Twitch says it’s withdrawing from the South Korean market over expensive network fees

by Lucas Garcia
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South Korea Twitch Withdrawal

Twitch, a widely recognized video streaming platform, has declared its withdrawal from the South Korean market due to what its CEO, Dan Clancy, has termed as “prohibitively expensive” network fees. In a recent blog post outlining this decision, Clancy expressed that the fees paid by the company to South Korean internet operators were notably higher, approximately 10 times more, when compared to most other markets. Regrettably, specific numerical figures to support this assertion were not disclosed.

Dan Clancy further conveyed, “We’ve made the challenging choice to cease Twitch’s operations in Korea on the 27th of February, 2024.” Clancy noted that although Twitch had attempted to mitigate costs by reducing video quality, the network fees in Korea remained significantly elevated, standing at tenfold compared to most other countries.

Twitch, known for its popularity among video game enthusiasts, had previously downgraded its video services’ quality in South Korea from 1080p to 720p in September 2022, citing the imperative need to curtail expenses. Additionally, in the same year, South Korean streamers were restricted from uploading video-on-demand content, a decision that garnered strong disapproval from the South Korean user base and potentially prompted many to migrate to alternative platforms such as YouTube or South Korean streaming services like Afreeca TV.

The impending competition from Naver, the largest domestic internet company in South Korea, reportedly preparing to launch live streaming services for online video game leagues in the coming year, would likely have intensified the challenges for Twitch in the South Korean market.

This withdrawal from South Korea is the latest manifestation of Twitch’s business difficulties, with the company having previously announced layoffs of 400 employees in March, citing a misalignment between user and revenue growth and their expectations.

Clancy elaborated, “Twitch has been operating in Korea at a significant loss, and unfortunately there is no pathway forward for our business to run more sustainably in that country.”

It’s noteworthy that South Korean telecommunications firms managing internet networks have been embroiled in disputes with global content providers, such as Network and Google, over exorbitant charges. These conflicts echo similar disputes between content providers and internet service providers in Europe.

In September, Netflix managed to resolve a legal dispute over network fees with SK Broadband, a South Korean internet provider, although the terms of their settlement were not publicly disclosed.

Jung Sang-wook, an official from the Korea Telecommunications Operators Association, an industry lobby comprising the country’s major telecommunications providers, expressed his inability to verify Clancy’s assertions about network fees, which are typically negotiated privately between companies under non-disclosure agreements. Jung also raised the possibility that Twitch’s decision may be rooted in broader management challenges, citing the profitability of similar services like Afreeca TV and asserting that Twitch’s video quality reduction had led to user complaints despite smooth service provision by telecoms providers.

Frequently Asked Questions (FAQs) about South Korea Twitch Withdrawal

Why is Twitch withdrawing from the South Korean market?

Twitch is withdrawing from the South Korean market primarily due to “prohibitively expensive” network fees. According to CEO Dan Clancy, the network fees paid to South Korean internet operators were approximately 10 times higher than those in most other markets.

When will Twitch cease its operations in South Korea?

Twitch is set to shut down its business in South Korea on February 27, 2024, as per the announcement made by CEO Dan Clancy in a blog post.

Has Twitch taken any cost-cutting measures in South Korea before this decision?

Yes, Twitch had previously reduced the video quality of its services in South Korea, downgrading from 1080p to 720p in September 2022, in an effort to reduce costs. However, this measure was insufficient to offset the high network fees.

What impact did these decisions have on South Korean users?

The downgrading of video quality and the blocking of South Korean streamers from uploading video-on-demand content drew strong complaints from South Korean users. Many users subsequently shifted to alternative platforms like YouTube and local streaming service Afreeca TV.

Was competition a factor in Twitch’s decision to exit South Korea?

Competition was indeed a concern for Twitch in South Korea. The impending launch of live streaming services by Naver, South Korea’s largest domestic internet company, would have intensified competition in the market.

What were the broader business challenges faced by Twitch in South Korea?

Twitch faced significant losses in its South Korean operations. CEO Dan Clancy stated that the company’s business in South Korea was unsustainable, and it had operated at a loss in the country.

Were there any legal disputes involving network fees in South Korea?

Yes, there have been disputes between global content providers like Network and Google and South Korean telecommunications companies over high network charges. In September, Netflix resolved a similar dispute with SK Broadband, a South Korean internet provider.

Why is there uncertainty regarding the network fee claims made by Dan Clancy?

The claims made by Dan Clancy about network fees in South Korea are difficult to verify because such fees are typically negotiated privately between companies and are subject to non-disclosure agreements.

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