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FTC approves merger that will create an OTT giant

Aug 21,2019
SK Telecom and local broadcasters received conditional approval to merge their over-the-top (OTT) media services, paving way to create a behemoth in the local OTT market to fight foreign rivals.

The Fair Trade Commission (FTC) said Tuesday that it has authorized the merger between OTT services Oksusu, under SK Telecom, and Pooq, jointly owned by broadcasters KBS, MBC and SBS, under restricted conditions to ensure fair competition.

OTT media refers to video content services provided over the internet, which bypasses broadcast and cable television. Prominent examples of OTT media include Amazon Video, Hulu and Netflix.

Under the proposed plan, SK Telecom will acquire 30 percent of the shares of a jointly-operated content company run by the broadcasters that owns Pooq. While SK Telecom has not disclosed the value of the deal, it plans to launch the new service, Wavve, by Sept. 18.

The move by SK Telecom and local broadcasters will take the market share of the proposed platform in the local OTT media market to 44.7 percent.

According to the FTC, as of last year, Oksusu held a 35.5 percent of the market with 3.29 million monthly active users, while Pooq had 9.2 percent of the market, with 850,000 monthly active users.

The conditional approval, the first of its kind related to local mergers of OTT media businesses, underscores the heated media landscape as foreign competitors look to enter the market.

Industry tracker Wiseapp said Netflix, which entered Korea in 2016, had 1.84 million paid users in June this year, a threefold increase from the same month a year earlier.

Apple and Walt Disney are also reportedly contemplating entering the local market. Disney controls libraries familiar to many Korean viewers, such as those of Lucasfilm and National Geographic.

The planned deal has drawn the scrutiny of regulators considering the size of the proposed new platform.

The FTC said it was concerned over the possibility other OTT providers could lose access to programming libraries as a result of the merger.

The three broadcasters, KBS, MBC and SBS, control 41.1 percent of Korea’s broadcasting content as of 2017.

The approval is contingent on limitations that will last for three years.

Under the conditions, the three broadcasters will not be able to cancel their content provided to other OTT providers without reasonable cause and will be limited from changing content currently provided online for free to paid services.

The FTC added that it would consider requests to change the conditions after one year if there is reasonable cause.

The regulator’s decision took four months since the merger’s approval was first requested in April. The FTC explained that it expedited the decision considering the rapid changes in the market, such as the rise of Netflix in Korea.

BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]