Hopes for the 22nd National Assembly
"Need for a Content and Platform Control Tower"
Supporting Exports through Chinese Publishing Licenses
While the online video service (OTT) market is rapidly growing, led by Netflix, domestic OTT companies continue to struggle. As of 2022, the deficit sizes are 119.2 billion KRW for TVING, 121.3 billion KRW for Wavve, and 55.5 billion KRW for Watcha. Considering these circumstances, OTT companies want to postpone being incorporated into the existing film and broadcasting industry system. From controversies over whether OTTs should also pay the Broadcasting and Communications Development Fund to administrative lawsuits regarding music copyright fees and rebroadcast appearance fees for writers and actors, the challenges are numerous. An industry insider lamented, "If these costs are added, it's like telling us to shut down," adding, "The domestic OTT industry, already on the brink of collapse, will face even greater difficulties."
"Please stop the power struggle between ministries"
The Digital Economy Alliance's '22nd General Election Policy Proposal' also called for an end to the power struggle between ministries over regulatory authority of the OTT industry. Several ministries are involved in the OTT industry, including the Ministry of Science and ICT, Ministry of Culture, Sports and Tourism, Korea Communications Commission, and Fair Trade Commission. Since each ministry views the industry differently, conflicts continue over whether to promote or regulate it. Recently, the Ministry of Science and ICT and the Korea Communications Commission pressured OTT operators to launch various bundled products to reduce household communication costs. Around the same time, the Ministry of Culture, Sports and Tourism signed a business agreement to strengthen the global competitiveness of native OTTs. A representative from the Korea Internet Corporations Association said, "Sometimes legislation is pushed forward when one ministry proposes a policy and others do not agree," adding, "Operators end up suffering from overlapping regulations."
The industry stated that a control tower capable of integrating and promoting both content and platform industries is necessary. They also proposed clearly establishing legal grounds to include OTT operators as eligible for tax benefits on OTT content production costs and raising the video production tax credit rate to levels seen in the U.S. (25-35%) and Canada (30-40%).
Conflicts between new and old industries are not limited to just one or two areas
The Digital Economy Alliance requested the 22nd National Assembly to resolve conflicts between startups and existing industries. They argued that innovation cannot sprout due to outdated regulations and conflicts with existing business groups. Startups engaged in tough battles include those in non-face-to-face medical services, legal service platforms, plastic surgery information platforms, tax refunds, and proptech, among others.
To resolve conflicts, the industry requested clear and rational adjustments to regulations and suggested a method to share a portion of profits considering both existing and new businesses.
Support needed for domestic games to enter the Chinese market
While recent Chinese games like Last War and Mushroom Keeper are active in the domestic market, domestic game companies face restrictions entering China, prompting calls for urgent policy measures. Due to China's suspension of distribution permits (panhao), domestic games' entry into China is limited, necessitating government-level support.
The Chinese government, which regulates foreign investment, requires foreign games to obtain a panhao to enter the Chinese market. Additionally, overseas game companies cannot distribute independently and must cooperate with Chinese publishers like Tencent. The industry believes discussions between the Korean and Chinese governments on game export regulations are needed to overcome these restrictions. Since China imposed the 'Hanhanryeong' (Korean Wave ban) in retaliation for the deployment of THAAD in 2016, obtaining panhao has become even more difficult. An industry official said, "While the government actively supports exports of manufacturing industries like semiconductors, it tends to give less support to the content (game) industry," adding, "Chinese games are freely distributed in Korea, so government support is even more urgent."
Why can't companies invest in virtual assets?
As the virtual asset market grows daily, demands for corporate investment in virtual assets are increasing. Domestic game companies, led by WeMade, have entered the virtual asset-based P2E (play-to-earn) market, drawing significant interest. However, to buy and sell virtual assets with legal tender, a bank account with real-name deposit and withdrawal verification is required, but except for some public institutions, account issuance for corporations is restricted. The reason the term "Kimchi Premium" arose?where Bitcoin prices traded in Korea are higher than on major exchanges in the U.S., Japan, and others?is analyzed to be due to limited institutional and corporate investment, resulting in insufficient market liquidity.
The Digital Economy Alliance expects that if institutions and corporations enter the virtual asset market, high-quality reports will spread, reducing information asymmetry and increasing trust.
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