Naver Webtoon Company, the Chinese division of Naver Webtoon, has given up on its investment in Watong Entertainment, a Hong Kong-based entity. This move has sparked speculation that Naver might consider liquidating Naver Webtoon Company.
As of April 15, Naver Webtoon Company has written off about 28.7 billion won invested in Watong Entertainment. This includes accepting that the additional 4 billion won put in two years ago during Watong Entertainment’s equity offering is irrecoverable. By the end of last year, Watong Entertainment was valued at only 54 million won. Naver Webtoon Company holds full ownership of Watong Entertainment.
Naver Webtoon Company attributed its disinvestment to Watong Entertainment’s consistent financial losses, which have depreciated its value below its liabilities. The South Korean webtoon industry faces significant hurdles in the Chinese market, including low awareness of intellectual property rights and stiff competition from local platforms such as Kuaikan Comics and Tencent Animation & Comics.
This setback has fueled speculation within the industry regarding the potential closure of Naver Webtoon Company. Although there were some successes in 2022, such as the popularity of adaptations of Naver Webtoon originals like ‘Moon Man’ in China, the failure to replicate these achievements has resulted in sustained losses.
In 2020, the company recorded an operating loss of 3.5 billion won and a net loss of 75.6 billion won, followed by an operating loss of 600 million won and a net loss of 4.7 billion won in 2021. In 2022, it incurred a net loss of 2.8 billion won, followed by a net loss of 3 billion won last year. Consequently, by the end of last year, the unappropriated deficit had reached approximately 251.7 billion won.
Naver split its webtoon business in May 2017, creating Naver Webtoon Company Corporation. In a bid to accelerate its global expansion, Naver then restructured the ownership of its webtoon subsidiaries. As part of this reorganization, Naver Webtoon Company was split in August 2020, with its Chinese operations retained. The remainder merged into Naver Webtoon Limited, now known as Naver Webtoon.
Presently, Naver Webtoon operates as a subsidiary of Webtoon Entertainment Incorporated, headquartered in the United States. Naver utilizes this entity as the central hub for its webtoon business worldwide. With all webtoon subsidiaries, including Naver Webtoon, falling under this U.S. corporation, Naver Webtoon Company, solely focused on Chinese operations, has been marginalized. Over the past two years, while Naver Webtoon raised 380 billion won through capital increases and other means, Naver Webtoon Company only received 2 billion won in capital injections and 15 billion won in short-term borrowing.
