'Tiving' and 'Wavve' Merger Countdown, Domestic OTT Market Shifts to Two-Strong Structure

Merger MOU Signing as Early as Next Week
Both Companies Report 200 Billion Won Deficit Over 2 Years
User Numbers Near Netflix, Forming a 'Two-Strong System'

The merger of domestic OTT (online video services) 'TVING' and 'Wavve' has entered its final countdown. A major upheaval is expected in the domestic OTT market, which has been dominated by Netflix as the sole leader. The existing structure of 'one leader and three contenders (Netflix, Coupang Play, TVING, Wavve)' will be reorganized into 'two leaders and one contender (Netflix and the merged entity, Coupang Play)'. From the consumer's perspective, an era is approaching where all domestic terrestrial broadcasters, general programming channels, and CJ ENM-affiliated channels such as tvN can be enjoyed through a single OTT platform.

An industry insider said on the 29th, "CJ ENM (the parent company of TVING) and SK Square (the parent company of Wavve) will sign an MOU (Memorandum of Understanding) outlining the merger as early as next week," adding, "The formal contract is expected to be finalized early next year." Although both companies were cautious in their statements as the final agreement is still being drafted, they effectively acknowledged that the merger is underway. The contracting parties are SK Square and CJ Holdings. The merger decision was made as a strategic judgment at the group level. In the merged entity, CJ ENM will be the largest shareholder, with SK Square as the second largest. CJ ENM stated, "We are discussing various cooperation plans, including strategic partnerships, to strengthen competitiveness as an OTT operator."

There have been persistent rumors about the merger between TVING and Wavve. The prevailing sentiment is that survival against the 'number one' Netflix is difficult through independent efforts. Their deficits have also been growing. TVING's operating loss was 76.2 billion KRW in 2021 and 119.1 billion KRW last year. Wavve also posted operating losses of 55.8 billion KRW in 2021 and 121.7 billion KRW last year. This year, they again failed to reach the break-even point. Since their parent companies, SK Square and CJ ENM, are also struggling with losses, the OTT business has been a 'pain point.'

If the two companies merge, they will be reborn as an 'OTT giant' comparable to Netflix in terms of user numbers. As of last month, Netflix had the highest monthly active users (MAU) at 11.37 million, followed by Coupang Play (5.27 million), TVING (5.10 million), and Wavve (4.23 million). Combining TVING and Wavve's user bases results in 9.33 million users, instantly rising to second place, nearly matching the leader. The combined monthly usage time of TVING and Wavve is approximately 90.29 million hours, approaching Netflix's 100 million hours. Of course, due to overlapping users, the actual number is expected to be lower.

Lee Jong-kwan, Senior Specialist at the law firm Sejong, said, "The domestic market has had a relatively small scale compared to OTT companies' investments. The merger creates possibilities to overcome deficits by expanding economies of scale and scope. From a content perspective, each company previously engaged in exclusive transactions, but with the merger, users will gather on an integrated platform, increasing user benefits and making it easier to secure subscribers."

There are still obstacles on the path to the merger. First, it must pass the Fair Trade Commission's corporate merger review. Additionally, it is known that there are still opposing opinions within CJ. This is because the merged entity will have to assume the convertible bonds (CB) worth 200 billion KRW with a five-year maturity issued by Wavve in 2019 to resolve financial difficulties. In fact, although merger rumors have been persistent, this issue was the biggest obstacle preventing the merger from materializing until now.