Ultimately, OTT Takes Strong Administrative Litigation Stance... "Music Copyright Rates and Procedures Are Illegal" (Comprehensive)

Meeting on Administrative Lawsuit Against Music Copyright Fee Amendment
OTT Music Association: "Insufficient Industry Feedback, Unclear Rate Basis"
Ministry of Culture, Sports and Tourism: "No Procedural Defects"

[Asia Economy Reporter Eunmo Koo] "There is a problem with the procedure itself." "At least tell us the basis for the music copyright royalty rates."

Domestic online video service (OTT) providers such as Wavve, Watcha, and TVING, which have recently launched, have finally taken legal action against the Ministry of Culture, Sports and Tourism (MCST), with which they have been in conflict over music copyright royalty rates, and are making a frontal breakthrough. The OTT industry claims that the criteria for determining the rates are unclear, as the music copyright royalty rates vary several times depending on the platform when watching the same terrestrial drama, and that the minimum mechanical neutrality among stakeholders has not been maintained. The OTT Music Copyright Countermeasure Council (OTT Music Council), which includes Wavve, TVING, and Watcha, filed a lawsuit on the 5th at the Seoul Administrative Court requesting the cancellation of the MCST's approval of the amendment to the music copyright usage fee collection regulations.

◆OTT: "Procedurally Illegal"

At a press conference held on the 17th at the Central Veterans Hall in Yeouido, Seoul, Hwang Kyung-il, chairman of the OTT Music Council, pointed out the 'illegality of the approval procedure for the amendment' as the background of the administrative lawsuit. He said that the process of gathering industry opinions was insufficient and that the decision was based on the opinions of a committee that was composed in a way that was significantly unfavorable to OTT companies. Looking at the composition of the Music Industry Development Committee (MIDC) under the MCST, 7 out of 10 members are skewed toward music copyright right holders. This could be considered a case of 'invalidity due to a serious procedural defect,' according to Supreme Court precedents.

The background for the rate determination is also unclear. The amendment mainly raises the rate from 1.5% this year to 1.9995% by 2026. Although the MCST cited overseas cases, the industry is puzzled. Even within the MIDC, it has been lamented that there is no global standard to refer to because the copyright trust structure, rights acquisition procedures, and settlement methods are all different. For example, the U.S. ASCAP's basic streaming license rate is 1.08%. In France, the rate is based on subscription fees rather than sales, and both reproduction and performance rights are permitted, making direct comparison difficult.

Wavve separately requested information disclosure from the MCST regarding the MIDC's opinion documents, final reports, and Copyright Commission deliberation reports related to the OTT music copyright royalty rate decision, but this was also rejected. Chairman Hwang said, "We repeatedly requested dialogue, but since there was no movement to communicate with the OTT industry, we had no choice but to file an administrative lawsuit as a last resort." He emphasized, "This is not to win the case but a procedure to appeal that the collection regulations are unreasonable," and added, "Depending on the MCST's future actions, we can withdraw the administrative lawsuit at any time."

He also explained that the administrative lawsuit is aimed at institutional improvement and the future development of the content industry. Heo Seung, director of Watcha, said, "Since the Music Copyright Association (MCA) monopolizes 90% of copyrights as a trust organization, there was a clear need to raise the issue at least once," and added, "It is time to think about putting a brake on problems that hinder industrial development rather than just winning or losing."

KT, which is not a member of the OTT Music Council, is also considering an administrative lawsuit against the amendment. Chairman Hwang said, "KT shares the same position as us regarding this disposition," but added, "It seems they will not proceed with the lawsuit together."

In response, the MCST maintains that there is no procedural defect. The MCST stated that it collected opinions from 18 companies from July 27 to August 10 last year, and during the Copyright Commission's deliberations from August to November, it gathered opinions from more than 20 companies. In addition to these legal procedures, it conducted substantial opinion gathering and review through discussions at the MIDC.

On the 17th, a press conference of the OTT Music Copyright Countermeasures Council was held at the Central Veterans Hall in Yeouido, Seoul.
(from left) Donghwan Nodong, Head of Policy Cooperation at Content Wave; Kyungil Hwang, Chairman of OTT Music Copyright Council; Seung Heo, Director of Watcha.

◆Different Rates Even for the Same Drama

The controversy surrounding OTT music copyright royalty rates is not limited to one or two issues. Concerns such as discrimination between identical services and double collection are being pointed out. For example, the SBS popular drama "Penthouse" has different rates when viewed on cable TV (0.5%), IPTV (1.2%), and OTT (1.5%). Moreover, when adjustment coefficients are applied, the rates for cable TV and IPTV drop to about 0.27% and 0.564%, respectively, but this does not apply to OTT. Additionally, there is unavoidable controversy over double collection as copyright fees are additionally collected for content whose rights have already been collectively processed through production companies.

Excessive rates inevitably lead to increased OTT subscription fees, which are passed on to consumers. This is the background for criticism that OTTs, which are in their early growth stage, are being held hostage. Ultimately, not only the MCA as the trust management organization but also the MCST, the competent ministry, have been criticized for maximizing the interests of copyright holders without considering the public interest, such as the user's position, universal use of works, and the development of culture and industry.

On this day, the OTT Music Council also mentioned the possibility of future fee increases. Labor Hwan, head of policy cooperation at Content Wave, said, "If all the contents proposed by the MCA are accepted, the simulation shows that the monthly copyright fee for Wavve would increase by 6 to 7 times," and added, "We appealed to the MCST about the possibility of subscription fee increases, but it was not accepted."

He added, "However, even if the copyright royalty rate increases, the structure does not allow for an immediate increase in monthly subscription fees," and said, "Various factors must be considered, but since profitability must be guaranteed, I think there will be a review of future fee increases."

The OTT Music Council emphasized that it can discuss the amendment to the collection regulations not only with the MCA but also with any of the 13 domestic copyright trust management organizations. The OTT Music Council plans to prepare and proceed with negotiations with the Korea Music Performers' Association (KMPA) next week.