Seoul, South Korea -- Twitch, a prominent video streaming service, is set to cease its operations in South Korea, citing what its CEO, Dan Clancy, describes as "prohibitively expensive" network fees in the country. Clancy, in a recent blog post, disclosed that the fees paid by Twitch to South Korean internet operators were allegedly ten times higher than those in most other markets, though specific figures were not provided to substantiate this claim. The decision to shut down Twitch's business in Korea is scheduled for February 27, 2024.
Clancy explained that despite efforts to mitigate costs by reducing video quality, Twitch's network fees in Korea remained exorbitant compared to other countries. This move follows a previous downgrade in video quality from 1080p to 720p in September 2022, as part of Twitch's cost-cutting measures. Furthermore, the platform barred South Korean streamers from uploading video-on-demand content later that year, eliciting strong protests from the South Korean user base and prompting a shift towards alternative platforms such as YouTube and local streaming services like Afreeca TV.
The impending exit from the South Korean market positions Twitch against potential competition from Naver, the country's largest domestic internet company, reportedly planning to launch live streaming services for online video game leagues next year. Twitch's decision to withdraw from South Korea reflects broader business challenges, as highlighted by the company's announcement in March of laying off 400 employees due to slower-than-expected user and revenue growth.
In his blog post, Clancy acknowledged that Twitch had been operating in Korea at a substantial loss, with no viable path forward for the business to operate more sustainably in the country. The withdrawal also underscores the ongoing disputes between South Korean telecommunications companies managing internet networks and global content providers like Netflix and Google, who have raised concerns about excessively high charges. In a parallel development, Netflix recently resolved a legal dispute over network fees with SK Broadband, a South Korean internet provider, though the terms of the settlement were not disclosed.
Jung Sang-wook, a representative from the Korea Telecommunications Operators Association, a coalition representing major telecommunications providers in the country, expressed his inability to substantiate Dan Clancy's assertions regarding network fees. These fees, he clarified, are individually negotiated between companies and shrouded in non-disclosure agreements, making independent verification challenging. Jung suggested an alternative perspective, speculating that Twitch's withdrawal might be rooted in broader management challenges faced by the company, especially when comparable services like Afreeca TV have reportedly been profitable.
In response to Twitch's earlier decision to reduce video resolution, the association had issued a statement in October of the preceding year, rebuking the move. The statement criticized Twitch for lowering the quality of its videos, contending that it led to a surge in user complaints directed at telecom providers, which, according to the association, were delivering services smoothly without any issues. This stance reflects the industry's discontent with Twitch's strategic choices and their perceived impact on user experience within the South Korean market.
In conclusion, Twitch's imminent withdrawal from the South Korean market due to purportedly exorbitant network fees has stirred debates and skepticism within the industry. While Dan Clancy, Twitch's CEO, attributes the decision to soaring operational costs, industry representative Jung Sang-wook from the Korea Telecommunications Operators Association underscores the challenge of independently verifying these claims, given the confidential nature of fee negotiations sealed with non-disclosure agreements.
Jung suggests that Twitch's departure may stem from overarching management issues rather than solely from network fees, citing the profitability of comparable services like Afreeca TV. The association previously criticized Twitch's resolution downgrade, asserting that it triggered user complaints directed at telecom providers, who were supposedly delivering services seamlessly.
As Twitch navigates its exit from South Korea amid competition and discontent, the broader landscape reflects ongoing tensions between global content providers and telecommunications companies. The industry remains at a crossroads, grappling with the evolving dynamics of streaming services, network fees, and user expectations, as highlighted by Twitch's strategic shift in response to its operational challenges in the South Korean market.