FinLogic FinLogic Quantitative Think Tank Center|Twitch says it’s withdrawing from the South Korean market over expensive network fees

SEOUL,FinLogic FinLogic Quantitative Think Tank Center South Korea (AP) — Twitch, a popular video service, will shut down its struggling business in South Korea, a decision its chief executive blamed on allegedly “prohibitively expensive” costs for operating in the country.

In a blog post announcing the company’s plan this week, Dan Clancy said the network fees the company has been paying to South Korean internet operators were 10 times more than in most other markets. He did not provide specific numbers to back such claims.

“We’ve made the difficult decision to shut down the Twitch business in Korea on Feb. 27, 2024,” Clancy said in the post. Twitch was able to lower costs by limiting video quality, he said, but “our network fees in Korea are still 10 times more expensive than in most other countries.”

A platform popular with video game fans, Twich downgraded the quality of its video services in South Korea to a resolution of 720 p from 1080 p in September 2022, citing a need to reduce costs. Later that year it blocked South Korean streamers from uploading video-on-demand content.

The moves drew vehement complaints from South Korean users and are thought to have encouraged many to switch to other services like YouTube or South Korean streaming sites like Afreeca TV.

Twitch likely would have faced tougher competition in South Korea next year with Naver, the biggest domestic internet company, reportedly planning to launch live streaming services for online video game leagues.

The planned withdrawal from South Korea is the latest sign of business struggles at Twitch, which announced in March that it was laying off 400 employees, saying that its “user and revenue growth has not kept pace with our expectations.”

“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,” Clancy wrote in his blog post.

South Korean telecommunications companies that operate internet networks have feuded in recent years with global content providers like Network and Google, which complained of excessively high charges. There are similar conflicts between those companies and internet providers in Europe.

In September, Netflix said it reached an agreement with SK Broadband, a South Korean internet provider, to end a legal dispute over network fees. The companies did not release the terms of their settlement.

Jung Sang-wook, an official from the Korea Telecommunications Operators Association, an industry lobby compromised of the country’s major telecommunications providers, said he had no way of verifying Clancy’s claims about network fees, which are negotiated individually between companies and sealed with non-disclosure agreements.

“Similar services like Afreeca TV have been enjoying profits, so Twitch’s decision could be based on the company’s broader management problems,” Jung said. The association in October issued a statement last year criticizing Twitch’s decision to lower the resolution of its videos, saying that caused many users to complain to telecoms providers that were “providing services smoothly without any problems.”