 11.53 million, exceeding the combined total of the three native OTTs.

The main reason native OTTs are struggling is that they are losing out to Netflix in the competition to secure exclusive content. Killer content is necessary to enhance a platform's competitiveness. Native OTTs have continuously invested in content. However, they could not withstand Netflix's aggressive approach backed by massive capital. Netflix increased its investment in production companies to acquire quality content and actively introduced Korean original content. Broadcasters and production companies also preferred Netflix over native OTTs because Netflix guarantees basic revenue to producers regardless of success. This allows producers to reinvest in content. Another advantage is easy access to a global audience. Netflix has firmly established its position in the Korean market. Native OTTs' investments were like throwing eggs against a rock.

Native OTTs also partnered with overseas OTTs to diversify content, but the effect was minimal. Overseas OTTs demanded high prices for popular new releases. Wavve, which exclusively broadcasts HBO dramas, failed to secure the hit series "The Last of Us" in the first half of this year. Native OTTs mainly brought in outdated and inexpensive content. Users who expected to watch overseas dramas eventually turned away.

For native OTTs to survive, they must achieve economies of scale and increase subscribers. The core of OTT competitiveness lies in securing the capability to produce original content. This means having a large amount of content that users want to watch on the platform. The domestic OTT market, excluding Netflix, is fragmented with many small platforms. Survival of the fittest will not surpass Netflix. To compete against Netflix, native OTTs must also have scale and financial power.

A platform that gathers Korean content in one place must be created to enter overseas markets. The competitiveness of Korean content is already recognized worldwide. About 60% of global viewers on Netflix have watched at least one piece of K-content. The movie "Carter" and series such as "All of Us Are Dead" and "The Glory" ranked in the top 10 in more than 90 countries. Surveys also show that ASEAN countries prefer Korean content over American content. Netflix plans to invest approximately 3.2 trillion KRW in Korean content over five years. Timing is crucial. If there is a competitive K-platform, it can elevate Korea's status in overseas markets. The government and companies must join forces to rapidly grow the K-platform.

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