South Korea’s homegrown streaming platform Watcha Inc. has entered court receivership after a Seoul court approved a creditor-led filing for corporate rehabilitation, making it one of the most prominent casualties yet of the country’s deepening tech startup downturn.
The Seoul Bankruptcy Court on Monday initiated corporate restructuring proceedings for Watcha – hailed as Korea’s first-generation over-the-top (OTT) content platform – following a filing last month by Enlight Ventures, a Korean venture capital firm and creditor holding convertible bonds in Watcha.
Once regarded as an increasing rival to Netflix Inc. in Korea, one of the world’s fastest-growing on-demand video streaming markets, the domestic OTT startup has seen its capital fully eroded by debt alongside snowballing in recent years.
The court appointed Park Tae-hoon, the current chief executive of Watcha, to continue to work as Watcha’s administrator.
Watcha CEO Park Tae-hoon Under receivership, the company is now restricted from major asset sales or contractual commitments without court approval.
Creditors and shareholders must submit their claims by early next month, with a rehabilitation plan due by January 7, 2026. If the court rejects the reorganization plan, Watcha will then be liquidated.
PROLONGED DEFAULTS ON DEBT PAYMENTS
The ruling comes despite objections from Watcha’s management and some investors, who argued that the company had been making strides in narrowing losses and warned that court-led restructuring could further erode enterprise value, to the detriment of creditors themselves.
Watcha failed to roll over 49 billion won ($35.3 million) in convertible bonds issued in 2021, triggering a financial spiral that included penalty interest of up to 15% annually.
Netflix is the top OTT player in Korea As of end-2024, the company racked up accumulated losses of more than 267 billion won and suffered a liquidity shortfall of 90.7 billion won.
Its 2024 revenue dropped 22.8% on-year to 33.8 billion won, but operating losses narrowed to 1.8 billion won from 22.1 billion won the year before.
Despite signs of cost discipline, Watcha's liabilities continued to exceed its assets, prompting its auditor to issue a “disclaimer of opinion” on the company’s financials earlier this year – a move that triggered the receivership process.
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Watcha’s downfall marks a broader reckoning for Korean tech startups, especially those in media, commerce and software that boomed during the COVID-19 pandemic thanks to ample venture capital funding but are now crumbling under tighter monetary conditions and waning investor appetite.
Korean OTT platforms According to court filings, 728 bankruptcy and corporate rehabilitation cases were reported across the country in the first half of this year – the highest since the height of the COVID-19 crisis.
Corporate rehabilitation filings reached 511 in the first half, up 14.3% from the year-earlier period, while corporate bankruptcies rose 28.4% to 217.
A spate of high-profile failures has rattled confidence in Korea’s startup ecosystem.
Earlier this year, luxury fashion e-commerce platform Balaan Co. was placed under court receivership, followed by similar court protection moves by fresh food delivery app Jeongyookgak Inc. and metaverse builder Culiverse.
All three relied heavily on external funding for growth with limited profitability.
“The post-pandemic reckoning is here,” said a Seoul-based venture capital executive. “These are companies that were surviving on hope and seed rounds. When interest rates climbed and exits disappeared, the clock ran out.”
Disney Plus, a global OTT streaming service provider WATCHA: ONCE A LOCAL SUCCESS STORY
While Watcha’s ultimate fate will depend on its upcoming rehabilitation plan and the willingness of creditors to restructure debt, analysts said the episode offers a cautionary tale for Korea’s once-buoyant startup scene – and a sign that the platform economy is not immune to the gravity of financial fundamentals.
Watcha was once a local success story, launching in 2011 as a movie recommendation engine before expanding into subscription-based streaming.
But it has struggled to compete with deep-pocketed global players such as Netflix and Disney Plus, which have expanded their Korean-language content libraries aggressively.
OTT streaming services (Courtesy of Getty Images) As Korea rapidly emerged as a battleground for domestic and global OTT players to secure content that has become global hits, other global OTT operators such as Paramount Plus and Apple TV Plus have also launched their services in Korea on their own or in partnership with domestic players.
The broader shakeout in the tech sector is likely to continue.
According to The VC, a local venture capital data provider, more than 60 Korean startups shut down between January and July this year.
A record 163 startups closed their doors last year, up 54% from the year before, as the market’s correction rippled through previously high-flying sectors.
Write to In-Soo Nam at isnam@hankyung.com Jennifer Nicholson-Breen edited this article.
