Watcha may be in play as streaming consolidation advances

Watcha CEO Park Tae-hoon announces the company's blueprint in a press conference on Feb. 22, 2022. [WATCHA]

Korea's No. 7 streaming service may be in play as shareholders have been reported by the local press to be looking for buyers for their stock.

The reports come as the steaming business overall struggles with weakening demand and intense pressure from foreign competitors and as consolidation looms.

Exactly who is selling stock in Watcha is unclear, as is whether all shareholders are on board with a possible transaction.

The company is 25.1 percent owned by founders, including the CEO Park Tae-hoon. Korea Development Bank has 3.9 percent and Kakao Growth Hacking Fund has 3.7 percent.

Watcha declined to confirm the press reports about a possible sale of shares, only saying Thursday that it is restructuring its business after failing to raise much-needed funding this year amid growing competition and economic uncertainties. It will be laying off a double-digit number of workers and postponing the plans for an upgraded service the company promised earlier this year.

Local media reported earlier this week that CEO Park was meeting with potential buyers, such as Krafton, Kakao and Coupang, which have been actively expanding in the business.

Watcha has only said that all options are possible, including financing and a merger with another company.

As a part of the streamlining process, Watcha will be postponing all plans it announced earlier this year. The company presented its blueprint for Watcha 2.0 in a press conference last February, saying it will expand into music and webtoons this year and introduce its service globally next year.

It will be halting investment into new programming. The company also hinted that it may be going public in 2022, but that is no longer a priority.

Watcha lost 24.8 billion won in 2021.

Founded in 2011 under the name Frograms, it started as a streaming service in January 2016. It had 1.2 million subscribers as of June, according to WiseApp.

It is also the only streaming company not supported by a larger company. Tving is run by CJ ENM, Coupang Play by Coupang, Wavve by SK Telecom and U+ Mobile TV by LG U+.

The local streaming market is becoming increasingly crowded in recent years and especially competitive with the presence of Netflix and the arrival of Disney+ and Paramount+.

Even bigger companies have been teaming up to survive the storm. Tving and Seezn announced their merger earlier this month to form the biggest domestic streaming service.

Paramount+ began its video streaming service in Korea through Tving in June, rather than introducing a separate service. Wavve said Thursday that it has signed an exclusive distribution deal with HBO to provide the U.S. entertainment company's programming through the Korean app.

"Multiple streaming services won't be able to exist in the long term," said Lee Hwan-wook, an analyst at IBK Securities. "High inflation rates mean that consumers are forced to cut down their choice of services."

BY YOON SO-YEON [yoon.soyeon@joongang.co.kr]