Opposition from Small and Medium PP to Large PP's Demand for Usage Fee Increase, Citing "Threat to Survival Rights"

[Asia Economy Reporter Eunmo Koo] Small and medium-sized PP (program providers) have opposed the large PPs’ demands for increased program usage fees amid the conflict between paid broadcasting operators and broadcasting channel providers (PP) triggered by the controversy over program usage fee hikes between IPTV’s three major companies?KT, SK Broadband, LG Uplus?and CJ ENM.

The Korea Small Broadcasting Channel Association, composed of 26 small and medium-sized PPs, issued a statement on the 24th titled “Condemning the Monopoly of Large PPs in the Paid Broadcasting Market,” asserting that the opinions of large PPs do not represent the entire PP industry and that instead of demanding excessive program usage fees, a path for coexistence should be established.

Small and medium-sized PPs first criticized the large PPs’ demand for “contract first, supply later” as a “ladder kicking” move benefiting only the large PPs. If the practice of “supply first, contract later” is prohibited, considering that paid broadcasting operators usually negotiate program usage fee contracts with large PPs before negotiating with small and medium-sized PPs, the allocation of program usage fees to small and medium-sized PPs would decrease, and there could even be a risk of their exit from the market.

Currently, program usage fees for PPs are paid based on the practice of “supply first, contract later,” where channels registered on IPTV provide programs to IPTV, and after broadcasting, payments are made through negotiations based on various evaluations such as viewership ratings. However, if contracts precede supply, small and medium-sized PPs, which are at a disadvantage compared to large PPs in negotiations, could face not only reduced usage fee revenues but also threats to their survival.

Small and medium-sized PPs also argue that their contributions to the paid broadcasting market are being undervalued. Despite low program production costs, they have worked to secure content diversity by producing niche content that broadens viewers’ content choices. A representative of the Small Broadcasting Channel Association expressed concern, saying, “If quantitative evaluations such as viewership ratings gain more weight in usage fee negotiations, it could be used as a justification for not paying program usage fees to small and medium-sized PPs with low ratings, which could ultimately lead to a homogenized paid broadcasting market.”

Some suggest that paid broadcasting operators need to find ways to expand the funding for program usage fees, such as raising IPTV subscription fees. However, considering the current situation of the IPTV industry, fee increases are not easy. A representative of the Korea IPTV Broadcasting Association explained, “Firstly, the approval process for fee increases is challenging, and even if fee increases become possible, the emergence of large domestic and international OTT operators has created a structure where raising fees is difficult.” According to the Korea IPTV Broadcasting Association, as of 2019, 48.1% of subscription revenue was paid as content costs.

Earlier, CJ ENM proposed a 25% increase in real-time channel usage fees to the three IPTV companies. In response, the Korea IPTV Broadcasting Association, representing the IPTV three companies, issued a statement demanding, “Large content providers should stop unreasonable attempts to increase fees that burden viewers and infringe on their choices and engage in reasonable and appropriate negotiations.” CJ ENM countered, stating, “The core issue we raise is that the IPTV three companies excessively undervalue the content’s worth. We are negotiating with demands that reflect the increased influence of our channels due to rising viewership shares, as well as increased production costs and content investment scale.”

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