Crisis unfolds for streaming platform Watcha amid Netflix dominance

A screenshot of Watcha's short-form platform, Shortcha / Courtesy of Watcha

Watcha, a homegrown streaming service, is facing a serious financial crisis that threatens its survival after being pushed by rivals out of the increasingly competitive market.

According to industry officials on Friday, one of Watcha’s convertible bond (CB) holders filed a court receivership on the streaming platform earlier this month, out of concern that the company may fail to address a CB worth 49 billion ($35.14 million), some of which reached maturity last year. Watcha reportedly sought an extension with investors, but failed to reach an agreement.

Under the law, any creditor holding more than 10 percent of a company’s equity can file for a court receivership without the company’s consent.

The streaming service has been struggling with deteriorating financial structure, exacerbated by continuous operating losses and a plunging user base, as global streaming giant Netflix and other homegrown services like Coupang and Tving have aggressively expanded their market share.

A scene from Netflix's hit series "Squid Game" Season 2 / Courtesy of Netflix

The CB in question was raised around 2021 from venture capital firms and private investors, including Kakao Ventures. But the company has stagnated in the increasingly cutthroat market, dragging down its financial situation.

To stay afloat, the streaming service scaled back its business and sold off subsidiaries, leading to a huge decrease in operating losses, which dropped dramatically from about 22.1 billion won in 2023 to just over 2.1 billion won in 2024.

“Watcha received a large-scale CB investment in 2021, and while we are currently in a capital impairment situation from an accounting perspective, we have improved our operating profit by more than 90 percent over the past year and are working to find new business breakthroughs, including launching our shortform series platform globally,” the company said.

However, losses accumulated over the years, reaching 87.5 billion won in total negative equity at the end of last year. Citing the company’s inability to pay back the CB, its external auditor issued a disclaimer of opinion, in which the auditor declined to look into the company’s financial books because its total capital was deeply negative and its liabilities substantially exceeded current assets.

The service’s shrinking user base is adding to its struggles, despite its efforts. According to multiple market trackers, Watcha’s monthly active users peaked at about 1.33 million in February 2022, but plummeted to 470,000 by this May.

The court is scheduled to hear the statements next week, and, if approved, Watcha could come under management by the court, triggering a debt restructuring process and potential asset sales.

The company said it will continue to pursue all available options to stabilize its finances and seek constructive dialogue with its investors to settle the issue.

“Given the tough economic, investment and startup environment lately, we respect the rights and opinions of our investors,” it said.

“Despite facing many challenges over the past 15 years as we established Watcha, we have grown together with our investors, and we intend to keep working towards a better future. We will continue to work closely with our investors to improve our business going forward.”