Naver Webtoon loses over $20M in Japan paid sales as illegal manga sites surge

Naver Webtoon, a platform where individual creators can earn up to 12.4 billion won ($8.76 million) a year, has run into a major obstacle in Japan: illegal manga sites. Paid content sales in Japan by Webtoon Entertainment, Naver Webtoon's parent company, have fallen by more than 20 billion won in a single year.

Webtoon Entertainment said Tuesday that its Japan paid content sales in the second quarter came to $135.96 million, down 15.6 percent from $161.07 million in the same period last year.

Applying the average won-dollar exchange rate for each quarter, the figures translate to a drop from roughly 225.8 billion won to 204.2 billion won — a decline of 21.6 billion won. The double-digit contraction in Japan paid content sales alone dragged Webtoon Entertainment's total paid content sales down 4 percent year-on-year.

The number of users paying for content also fell sharply. Japan's monthly paying users in the second quarter stood at about 2.1 million, down 9.5 percent from the same period last year.

The weak Japan performance weighed on Webtoon Entertainment's overall earnings. Total second-quarter sales came to roughly 508.3 billion won, down 2.8 percent year-on-year. The net loss widened to about 21.9 billion won, roughly 3.8 times the 5.8 billion won loss recorded in the same period a year earlier.

Industry observers point to illegal online manga platforms as the main reason for Webtoon Entertainment's deteriorating performance in Japan. According to Japan's Ministry of Economy, Trade and Industry, losses from illegal online distribution of Japanese digital content nearly tripled from 2 trillion yen in 2022 to 5.7 trillion yen last year.

Particularly hard hit was published content — a category that includes webtoons and manga — where losses more than tripled over the same period, from 800 billion yen to 2.6 trillion yen. The Japanese government attributed the growing damage to a rising number of users turning to illegal manga platforms.

The illegal distribution of manga has crossed the border between South Korea and Japan. The operator of "New Toki," South Korea's largest illegal manga site, identified only as A, moved to Japan in 2017 and obtained Japanese citizenship in 2022, temporarily halting the domestic investigation.

The South Korean government began consultations with Japanese judicial authorities in 2024. As a result, authorities extradited A to South Korea in June under the South Korea-Japan extradition treaty — the first case in which a Japanese national has been sent back to South Korea since the treaty took effect in 2002.

Meanwhile, the industry has raised concerns that illegal webtoon distribution could erode not only platform revenue but also the earnings of domestic creators. Naver Webtoon disclosed in 2021 that its highest-earning individual creator had made up to 12.4 billion won over the preceding 12 months. Because creators receive a share of revenue from paid transactions, advertising and intellectual property projects on the official platform, illegal distribution directly cuts into what they stand to earn.