'Blackout' Dramatic Resolution?... Key Issues in CJ ENM-D'Live Arbitration

Negotiation Table Hosted by the Ministry of Science and ICT on the 9th

Image source=Yonhap News

[Asia Economy Reporter Kim Heung-soon] Broadcasting channel operator (PP) CJ ENM and cable TV operator D'Live will sit at the negotiation mediation table arranged by the Ministry of Science and ICT on the afternoon of the 9th. This meeting aims to narrow the gap between the two companies, which has even mentioned a 'blackout'?the suspension of channels provided by CJ ENM?and to prevent user damage. One of the causes of the conflict is the difference in each company's approach regarding the program usage fee increase proposal. Both sides expect to find a breakthrough for negotiation through government mediation, drawing attention to whether they will withdraw the strong stance of blackout and reach a compromise in the discussion on this day.

◆ "Pre-contract, not post-payment"= The final deadline CJ ENM gave D'Live, threatening to suspend the transmission of 13 channels if negotiations for program usage fee increases stall, is the 17th. CJ ENM's position is that "the value of content must be properly recognized." The issue they point out is the 'percentage-based system.' This system sets the program usage fee as a certain percentage based on five items, including the paid broadcasting operator's sales, and settles the entire year's fee retroactively at the end of the year. Applying this system, cable TV, which is declining due to competition from online video services (OTT) and internet TV (IPTV), inevitably faces lower program usage fees set annually.

In fact, D'Live has recently requested freezing or reducing program usage fees over the past four years, reflecting this situation. According to CJ ENM, only D'Live currently insists on the percentage-based system. CJ ENM's stance is that the system should change to negotiating and signing contracts at the beginning or first half of the year before providing content.

A CJ ENM official stated, "We have continuously accepted D'Live's demands to avoid carrying over issues into the next year," and added, "While D'Live raises retransmission fees and program usage fees for terrestrial broadcasters and comprehensive programming channels, it continues to freeze fees only for PPs, which is no longer acceptable." Paid broadcasting such as cable TV pays retransmission fees to terrestrial broadcasters and program usage fees to comprehensive programming channels or PPs as usage fees for content provision.

◆ "Current usage fees already excessively concentrated"= D'Live emphasized that the post-settlement system and program usage fee payments are not unilateral decisions but agreements between companies. A D'Live official explained, "It is impossible to unilaterally process contracts that CJ ENM has not accepted," and added, "Negotiations have continued through official letters and proposals."

D'Live also stated that while they understand the other party's desire to 'get the right price' for content, considering the conditions cable TV faces, they are already paying a significant amount to CJ ENM as program usage fees, making it difficult to accept the increase demand. A D'Live official explained, "We pay program usage fees to about 130 PPs, including CJ ENM, and CJ ENM takes about one-quarter of that," adding, "Since the total amount is limited, if the fees are raised further, the share paid to other small corporations will inevitably decrease."

CJ ENM initially demanded a 20% increase in program usage fees from D'Live in March. However, considering this situation and the amounts frozen or reduced in recent years, they reportedly lowered the proposed increase to about 10% around May. When negotiations did not progress afterward, they brought out the blackout card.

Both sides said, "Ultimately, since this is a dispute between companies, the problem must be resolved through negotiation," and "We hope that after fully explaining our positions during government mediation, a point of agreement will be reached."