CJ’s TVing, KT’s Seezn set for merger to challenge OTT leader Netflix

South Korean entertainment powerhouse CJ ENM Co.'s over-the-top streaming platform TVing is set to merge with its local rival Seezn, run by telecommunications giant KT Corp., to gain the upper hand in the increasingly competitive on-demand video streaming market.

TVing and KT Studio Genie, the telecom company’s content production subsidiary, will hold their respective board meetings on Thursday to approve the merger plan, people familiar with the matter said on Tuesday.

Senior executives of the two companies, including CJ ENM Chief Executive Kang Ho-sung, KT Group’s business transformation chief Yoon Kyung-lim and KT Studio Genie Chief Executive Kim Cheol-yeon, have held talks on OTT and content cooperation since early this year, the sources said.

“On Thursday’s board meeting, we’ll discuss various ways to improve cooperation between the two companies,” said a KT Studio Genie executive.

When TVing and Seezn are merged, their service users will total about 5.6 million, making the combined entity the largest on-demand video streaming service among homegrown OTT operators in Korea.

The anticipated merger comes as Korea is rapidly emerging as a battleground for domestic and global OTT players to secure content as locally produced TV series and dramas have become global hits.

In Korea, Netflix Inc. is the dominant player with its viewership growth far exceeding that of its competitors thanks to a string of popular content releases like Squid Game and All of Us are Dead.

In January, Netflix said it will release 25 Korean-language drama series this year, including six original films and 18 series.

Netflix has a subscriber base of 11.17 million people in Korea. Local rival Wavve, operated by Korea’s top mobile carrier SK Telecom Co. and the country's three major broadcasters, has 4.24 million monthly active users (MAUs).

ECONOMIES OF SCALE

Through the merger of their OTT subsidiaries, CJ and KT aim to bulk up their services to challenge Wavve and global players such as Netflix, Paramount Plus, Disney Plus and Apple TV Plus.

According to the Korea Creative Content Agency, people aged between 15 and 59 subscribe to 2.69 OTT services a person on average in Korea, putting pressure on streaming video service providers to win over customers.

Last year, TVing posted 207.7 billion won ($159 million) in operating loss on sales of 131.5 billion won. The company’s commercial and advertisement costs increased 27-fold to 18.1 billion won.

CJ ENM has been spending heavily to pursue acquisitions in Korea and abroad to capitalize on the global success of K-content ranging from TV series and movies to pop music groups.

CJ ENM runs around 16 cable TV channels, including drama channel tvN and music channel Mnet as well as the OTT platform TVing. CJ, the producer of the Oscar-winning film Parasite, also operates film production companies such as Studio Dragon Corp.

In May, CJ Group said it is investing 20 trillion won over the next five years to enhance its presence in content, K-food and other future growth drivers.

KT CLOSES RANKS WITH CJ

KT is also beefing up its efforts to turn into a media platform giant.

The company in April unveiled an ambitious goal to become the country’s leading media and content group by strengthening its media value chain with projected annual content sales of $4.1 billion by 2025.

Industry sources said KT and CJ will likely implement an OTT merger in a way that ensures TVing makes Seezn’s services available on its platform while KT preloads the TVing app on the smartphone of new KT telecom subscribers.

About 420,000 people newly subscribed to KG’s mobile services in May.

With reduced marketing costs following the merger, the two companies will also be able to spend more on securing intellectual property and globally bankable content, according to the sources.

KT Studio Genie, established in January of last year, currently creates drama, film and entertainment content based on the original intellectual property owned by Storywiz, another KT affiliate focusing on webtoons and web novels.

Studio Genie distributes content on the KT group’s platforms, including SkyTV, Olleh TV and KT SkyLife channel. It also uses KT’s mobile-oriented platforms such as KTH and Seezn.

KT recently changed the name of its IPTV channel SkyTV to ENA, a word coined by combining entertainment and DNA.

The telecom giant said early last year it plans to expand its content business with an investment of 400 billion won by 2023.

At Thursday’s board meeting, KT Studio Genie will also approve a CJ ENM plan to invest 100 billion won in the company for a 10% stake as part of their strengthened OTT partnership.

Meanwhile, KT is known to be estimating Seezn’s corporate value at around 1 trillion won, higher than market expectations.

TVing with 4.02 million monthly active users was valued at about 2 trillion won when it received 250 billion won in funding from financial investors in February. Seezn has some 1.57 million users.

“Deciding on the mutually acceptable valuations will be the key to a successful merger of the two,” said an industry official.

Write to Han-Gyeol Seon at always@hankyung.com
In-Soo Nam edited this article.