[Asia Economy Reporter Kim Heung-soon] The dispute over program usage fees between 'CJ ENM,' which operates broadcasting channels such as OCN, tvN, and Tooniverse, and the cable TV operator 'D'Live is turning into a power struggle between broadcasting channel operators (PP) and paid broadcasting platform companies. The opposing side claims unfairness in negotiations, asserting that they are in the position of 'Gap (甲)' (the dominant party).
According to industry sources on the 5th, CJ ENM recently sent official letters to paid broadcasting operators such as Internet Protocol TV (IPTV), cable TV, and satellite broadcasting, demanding a 15-30% increase in program usage fees. It is reported that some operators were notified that if negotiations are not concluded by July 17, program transmission would be suspended. D'Live, which was offered a 20% increase, is protesting that this is a unilateral demand by CJ ENM. Approximately 2.01 million D'Live subscribers in Seoul and the metropolitan area could face a 'blackout' situation where they cannot actually watch channels provided by CJ ENM, such as tvN.
"Those who pay are 甲"
"Not receiving fair usage fees"
CJ ENM claims, "D'Live has demanded a freeze on program usage fees for the past four years and even reduced fees in 2018." They added, "While paid broadcasting platforms have steadily increased retransmission fees paid to terrestrial broadcasters and comprehensive programming channels, they have repeatedly frozen program usage fees for CJ ENM." Because this structure is unfair, CJ ENM insists that program usage fees, which have not been raised in recent years, must be increased.
Paid broadcasting such as cable TV pays retransmission fees (CSP) to terrestrial broadcasters and program usage fees to comprehensive programming channels or PPs annually for content provision. CJ ENM is a PP (Program Provider) supplying broadcasting programs, and D'Live is a platform company delivering these programs to homes, known as a System Operator (SO).
CJ ENM argues, "More than three-quarters of platform companies have already agreed or are negotiating program usage fee increases, but only D'Live is refusing to negotiate." They added, "Considering that retransmission fees or program usage fees are being increased for terrestrial and comprehensive programming channels, but D'Live refuses to even negotiate with us, it proves that the 'paying side' holds the power as the 'Gap'." Explaining the background of mentioning the measure of transmission suspension, they also stated that this disparity in fairness is significant and that content is not receiving its proper value.
"Popular content holds power"
"Platform companies' dominance is a thing of the past"
An industry insider in paid broadcasting said, "Even if only the transmission of popular content like tvN is suspended, there would be significant subscriber churn and complaints," adding, "We are negotiating program usage fees based on the increase proposal presented by CJ ENM." Another insider said, "About ten years ago, when platforms to watch video content were limited, cable TV had tremendous influence, and PPs often pleaded to be allowed to supply programs, but now it is the exact opposite," emphasizing, "The claim that platform companies are 'Gap' in program usage fee negotiations does not match reality at all."
According to the '2019 Fiscal Year Broadcasting Business Operators' Asset Status' recently announced by the Korea Communications Commission, PP broadcasting business sales increased by 244.7 billion KRW from 7.6 trillion KRW in 2018 to 7.849 trillion KRW last year, while SO sales decreased by 67.1 billion KRW to 2.0227 trillion KRW. Operating profit for PPs increased by 184.4 billion KRW to 821.3 billion KRW, whereas SOs saw a decrease of 70.5 billion KRW to 240 billion KRW.
D'Live argues that the increase rate proposed by CJ ENM is excessive considering market conditions. A D'Live official said, "We are already paying about 25% of the total program usage fees to PPs to CJ ENM," and protested, "Compared to typical increase rates, the 20% excessive increase demand is difficult to accept."
Industry insiders view that the emergence of online video services (OTT) has shrunk the broadcasting market, intensifying the power struggle between program suppliers and platform companies. A media content industry official said, "As we enter the OTT era, paid broadcasting is shrinking, and the influence of those providing popular content has grown," forecasting, "Similar conflicts over cost issues directly linked to each company's profits may recur."
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