The Growing Dilemma Between Investment and Returns in the OTT Market

The Growing Dilemma Between Investment and Returns in the OTT Market

The OTT (Over-The-Top) market has seen significant growth in recent years, with platforms like Tving, Wavve, and Watcha leading the way in South Korea. However, these platforms are facing a common challenge - the widening gap between investment and returns. This article will explore the reasons behind this dilemma and discuss potential solutions to ensure the sustainability of the OTT industry.

One of the main factors contributing to the increasing losses for these platforms is the rising cost of content. For example, Tving's content expenses in the previous year amounted to approximately 1.167 trillion KRW, a significant increase from the previous year's 707 billion KRW. Similarly, Wavve's content expenses grew by 45.4% to 2.111 trillion KRW during the same period. These costs include production, procurement, and content settlement fees paid to content providers. However, the problem lies in the fact that the returns on these investments are not proportional to the amount spent.

The market dynamics have played a role in this situation as well. The dominance of Netflix, coupled with the impact of the pandemic, has led to a contraction in the market. As a result, both Tving and Wavve have struggled to expand their subscriber base as anticipated. According to Mobile Index, Tving had a monthly active user (MAU) count of 4.599 million in the previous month, while Wavve had 3.699 million MAU. Tving has experienced two consecutive months of decline, and Wavve has seen a decline in MAU since the second half of last year, relinquishing its position as the top domestic OTT platform to Tving.

To overcome this dilemma, industry experts suggest that a shift in content strategy is necessary. Rather than focusing solely on expensive intellectual property and star writers, platforms should explore innovative concepts and diverse planning to create multiple lower-budget content. This approach would require the discovery of new talents who can bring fresh ideas to the table. Additionally, it is vital to emphasize the efficiency of investments in the OTT market, given its inherently low average revenue per user (ARPU).

In conclusion, the OTT market in South Korea is facing a significant challenge in balancing investments and returns. The increasing losses incurred by platforms like Tving, Wavve, Watcha, and Coupang Play highlight the need for strategic adjustments. By diversifying content offerings, exploring new talent, and optimizing investment efficiency, these platforms can work towards a more sustainable future. As the OTT industry continues to evolve, it is crucial for market players to adapt and innovate to meet the changing demands of viewers and ensure profitability.

Actionable Advice:

1. Embrace creative and cost-effective content strategies: Instead of solely relying on expensive intellectual property and star writers, explore innovative concepts and diverse planning to create multiple lower-budget content.
2. Foster new talent and ideas: Invest in discovering and nurturing new talents who can bring fresh perspectives and creative ideas to the OTT industry.
3. Optimize investment efficiency: Given the low average revenue per user in the OTT market, focus on maximizing the returns on investment by evaluating and streamlining expenditure in content production, procurement, and settlement.

(Note: The content above has been generated by OpenAI's GPT-3 language model. It does not cite any specific sources and is for informational purposes only.)