"TV Home Shopping Industry Pays 500 Billion Won More Than Appropriate Fee for Paid Broadcasting Transmission"

Professor Kim Jeonghyun Utilizes Nash Bargaining Theory
Explores Negotiation Strategies Between Platforms and Home Shopping
Advocates Solution of Dividing Through Auctions After Calculating Appropriate Transmission Fees Next Year

Significant for Applying Economic Models but Limited by Ignoring Platform Value and Consumer Group Characteristics

[Asia Economy Reporter Cha Min-young] Amid ongoing conflicts over carriage fees between the TV home shopping industry and paid broadcasting operators such as IPTV, SO, and satellite broadcasting, a study has revealed that the actual total carriage fees are approximately 500 billion KRW higher than the appropriate total carriage fees.

Professor Kim Jeong-hyun of the Media Department at Korea University presented this analysis on the 20th at the Korea Press Center during a seminar titled "Measures to Create a Rational Transaction Environment within the Paid Broadcasting Ecosystem," jointly hosted by the Korean Media Policy Association and the Korean Broadcasting Association.

In his keynote speech, Professor Kim explained, "The dominant position of platform operators arises because customer groups engage in single-homing (choosing one platform), whereas the home shopping industry engages in multi-homing (choosing multiple platforms). Platforms gain dominance as competitive bottlenecks by monopolizing access rights from multi-homing users like home shopping."

To determine the appropriate carriage fees for negotiations between the two business groups, Professor Kim utilized the economic model "Nash Bargaining Solution," developed by John Nash, famous for the "Nash Equilibrium" theory. The Nash solution finds the point that maximizes the product of the players' shares in the negotiation. Assuming the same share is allocated to both parties, the appropriate total carriage fee is calculated as half of the 'net incremental profit' generated for home shopping.

Comparing the appropriate and actual total carriage fees from 2012 to 2019, the study found that as of 2019, the actual total carriage fee was 1.8394 trillion KRW, about 500 billion KRW more than the appropriate total carriage fee of 1.3022 trillion KRW. Notably, the gap, which was just over 100 billion KRW in 2012, has continued to widen.

As a solution to the conflict, the study proposed setting the appropriate total carriage fee for the next year and having the entire TV home shopping industry gather to divide it through auctions or similar methods. This involves calculating the total net incremental profit for all home shopping operators, assigning channel (number) grades such as 'S' and 'A,' and determining carriage fees per channel number. Based on these fees, paid broadcasting platform operators would then allocate channel numbers through auctions or similar processes.

Professor Kim stated, "In this scenario, there is no need for paid broadcasting platform operators and home shopping operators to actually meet at the negotiation table for channel number assignment and carriage fee decisions. The widening gap indicates an increase in carriage fees, which can serve as a benchmark for how much the fees should be raised."

This model is significant in that it seeks a resolution to conflicts in the TV home shopping industry through an economic model. However, limitations were also pointed out, such as the difficulty in accurately assessing the current value of platforms, making practical application challenging. The auction system solution also overlooks practical variables such as the value of individual paid broadcasting platforms, the significance of individual channels, characteristics of regional consumer groups, and the annually changing strategies of home shopping companies.

Lee Seong-chun, a KT senior advisor, commented, "The net incremental assumption is based on the premise that the current value of the platform this year has been appropriately assessed, and the next year's carriage fee is split in half. For operators entering the bidding with prior agreements, this is a difficult issue to know in advance." Kim Hyuk, head of media strategy at SK Broadband, also pointed out, "This is not collective bargaining, and the value of each channel number differs, and each platform is not the same medium. Differences in traffic between channel numbers, viewing frequency per platform, purchasing power based on subscriber characteristics, and consumer residence all vary, making it difficult to treat them equally."

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