[Initial Insight] Turbulent Distribution Market, Controversy Over Home Shopping Broadcast Fees

"Large content providers have demanded a commission increase of more than 25% compared to the previous year. They should stop this unreasonable attempt to raise supply fees that increase the burden on viewers and infringe on their choices, and engage in reasonable and appropriate negotiations."

Last week, the three major telecommunications companies operating IPTV issued a statement targeting CJ ENM, which demanded an increase in content usage fees, drawing a bitter smile from the home shopping industry. In their statement, they reversed the roles and pointed out, "Over the past five years, IPTV has increased the transmission fees paid to home shopping channels by an average of 39.3% annually. Why do broadcasting platform operators rely solely on increasing home shopping transmission fees for their profits?" The annual recurring dispute over transmission fees between the platform industry and the home shopping industry is no exception this year.

TV home shopping and T-commerce companies negotiate every year with paid broadcasting operators such as IPTV and cable TV to be allocated broadcast channels and pay transmission fees accordingly. The closer the allocation is to high-viewership channels like terrestrial broadcasters, the higher the customer inflow rate and the more directly it translates into revenue, resulting in higher fees.

The problem is that there is no clear standard for calculating transmission fees. To secure limited popular channels, home shopping companies pour large amounts of funds into bidding competitions every year. As a result, the total transmission fees for the home shopping industry have been rapidly increasing since surpassing 1 trillion won in 2014. As of 2019, transmission fees accounted for 49.2% of TV home shopping operators' broadcasting sales of 3.1495 trillion won, nearly half. Although the home shopping industry enjoyed a temporary boom last year due to the spread of non-face-to-face consumption caused by COVID-19, there is a self-deprecating complaint that they have to pay transmission fees exceeding what they earn.

On the other hand, the revenue home shopping companies earn through TV channels is on a declining trend. The proportion of TV broadcast sales (total sales) of the seven domestic home shopping companies decreased continuously from 50.8% in 2016 to 48.9% in 2017, 47.0% in 2018, and 46.3% in 2019. This is due to consumers shifting to mobile shopping and live commerce markets.

As the transmission fees that home shopping companies must bear increase and profitability worsens, the burden is passed on to small and medium-sized partner companies supplying products to home shopping, leading to a vicious cycle of rising product prices. If the home shopping industry is pushed to the brink, IPTV operators, who rely on home shopping transmission fees for more than 20% of their total sales, will have no way out. Ultimately, if this transmission fee issue is not resolved, the entire paid broadcasting ecosystem, which operates interdependently like gears, will face the risk of mutual destruction. The government has so far neglected the transmission fee controversy, citing it as a private contract between paid broadcasting operators and home shopping companies.

The Ministry of Science and ICT plans to hold a closed-door meeting with paid broadcasting industry stakeholders on the 27th to discuss current issues such as home shopping channel policies and home shopping transmission fees. Although a perfect solution will not come immediately and the process will not be easy, the government should now provide guidelines through appropriate intervention, and stakeholders in the home shopping industry should also pool their wisdom.

/ Jo In-kyung, Deputy Head of Consumer Economy Department ikjo@

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