“Down with Netflix!” is presumably a slogan uniting all Korean streaming platforms, but they face a harsh reality.

Netflix is still ranked at the top in Korea, with its monthly active user (MAU) doubling that of Tving, which has the second-largest MAU in Korea’s streaming market.

Most local viewers subscribe to Netflix as a given and hop around Tving, Wavve and Coupang Play, plucking their short-term promotion sales.

The trio’s growth, led by price competitiveness and exclusive rights over terrestrial broadcasters’ programs, has been plateauing recently and even the IP-rich Disney+ is no match for Netflix.

Setting Coupang Play, which is more of a sideline membership under e-commerce company Coupang, aside, Tving and Wavve forming an alliance is widely regarded as their only shot at bringing Netflix down. But rugged terrain lies ahead, with no official talks on a merger held as of yet.

“They’ve only shared proposals. It’s safe to assume that no progress has been made in regards to the conditions or means of the merger,” an industry source told the JoongAng Ilbo on condition of anonymity.

A simple addition of Tving and Wavve’s MAU is around 9 million, which is short of Netflix’s 10 million. Cutting back on production costs and increasing profitability by using their economies of scale against the dominant U.S. over-the-top (OTT) company have been the pair’s strategy since 2020, but some critics remain skeptical because the coupling scheme itself is a challenging task.

A major obstacle to Tving and Wavve’s merger is their complex management structure.

Wavve is Korea’s OTT service trailblazer jointly established in September 2019 by the country’s top three terrestrial broadcasters — KBS, MBC and SBS — and SK Telecom. Wavve’s competitiveness lies in its expansive list of content and its affiliation with the largest telecom carrier.

But Wavve’s seemingly bright future quickly lost its glow following repeated flops of its original content that led to an unhealthy cycle of failed investment and a drop in user loyalty. Caught in a catch-22 situation, it was hesitant to withdraw from a heavily-invested business even with television programs’ fading popularity.

Uncertainty in securing its say in the merged OTT is another risk for Wavve.

Tving’s share is divided among CJ ENM, the largest shareholder, content creators KT Studio Genie and SLL JoongAng. Portal operator Naver also has shares in Tving as it eyes the cinematic adaptation of its webtoons and web novels.

Tving grew its streaming platform market share to 18 percent last year by merging with KT’s seezn, which was ranked 6th in the market at the time. Tving has been spending aggressively on content creation, pouring 100 billion won ($78.7 million) into KT Studio Genie.

Diverging voices in both Wavve and Tving’s management could hamper an agreement between shareholders who entered the OTT business with their own goals.

Even if the companies somehow unite their shareholders and push for a merger, the Fair Trade Commission’s (FTC’s) merger screening process is a further obstacle to surmount. The antitrust regulator will decide whether Wavve and Tving’s merger is a fair move that does not result in a monopoly, which could take months to scrutinize.

The FTC approved Tving’s merger with seezn last year, judging that their market share sum of 18.05 percent falls far below that of Netflix at 38.22 percent.

Tving and Wavve’s total estimated market share is 32 percent, meaning that the FTC’s evaluation process could take much longer. Before Tving broke away from CJ ENM as a subsidiary in October 2020, CJ ENM tried to form a joint OTT venture with JTBC earlier that year. But when the FTC’s screening process began in May 2020, it went on for months. CJ ENM eventually demerged Tving as a subsidiary and formed a multi-party venture hosting outside investors, free of FTC approval.

Tving and Wavve’s revenues have been on the rise lately, but their operating losses are also mounting amid rising production costs.

Tving’s revenue last year reached 247.6 billion won, up 88 percent on year, but its operating loss also climbed 56 percent on year to 119.2 billion won. Spending on intangible assets and content usage rose 127 percent and 65 percent on year, respectively.

Wavve’s revenue for 2022 inched up 19 percent on year to 273.5 billion won, but its operating loss doubled to 121.7 billion won. The platform company’s debt ratio stood at 519 percent last year, with the clock ticking on its redemption period for investments until its planned initial public offering in 2024.

BY JEON YOUNG-SUN [sohn.dongjoo@joongang.co.kr]