Online video service (OTT) Tving has reported its first quarterly profit since its launch, but the calculations surrounding its merger with Wave have become more complex.
Since the two companies began serious merger discussions in 2023, the competitive landscape in the OTT market has shifted from subscriber acquisition to profitability through advertising and live content. This has prompted major shareholders to reassess the merger's benefits, especially as Tving demonstrates its potential for independent survival.
According to CJ ENM, discussions regarding the merger between Tving and Wave will intensify in the second half of the year. Tving's Chief Financial Officer, Jang Hyun-kyung, stated, "We plan to advance merger discussions in the second half and continue consultations with strategic investors in conjunction with discussions with KT."
Tving and Wave signed a memorandum of understanding (MOU) for the merger in December 2023. The Fair Trade Commission (FTC) conditionally approved the merger in June of the previous year, with a key condition being the maintenance of existing pricing plans until the end of this year, considering the potential for price increases post-merger.
Over a year after the FTC's approval, neither party has produced concrete results regarding the merger. While Tving and Wave have engaged in preliminary collaborations, such as content sharing and personnel exchanges, they have yet to reach a final agreement among major shareholders.
Industry insiders express concern that the prolonged merger discussions may have caused the domestic OTT sector to miss its 'golden time' for maximizing integration benefits. Since the merger discussions began in 2023, the competitive environment has rapidly changed, with Coupang Play expanding its influence through sports broadcasting and the emergence of mass-produced short-form dramas from China, leading to a swift dispersion of viewer engagement.
Tving reported a 40% year-on-year revenue growth in the second quarter, reaching 140.7 billion won, and achieved an operating profit of 6 billion won. This success is attributed to its strategy of securing users through live content, such as professional baseball, and increasing advertising revenue.
As Tving shows potential for independent profitability, questions arise about the necessity of merging with Wave, which has been accumulating losses. Even if the two companies combine their subscriber bases to increase scale, there are doubts about their ability to compete effectively with global OTT services like Netflix.
KT is also evaluating the merger's benefits in light of the changing market environment. KT CEO Park Yoon-young stated on July 23, "Given the rapid changes in the content market, there are many factors to consider regarding company profits."
Some experts caution that Tving's second-quarter profit alone does not guarantee its independent survival. The profit is a result of both revenue growth and cost efficiency, while the burden of content investment, including broadcasting rights for professional baseball, continues.
Kim Yong-hee, a professor at Sun Moon University, noted, "We need to observe whether Tving can maintain its profit trend. The merger is not merely about increasing scale to compete with global OTTs like Netflix; it is a choice to reduce overlapping investments and secure more customers for sustainable OTT operations."
He also suggested that the merger's benefits lie more in the efficiency of content investment and platform operations than in simply combining subscriber numbers. "To operate a typical OTT, a certain level of drama and entertainment content must be secured annually. If the two companies merge, they can reduce the burden of production and supply while expanding their subscriber base. While it may be challenging for each to reach 10 million subscribers independently, merging could make that possible," he analyzed.
He added, "In South Korea, a two-track strategy is needed to secure scale and efficiency through integration while increasing subscribers through partnerships with local OTTs overseas."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.