South Korea

YouTube accused of beating Korean rivals with ‘stolen’ business model

Critics compare YouTube’s new Super Chat model to Seoul-based live videos treaming site AfreecaTV

PUBLISHED : Monday, 20 February, 2017, 12:23pm
UPDATED : Monday, 20 February, 2017, 12:24pm

By Lee Min-hyung

 “One sows and another reaps” seems to be a perfect match for YouTube’s long-term business tactics.

The U.S.-based video streaming giant unveiled last month its plan to start Super Chat, a platform where creators and the company share profits raised from fans who watch live videos from YouTube “stars.”

The arrival of the new revenue stream reflects the ever-growing influence of talented online posters, with multi-channel networks ― such as YouTube ― growing in size and importance as a core venue for advertisers and other business operators in almost all industries.

But the YouTube business model is not the first of its kind, looking almost identical to AfreecaTV’s “star balloon” system.

The Seoul-based live video streaming site adopted the platform in November 2007, allowing users to buy balloon items, which cost 110 won (US$$0.10) apiece. Fans of AfreecaTV hosts then send the balloons to their favourite broadcasting jockeys ― BJs as they are called in Korea ― via a live chat. In return for the monetary support, BJs communicate with their supporters in real-time by reading out their IDs and having brief talks with them via video.

On average, AfreecaTV gets 40 per cent of its revenue from the balloons, with BJs pocketing the rest. YouTube has yet to make public its specific profit-sharing portion for Super Chat.

“For YouTube, the decision (to adopt the similar business model) must have been an unavoidable choice to diversify its revenues. We do not view this as a serious threat,” an AfreecaTV spokesman said.

“YouTube is not the first firm to copy such a business model as our star balloons. There have been so many late movers in our industry but almost all of them failed to make enough of an impact and stopped their businesses.”

The top priority for those who want to start their own live video channels is a platform where the so-called “gift ecosystem” between users and creators is deeply-rooted, according to the official.

“In this context, we believe Super Chat will not be a serious threat to our decade-long ecosystem, at least in the Korean market,” he said. “For example, Kakao failed to draw enough response with its live video streaming service, Kakao TV, falling short of extending its mobile influence.”

Kakao is the operator of the nation’s most popular messenger app Kakao Talk and No. 2 web portal Daum.


Level playground?

Although AfreecaTV shows confidence that it will beat YouTube, the latter has a track record of having dethroned a Korean powerhouse in the video market to hold a dominant 80 per cent share in the online video-sharing industry here.

In 2004, Pandora TV, the Seoul-based online broadcasting firm, started the video-sharing business for the first time in the world. The following year, YouTube was founded and began to steal the limelight from Pandora TV.

Pandora TV founding CEO Peter Kim attributed its downfall to a weak social environment where the government did not encourage fair and transparent competition.

“It is not a matter of who copied what,” he said. “Much more important is to keep the No. 1 title in any given industry. For start-ups or venture firms in Korea, it is extremely tough to compete with global IT giants.”

“One underlying reason behind this is the unfair competition landscape in Korea, as the government does not adopt the same regulation standards toward local companies and their overseas counterparts,” he said.

“Under the current legal structures, Korean companies will continue to fall prey to overseas business titans. The playground is not level and does not favour us. All firms should be treated equally under local restrictions regardless of the locations of their headquarters.”

The remarks reflect that renowned IT firms ― including Apple, Google or YouTube ― have generated billions of won in profits each year here, but the Korean government has failed to collect enough taxes from their business operations, due to a different taxation system imposed on multinational firms.

This is in contrast to hard-line protectionist policies from the Chinese government, which has in recent years imposed strict regulations on Western IT titans. This has resulted in creating such influential Chinese firms and services as Baidu and TenCent’s WeChat.

YouTube accused of beating Korean rivals with ‘stolen’ business model