The CEO of Twitch, a well-known video platform, has announced plans to close its unprofitable operations in South Korea due to high operating expenses.
In a recent blog post, Dan Clancy announced the company’s plan for the week, stating that the network fees paid to South Korean internet operators were significantly higher compared to other markets. However, he did not provide any specific figures to support this statement.
According to Clancy’s statement, we have come to the challenging conclusion to close down Twitch operations in Korea on February 27, 2024. While Twitch was successful in reducing expenses by restricting video quality, Clancy mentioned that the network fees in Korea remain significantly higher compared to other countries.
In September 2022, Twich, a popular platform among video game enthusiasts, decreased the resolution of its video services in South Korea from 1080 p to 720 p, stating a need to cut expenses. Later that year, it also prohibited South Korean streamers from sharing video-on-demand content.
The actions sparked strong dissatisfaction among South Korean individuals and are believed to have motivated numerous individuals to shift to alternative platforms such as YouTube or South Korean streaming websites like Afreeca TV.
It is possible that Twitch would have encountered more challenging rivals in South Korea in the following year, as there are reports that Naver, the largest local internet company, intends to introduce live streaming options for online gaming tournaments.
The planned withdrawal from South Korea is the latest sign of business struggles at Twitch, which announced in March that it was laying off 400 employees, saying that its “user and revenue growth has not kept pace with our expectations.”
According to Clancy’s blog post, Twitch has been running at a notable deficit in Korea and there is no viable solution for the company to operate more efficiently in that region.
In the past few years, there have been disputes between South Korean telecommunication companies and international content providers such as Network and Google. These companies have raised concerns about the high fees charged by the telecommunication companies. Similar conflicts have also arisen between these companies and internet providers in Europe.
In September, Netflix announced that it had come to a resolution with SK Broadband, an internet provider in South Korea, regarding a legal disagreement over network fees. The specific details of their settlement were not disclosed by either party.
According to Jung Sang-wook, a representative of the Korea Telecommunications Operators Association, a group representing the main telecommunications companies in the country, he is unable to confirm the accuracy of Clancy’s statements regarding network fees. These fees are determined through individual negotiations between companies and are kept confidential through non-disclosure agreements.
Jung stated that other companies, such as Afreeca TV, have been profitable, suggesting that Twitch’s decision may be influenced by their overall management issues. The association released a statement in October of last year expressing disapproval of Twitch’s choice to decrease video resolution, citing an increase in complaints to telecom providers who were previously providing seamless services.