[Asia Economy Reporter Kim Heung-soon] CJ ENM, which operates broadcasting channels such as OCN, tvN, and Tooniverse, is causing controversy by demanding a 15-30% increase in program usage fees from paid broadcasters such as Internet Protocol TV (IPTV) and cable TV. CJ ENM has significantly raised the program usage fees paid by paid broadcasters for using its broadcast content and has notified that it will suspend transmission if the demand is not accepted. Some paid broadcasters are opposing CJ ENM's unilateral demands, making a blackout situation where broadcasts are actually suspended a possibility.
"Pay More" vs "Can't Pay"
Will It Lead to a Blackout?
According to the industry on the 2nd, CJ ENM recently sent official letters proposing such an increase to paid broadcasters including IPTV, cable TV, and satellite broadcasting operators. The letter contained a statement to the effect that "if negotiations are not concluded by July 17, transmission will be suspended." Paid broadcasters who received the letter are in a difficult position. An IPTV industry official said, "We are internally discussing whether to accept the increase." Another industry official also said, "We are keeping open the possibility of an actual blackout and monitoring the situation."
Delive, a cable TV operator that was presented with a 20% increase proposal, is also strongly opposing it. Delive stated, "We have unilaterally been notified that if an agreement on the increase is not reached by the 17th, program supply will be suspended and digital receivers will be collected." Delive operates in the Seoul metropolitan area and has 2.01 million subscribers, ranking third in the industry. If CJ ENM actually suspends transmission, 2.01 million subscribers will be unable to watch broadcasts.
CJ ENM is a PP (Program Provider) supplying broadcast programs, and Delive is an SO (System Operator) delivering programs to homes. A Delive official said, "We currently pay about 25% of the total program usage fees to CJ ENM." He added, "Compared to typical increase rates, the 20% excessive increase demand is difficult to accept." In response, CJ ENM said, "Delive has demanded a freeze on program usage fees for the past four years and even reduced fees in 2018. While we have already reached agreements or are negotiating with other paid broadcasters, only Delive is refusing to negotiate."
Claims That the Dispute Originates from Home Shopping Transmission Fees
Some speculate that the conflict between CJ ENM and Delive stems from a dispute over transmission fees for CJ O Shopping, a home shopping channel affiliated with CJ. Home shopping companies must pay transmission fees to paid broadcasters for cable TV broadcasting, and the conflict began when CJ O Shopping unilaterally reduced fees without consulting Delive.
Delive explained, "Last August, CJ O Shopping demanded a 20% reduction in transmission fees and has been deducting 20% unilaterally before paying fees. We had no choice but to offset CJ O Shopping's transmission fees against the program usage fees payable to CJ ENM, resulting in this cost. This time, CJ ENM made a unilateral notification." CJ ENM, however, drew a clear line, stating, "This program usage fee increase has nothing to do with the CJ O Shopping issue."
Industry insiders view this as a power struggle between program providers and platform companies intensifying as the broadcasting market shrinks due to the emergence of Over-The-Top (OTT) online video services. A media content industry official said, "In the past, platform companies such as cable TV held the dominant position, but with the advent of the OTT era, paid broadcasting has shrunk, and the influence of those providing popular content has grown. Conflicts similar to those over home shopping transmission fees or program usage fees, which directly affect each company's profits, may recur." Delive is currently exploring mergers and acquisitions (M&A) on the premise of a sale.
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