Music Copyright Rates Gradually Raised from 1.5%... Domestic OTTs Criticize "Unresponsible Attitude of the Ministry of Culture, Sports and Tourism" (Comprehensive Report 2)

[Asia Economy Reporter Kim Heung-soon] Domestic online video service (OTT) providers will be required to pay 1.5% of their total sales as usage fees for music copyrights included in video content starting next year. For an OTT provider with sales of 100 million KRW, 1.5 million KRW will be set as the music copyright usage fee. Following the government's regulation of music copyright usage fees, domestic OTT companies such as Wavve, Watcha, and Tving have expressed concerns that user burdens may increase due to price hikes. Citing issues in the process of setting music copyright fees, they have stated they will not hesitate to pursue legal actions such as administrative lawsuits, indicating that the ongoing controversy is unlikely to subside anytime soon.

The Ministry of Culture, Sports and Tourism announced on the 11th that it has revised and approved the music copyright usage rate that OTT providers must pay, based on the amendment proposal for music copyright usage fee collection regulations submitted by the Korea Music Copyright Association (KOMCA), a music copyright management organization, in July.

Music Copyright Usage Fee of 1.5 Million KRW per 100 Million KRW Sales
Increase to 1,999,500 KRW in 2026

According to the approved amendment, a new clause for 'video transmission services' applicable to OTT was established. The music copyright usage rate for OTT videos where music copyrights are used as a subsidiary purpose will start at 1.5% in 2021 and will be gradually increased annually to a final rate of 1.9995% in 2026. Additionally, considering the existence of multiple music copyright management organizations, a music copyright management ratio was added, representing the proportion of music copyrights managed by KOMCA among the total music copyrights used by the user.

Starting next year, OTT providers with sales of 100 million KRW must pay music copyright fees calculated by multiplying 1.5 million KRW by the annual coefficient (1.0) and the music copyright management ratio. The annual coefficient will also be gradually increased to 1.333 by 2026, similar to the music copyright usage fee.

For content primarily using music copyrights, such as music entertainment or live performances, the music copyright usage fee is set at 3.0% for sales of 100 million KRW. In this case, the copyright fee is calculated by multiplying 3 million KRW by the annual coefficient and the music copyright management ratio.

The OTT Music Copyright Countermeasure Council (hereinafter OTT Music Council), composed of major domestic OTT companies, strongly criticized the Ministry of Culture, Sports and Tourism's approval of the amendment, stating, "The Ministry and KOMCA cleverly announced 1.5% to appear moderate, but in reality, they have announced a 2% music usage fee rate for OTTs," and added, "They failed to find a reasonable balance between users and rights holders and did not even maintain minimal mechanical neutrality." They further suspected, "It seems the Ministry had already made a decision and only went through a formal opinion collection process," calling it "an irresponsible attitude as the main ministry of the content industry."

Previously, KOMCA submitted an amendment proposal setting the music copyright usage rate at 2.5%, citing reports published by the International Confederation of Societies of Authors and Composers (CISAC) and contracts with global OTT Netflix. On the other hand, major domestic OTT companies argued that about 0.625% of sales is appropriate based on the existing 'broadcast retransmission service' regulations applied to broadcasters' internet catch-up services. With a roughly fourfold difference in the rates claimed by both sides, the Ministry approved a rate closer to KOMCA's demand.

The Ministry explained, "The level of music copyright usage rates was decided by referring to existing domestic contract cases and overseas examples, while considering the domestic market situation and the conditions of providers."

Source: Provided by the Ministry of Culture, Sports and Tourism

OTT Industry: "Decision-Making Process Biased, Starting Legal Responses Including Administrative Lawsuits"
Ministry of Culture, Sports and Tourism: "Copyright is Private Property, Creator's Share Must Not Be Denied"

The OTT Music Council pointed out, "Although OTT is an industry area combining video, broadcasting, IT, and media, the Ministry of Culture, Sports and Tourism blocked the voices of concern raised by various stakeholders, related ministries, and experts," adding, "Only the voices of some monopolistic management organizations (KOMCA) were accepted." They also stated, "We will seek countermeasures together with stakeholders, copyright holders, and experts across the media content industry in the future."

The domestic OTT industry is also showing a willingness to pursue legal actions such as administrative lawsuits. According to legal advice sought by domestic OTT providers, some in the legal community judge that the amendment maximizes 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.

They also presented opinions that the amendment discriminates against domestic OTT providers without reasonable grounds compared to cable TV, internet TV (IPTV), and terrestrial broadcasters providing the same content, violating the 'principle of equality,' and that domestic OTT providers may face threats to their survival due to managerial burdens, violating the 'principle of proportionality.' According to current music copyright usage fee collection regulations, terrestrial broadcasters are subject to a 1.2% music copyright usage rate, cable TV 0.5%, satellite broadcasting 1.0%, and IPTV 1.2%.

On the other hand, the Ministry of Culture, Sports and Tourism maintains that copyright is private property as economic compensation for creators' creative activities and is not a regulation. They argued, "If copyright fees are set too low, the individual share that should go to creators will be denied, which could infringe on private property," and added, "Proper payment for domestic content leads to the development of our content industry and also benefits the development of the domestic OTT industry, which gains competitiveness based on domestic content."

This content was produced with the assistance of AI translation services.