Both Industries Facing Difficulties
Pay TV Operators Notify PP Evaluation Results
'Blackout' Risk if Fee Negotiations Fail
The risk of a ‘blackout’ (broadcast transmission suspension) by pay TV providers, which had been quiet for some time, is expected to resurface after the general elections. Pay TV providers negotiate program usage fees annually after evaluating broadcasting channel operators (PPs), and there is a growing possibility that demands suppressed before the elections will erupt. Both pay TV providers and PPs are cornered due to the rapid rise of online video services (OTT) like Netflix and increased content production costs.
According to the industry on the 15th, pay TV operators such as IPTV, cable TV, and satellite broadcasting recently completed their PP evaluations and notified the results. PP evaluation is a preliminary procedure for pay TV providers to negotiate program usage fees with PPs like CJ ENM, Tcast, and SBS Medianet. A media industry official said, "To prevent the worst-case scenario of broadcast disruptions such as blackouts before the general elections, pay TV providers and PPs have been holding back, but it seems they will raise their voices once the elections are over."
Program Fees of Hundreds of Millions Won Even for Zombie Channels
Pay TV providers evaluate individual PPs based on criteria such as ▲viewership ratings ▲audience share ▲content investment ▲operational capability according to guidelines set by the Ministry of Science and ICT, then assign scores and grades. Based on this, pay TV providers negotiate how much to pay PPs as program usage fees. Differences in positions are prominent in this process, making conflicts inevitable, and this year, the stances of both sides are expected to be even more polarized, making program usage fee negotiations a thorny path. A PP official said, "After receiving the evaluation results, we have submitted written objections." This indicates that they find the evaluation results difficult to accept.
The industry expects program usage fee negotiations to be tough. The overall pay TV market growth rate is stagnant, and cable TV and satellite broadcasting subscribers are declining, creating a strong atmosphere where neither side can yield an inch. Especially with the rapid rise of OTT increasing market uncertainty, pay TV operators are trying to minimize costs as much as possible. According to the Ministry of Science and ICT, as of the first half of last year, the number of pay TV subscribers increased by 0.27% (99,000 people) compared to the second half of the previous year. Since 2022, the subscriber growth rate has mostly been below 1%. IPTV, which accounts for about 57% of total pay TV subscribers, is in a relatively better situation. Cable TV and satellite broadcasting subscribers are decreasing every year. A cable TV official lamented, "We have to pay hundreds of millions of won annually even for so-called ‘zombie PPs’ with 0% viewership ratings, which is a significant burden."
Production Cost Burden... Government Mediation Has Limits
On the other hand, PPs are struggling with the burden of content production costs. With ‘big spender’ Netflix directly investing in K-content, actors’ fees are soaring, and they claim they are not receiving fair compensation for their content. CJ ENM, which owns popular channels like tvN and Mnet and spends 800 billion won annually on content production, is a representative case. In 2021, the program usage fee negotiations between CJ ENM and LG Uplus broke down, resulting in CJ ENM channels being unavailable on U+ Mobile TV. The government intervenes in mediation when an agreement fails and viewer damage is expected, but there are limits to narrowing the differing positions of companies with conflicting interests. An industry official said, "Currently, pay TV providers and PPs are in the stage of coordinating their positions," adding, "Sharp issues are expected to arise in the future."
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