Netflix turns profit as Tving and Wavve struggle

Netflix was the sole profitable streaming service in Korea last year, while domestic platforms Tving and Wavve posted losses.

The Netflix logo is shown on one of their Hollywood buildings in Los Angeles, California. [REUTERS/YONHAP]

Netflix was the only streaming service to make a profit last year amid saturated market conditions while homegrown platforms accumulated losses.

Netflix Korea logged an annual operating profit of 12.05 billion won ($8.7 million), down 15.6 percent on year. Revenue jumped 6.47 percent to 823.3 billion won, the company said in its electronic disclosure on Friday.

While the Korean branch saw an increase in revenue after collecting a surge of membership fees last year, it attributed its drop in operating profit to rising marketing management and administrative expenses.

Netflix paid corporate tax of 3.6 billion won, 0.4 percent of its total revenue, and posted 696 billion won in cost of goods sold.

Some 80.7 percent of total revenue, or 664.4 billion won, was labeled as “subscription membership purchase” fees. That sum was sent to Netflix's U.S. headquarters.

The original subscription plan from Netflix's U.S. headquarters is now sold to users in Korea, the company explained. Content production is also headed by the U.S. arm.

Netflix’s recently announced investments in Korean content were not included in the disclosure as production is headed by the firm's U.S. division.

Netflix occupies the largest domestic market share among streaming services, according to the data from Fair Trade Commission. Meanwhile, domestic platforms such as Tving, Wavve and Watcha posted operating losses of 142 billion won, 79.1 billion won and 22.1 billion won respectively.

The other two major players, Coupang Play and Disney+, have not posted full-year earnings.

Korean platforms have been attempting to make ends meet and attract more users by rolling out sports broadcasting content and downsizing workforces to streamline operations.

Tving, which is the currently the second largest domestic streaming service, is drawing more users with a cheaper ad-supported subscription tier and the broadcasting of KBO games, to which it has exclusive rights for the next three years.

The platform's monthly active users (MAU) jumped 4.5 percent on month to 6.9 million in March, while Netflix’s MAU shrunk 6.3 percent to 11.73 million during the same period, according to market tracker Mobile Index.

Tving and Wavve signed a deal to merge their respective platforms in December as domestic services aim to increase their competitive edge against global giants Netflix and Disney+. Details of the merger, including the shareholder stake and date, are yet to be announced.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]