OTT Also Emerges as a Subject of Broadcasting and Communications Development Fund Collection
Foreign OTTs Like Netflix and YouTube, Which Generate Massive Ad Revenue in Korea, Face Payment Issues
Ensuring Effectiveness of Overseas Companies Is Key to Justification
[Asia Economy Reporter Koo Chae-eun] The discussion about imposing the Broadcasting and Communications Development Fund (Bangbal Fund) on online video service (OTT) providers has stirred the OTT industry. The key issue is whether the fund can be levied on foreign content giants like Netflix and YouTube. However, concerns about effectiveness arise since these are overseas companies.
According to the industry on the 3rd, at the National Assembly Science, Technology, Broadcasting and Communications Committee plenary meeting held the previous day, Democratic Party lawmaker Jeong Pil-mo mentioned that OTT providers and portal operators should also be subject to the Bangbal Fund. Lawmaker Jeong pointed out, "Platform operators earn advertising revenue based on broadcasting and communications infrastructure built through the Bangbal Fund but do not bear the fund's burden." Earlier, lawmaker Byeon Jae-il also proposed a bill to integrate the bifurcated funds and completely overhaul the fund operation method.
Can Netflix and YouTube be Collected From?
The problem is whether the law can be applied to foreign content giants. Currently, in the OTT market, YouTube and Netflix have dominant shares, while domestic OTTs are at a disadvantage. In this situation, if only domestic OTTs are charged the fund and foreign content giants that earn huge advertising revenue evade the law, the tilted playing field between foreign and domestic OTTs will only deepen.
According to mobile app analytics firm WiseApp, as of June this year, total usage time of the YouTube app was an overwhelming 864 million hours. YouTube showed explosive growth with usage time increasing by 94.1% compared to one year ago (17 million hours). TikTok (33 million hours) and Netflix (29 million hours) followed. Domestic OTTs like Wavve recorded only 14 million hours, and AfreecaTV just 13 million hours.
An OTT industry official said, "They said they would introduce minimum regulation across the OTT industry, but demanding a fund that realistically cannot be collected from Netflix or YouTube only from domestic OTTs is inconsistent," adding, "The fund-sharing structure should be based on the revenue earned, but there is no data on Netflix and YouTube’s revenue structure, and it will be difficult to exercise such enforcement."
Weak Justification if Foreign Content Giants Cannot Be Collected From
Inside and outside the National Assembly, there are plans to supplement with extraterritorial provisions (applying the law if acts abroad affect the domestic market), but many measures require cooperation from foreign companies, which could result in a bill that only tightens restrictions on domestic OTTs. Another platform company official said, "Although extraterritorial provisions are legally codified, their effectiveness is another matter," adding, "If funds cannot be collected from foreign platform companies, it will be difficult to find justification for the collection itself."
For this reason, government ministries are also cautious. At the National Assembly Science, Technology, Broadcasting and Communications Committee plenary meeting, Broadcasting and Communications Commission Chairman Han Sang-hyuk said, "It is necessary to approach this carefully," and Science and ICT Minister Choi Ki-young also said, "The 'tilted playing field' issue could worsen, so we will look for a direction."
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