OTT Music Copyright Fees Headed to Court, KT and LGU+ Also Face First Hearing Today... Key Issues Reviewed

[Asia Economy Reporter Seulgina Jo] Following domestic online video service (OTT) providers such as Wavve and TVING, Korea's leading telecommunications companies KT and LG Uplus will also face the government in court on the 14th. This is due to multiple issues raised regarding the ‘OTT Music Copyright Royalty Rates’ approved by the Ministry of Culture, Sports and Tourism at the end of last year, which are considered excessively high, involve double charging, and discriminate against identical services.

According to industry sources, KT and LG Uplus will hold the first hearing of their administrative lawsuit against the Ministry of Culture, Sports and Tourism at 3 p.m. on the same day at the Seoul Administrative Court. At this hearing, the two companies plan to point out the problems with the revised music copyright royalty collection regulations disclosed by the ministry last year and argue for their invalidation. The revision mainly introduces a new clause for 'video transmission services' applicable to OTT, raising the royalty rate from 1.5% this year to 1.9995% by 2026.

The controversy surrounding OTT music copyright royalty rates is far from isolated. This is why, following newly launched OTT providers, telecommunications companies offering OTT services have also joined the government in administrative lawsuits.

One of the foremost concerns acknowledged by the court is the risk of double charging. The current revision applies the rate based on total sales revenue, resulting in additional copyright fees being collected for content whose rights have already been collectively managed through production companies. Furthermore, the revision applies twice the transmission rate for broadcasters (0.75%) to OTT services, violating the 'same service, same rate principle.' The Ministry of Culture, Sports and Tourism has also been criticized for not sufficiently gathering stakeholders' opinions during the rate-setting process and favoring copyright collective management organizations.

KT and LG Uplus have cited as reasons for their lawsuit that ▲ the revision imposes excessive burdens on OTT providers compared to similar platform operators ▲ the proper opinion-gathering procedures were not followed ▲ the Korea Music Copyright Association has not clearly presented the basis for its claim of a 2.5% sales collection rate and instead requires OTT providers to prove unfairness.

OTT providers who filed an administrative lawsuit earlier this March for the same reasons completed their first hearing on August 13 and are scheduled for a second hearing on the 29th. The first hearing confirmed the differences in positions between the parties without reaching a meaningful conclusion. However, the court acknowledged the possibility of double charging for content whose rights have already been managed, as claimed by the industry.

An industry insider expressed concern, saying, "It is a unilateral decision, and there is not even a reasonable justification for the rate differences between platforms. If copyright fees differ this much between identical or similar services, market distortion could occur."