The Lessons We Can Learn from Twitch’s Departure in South Korea: The Pitfalls of the Cost-Sharing Policy
On December 5, 2023, the CEO of Twitch issued a brief and to-the-point statement bidding farewell to South Korea, citing the burdensome costs associated with the “fair share” or “network fees” policy already in effect in the country.
Twitch is a prominent live-streaming platform focusing on gaming, music, art, and cooking, boasting over 140 million monthly active users globally.
In Brazil, the platform has played a pivotal role in catapulting artists and personalities, such as streamer Casimiro, to stardom. With the highest channel subscribers in Brazil, Casimiro secured rights to broadcast live soccer matches and exclusive movies such as “Spider-Man: Across the Spiderverse.”
The departure of Twitch from South Korea serves as a cautionary tale for Brazil. Our previous warnings (here, here and here) emphasized that implementing the cost-sharing policy could diminish competition, thereby contracting markets. For a detailed explanation of the policy, refer to this link.
The Ministry of Science and Information Technology and Communications in South Korea acknowledged the ongoing review of network usage charges, framing it as a “comprehensive issue” that necessitates consideration of sustainable internet network development, content industry growth, and user convenience.
In Brazil, experts (except big telcos) unanimously oppose the introduction of cost-sharing, including various stakeholders in the ecosystem.
Besides, the private sector, including the Open Internet Alliance (AIA) and the Latin American Internet Association (ALAI), voiced concerns about the policy’s potential impacts.
Alessandro Molon, the spokesperson for the Alliance, asserted that cost-sharing would inflict significant harm, drawing attention to South Korea’s case where “the quality of internet services decreased rather than improved— it was the only country to adopt this, and the experiment went awry.”
Regardless, Twitch didn’t opt to depart the country without exhausting all options. In that context, the company went as far as lowering the maximum broadcast quality to 720p, delivering an experience reminiscent of bygone years, particularly for smartphones equipped with 4K screens. However, it proved insufficient, as in South Korea, internet service costs tend to be ten times higher than the global average.
Comparing investments with the Brazilian context, Sérgio Garcia Alves, ALAI’s public policy manager for Brazil, highlighted that:
“The network architecture in Brazil is unique. We can’t find similar designs in any other region. Companies invest significantly in infrastructure, data centers, CDNs (servers), traffic exchange structures, and cables. This ensures quality of service that we can attest as users.”
The Twitch case underscores the adverse effects of internet cost-sharing policies on adopting countries. Ultimately, consumers, or users, stand to lose, experiencing a gradual erosion of the benefits of free and open internet, reduced content availability, limited quality, and higher costs.