"Growing 5 Global K-OTT Platforms" Yet the Whole-of-Government Digital Media Policy Hasn't Made Any Progress in a Year

[Asia Economy Reporter Seulgina Cho] "Domestic media market size of 10 trillion won, content export amount of 13.42 billion USD, nurturing at least 5 global digital media platform companies."

Last June, the government presented detailed goals for 2022, aiming to elevate the domestic media market to a global level based on the world's best 5G networks and devices, and the competitiveness of Hallyu content. It attracted attention as the first time since the Moon Jae-in administration began that related ministries collaborated to release a 'pan-government digital media comprehensive policy,' but one year later, the results are disappointing.

Online Video Service (OTT) promotion policies introduced to foster a 'Korean version of Netflix,' such as tax credits and the introduction of a self-rating system, have yet to establish even legal support grounds, and the scale of the cultural content fund is far short of the 1 trillion won target. It will take a long time before a global K-OTT capable of competing with Netflix, which has enormous capital power, emerges.

Rather, over the past year, the principle of 'minimum regulation, maximum promotion' has drifted away, and criticism has mounted that conflicts have only intensified due to competition for digital media platform leadership among the Ministry of Science and ICT, the Korea Communications Commission, and the Ministry of Culture, Sports and Tourism.

◆ One year after the "2022 goal to nurture 5 global K-OTT companies" declaration, examining the details

According to industry sources on the 19th, the government announced the pan-government 'Digital Media Ecosystem Development Plan' with such content last June. It is a pan-government promotion plan to leap the domestic media market to a global level through minimum regulation and maximum promotion.

With the vision of "a digital media powerhouse driving innovative growth," it set specific goals by 2022: ▲ domestic media market size of 10 trillion won ▲ content export amount of 13.42 billion USD ▲ nurturing 5 global platform companies. In particular, it clearly stated the policy to foster an innovation ecosystem focusing on rapidly growing new platforms such as OTT and K-content, and to continue bold investment and deregulation.

Specifically, 55 tasks were outlined to be completed by 2022, including easing broadcasting regulations and supporting content investment of 1 trillion won. Support measures for OTT platforms' overseas expansion were also included. For example, exposing native OTT apps like Wavve and Watcha Play on Samsung Electronics smartphones, which hold the world's largest market share. The government's plan at the time was to leverage the world's best network-device-Hallyu content competitiveness to achieve global competitiveness across the digital media ecosystem.

Along with this, the government planned to expand the current production cost tax credit applied to film and broadcasting content to OTT, and to grant a self-rating system for OTT content that bypasses the Video Rating Board. It also planned to establish a cultural content fund exceeding 1 trillion won and to grow the virtual reality (AR) content market utilizing 5G. Additionally, it included discovering and supporting projects linking content production sites with universities and graduate schools.

◆ 'Opaque' OTT tax credits, self-rating system... amendment bills with legal support grounds still pending

The problem is that no visible results have appeared even after one year since the announcement.

The year 2022, which the government set as the target, is just next year. However, major support measures that the industry has loudly called for, such as OTT tax credits and the introduction of a self-rating system, remain 'opaque.'

Not only related laws but even the most basic legal support grounds for OTT, contained in the 'Telecommunications Business Act Amendment Bill,' have been pending in the National Assembly's Science, ICT, Broadcasting and Communications Committee's second subcommittee for five months since the government proposed it in February. The bill aims to define OTT as a 'special type of value-added telecommunications business operator.'

To implement the OTT promotion policy proposed by the government a year ago, it is urgent to process the Telecommunications Business Act amendment bill that clearly defines the legal status of OTT, but it has been stalled in the National Assembly. This is why Minister Lim Hye-sook of the Ministry of Science and ICT recently cited the amendment bill as a law that must be urgently processed during a briefing at the full committee meeting. Some criticize that political logic, such as the TBS audit request right, has caused friction in the committee, preventing proper discussion of the bill.

The 'Restriction of Special Taxation Act Amendment Bill,' which would expand production cost tax credits to OTT, can only be enacted after the legal grounds for OTT are established. The National Assembly passed a supplementary opinion in the plenary session on December 2 last year, instructing to prepare legal grounds for OTT and tax credit measures for OTT content production costs upon the passage of the amendment bill. Previously, Rep. Choo Kyung-ho of the People Power Party proposed a partial amendment to the Restriction of Special Taxation Act, but the Ministry of Strategy and Finance, while recognizing the need for introduction, drew a line citing the lack of legal grounds for OTT.

The situation is the same for the introduction of the self-rating system. The Ministry of Culture, Sports and Tourism announced the legislative notice of the 'Film and Video Promotion Act Amendment Bill,' which centers on introducing the self-rating system, at the end of last month, but this too inevitably ties in with the Telecommunications Business Act amendment.

Moreover, the plan to establish and operate a cultural content fund exceeding 1 trillion won by 2024 still has a long way to go. Overseas expansion of platforms is out of the question. An industry insider lamented, "One year has passed, but nothing has been properly promoted yet," adding, "The government and the National Assembly are out of sync, and it looks like they have practically given up."

◆ Concerns rise over missing the growth opportunity for digital media such as OTT

Inside and outside the industry, there are growing concerns that if the current situation continues, the growth opportunity for digital media including OTT will be missed, leading to domination by overseas platforms like Netflix and even the reduction of K-content to a subcontracting base.

With the global OTT market rapidly growing without borders due to COVID-19, global expansion is essential for domestic OTT companies such as Wavve, Watcha, and TVING. However, rather than overseas expansion, the position of domestic OTTs is gradually shrinking under the offensive of OTT giants like Netflix and Disney Plus, which have enormous capital power. There are also concerns that the Korean content industry will become dependent on global platforms as the reliance on global OTTs for content production costs surpasses the domestic market scale.

It is also problematic that conflicts continue due to competition for platform leadership among ministries amid disputes over the Online Platform Fairness Act and music copyright rates. In this process, the principle of minimum regulation and maximum promotion is not being upheld. Another industry insider said, "There are differing positions among ministries regarding laws related to digital media including OTT," adding, "Considerable time is inevitably required for inter-ministerial consultations."

Previously, domestic OTT operators also filed administrative lawsuits against the Ministry of Culture, Sports and Tourism regarding music copyright rates. The 'Music Copyright Usage Fee Collection Regulation Amendment Bill' disclosed by the ministry has been criticized for unclear standards and being highly disadvantageous to OTT companies, as the rates jump several times depending on the platform even when watching the same terrestrial drama, and decisions were made based on the opinions of a committee structured in this way.

The insider emphasized, "To respond to global OTTs and secure competitiveness, OTT policies need nurturing support rather than strong regulation," adding, "The principle of minimum regulation on platforms must be maintained."