IPTV 3 Companies: "CJ ENM's Unfair Program Usage Fee Demand... Arrogance of a Market-Dominant Operator"

[Asia Economy Reporter Eunmo Koo] The conflict over program usage fees between IPTV operators such as SK Broadband, KT, LG Uplus, and CJ ENM is intensifying.

The Korea IPTV Broadcasting Association, composed of the three IPTV companies, issued a statement on the 2nd regarding CJ ENM's Vision Stream titled "Is the unfair increase in program usage fees the beginning of globalization as CJ claims?" raising criticism against CJ ENM.

The IPTV Association expressed, "We feel not just regret but sorrow that CJ ENM disparaged and distorted the partners in the pay-TV market in the Vision Stream announcement signaling the start of CJ ENM's global strategy," adding, "Using baseless examples and figures to mislead the media and the public, and with the idea that CJ ENM and TVING will monopolize the achievements of K-content, we see no sign of the win-win cooperation discussed just days ago, only arrogance and greed as a dominant market player."

At the 'CJ ENM Vision Stream' press conference held on the 31st of last month, Kang Hoseong, CEO of CJ ENM, urged IPTV operators again to raise program usage fees, stating, "In the case of SO (System Operators), more than half of the highest revenue is paid to content providers, but IPTV companies, which account for over 80% of the market, seem somewhat stingy." Previously, CJ ENM reportedly demanded about a 25% increase in program usage fees from IPTV operators compared to the previous year, which IPTV companies have opposed.

The IPTV Association first rebutted the criticism that IPTV is stingy in paying content fees. Based on the 2019 financial disclosure, the IPTV Association stated, "IPTV companies paid 1.1712 trillion KRW, exceeding 48% of subscription revenue, as total content procurement costs," adding, "IPTV companies pay content fees not only to large content providers like CJ ENM but also to various broadcasting channel operators and terrestrial broadcasters, and moreover, the total program usage fees paid exceed 63%, which is higher than their 51% market share based on pay-TV subscribers."

They emphasized, "The content program usage fees CJ ENM received from all pay-TV operators, including IPTV, amounted to 221 billion KRW, an overwhelming scale close to one-third of the broadcasting program sales revenue of about 150 broadcasting channel providers (PPs), and accounted for 35% of the increase in broadcasting program sales revenue from 2018 to 2019."

Furthermore, they criticized CJ ENM for trying to pass the costs of content production investments targeting the global market onto the domestic market. The IPTV Association explained, "CJ ENM claims some overseas media market cases with different market sizes as global standards, citing the U.S. case where pay-TV fees are more than nine times higher than in Korea," adding, "To match the U.S. level, user fees in Korea would have to be raised significantly." They argued, "Such claims, lacking consideration of the size and funding structure of the domestic media market, would disrupt market order and cause excessive burdens on domestic users."

Regarding criticism of CJ ENM's 'supply first, contract later' structure, IPTV companies rebutted that even if contracts are not finalized, they pay usage fees monthly to PP companies based on existing contracts to maximize predictability. The IPTV Association stated, "Even after the contract period with PP companies has expired, IPTV pays monthly usage fees based on the existing contract, and retroactively applies content value measured through channel evaluations," emphasizing, "In fact, pay-TV operators have played a greater role in guaranteeing stable revenue for PPs and offsetting risks by paying monthly content usage fees across all live channels based on the value of content produced without any prior information."

They argued that rather than simply banning the supply-first, contract-later approach, overall consideration of the current pay-TV market is necessary. The IPTV Association said, "Contract delays occur due to the power of large PPs, and unilateral contract terms are proposed, with frequent mentions of 'blackouts' where content is cut off if terms are not accepted, so institutional measures to prevent this are needed," adding, "Discussions on amending the IPTV Act to apply the same prohibitions under the Broadcasting Act to PPs should also be sufficiently conducted."

Earlier, Kang Hoseong, CEO of CJ ENM, appealed, "If we produce content in 2021 and supply it to platform companies, it will be aired that year and the amount will be decided that year. In this case, content producers bear all the risks without knowing how much to invest. K-content going global cannot afford to be uncertain about expected profits," adding, "While content quality is recognized at a global level, the business and market structures to sustain this remain at the domestic level," urging, "The distribution and allocation structure of the content market needs to be more advanced."

Finally, the IPTV Association raised its voice against CJ ENM for abandoning win-win discussions and continuing media play. The IPTV Association stated, "Although an agreement was reached at the pay-TV industry meeting chaired by the 2nd Vice Minister of the Ministry of Science and ICT on the 27th of last month to promote the mid- to long-term sustainable growth of the entire media industry, CJ ENM showed the opposite behavior in the Vision Stream," demanding, "CJ ENM should refrain from excessive and unreasonable demands and consider ways to grow the entire industry's pie together with IPTV companies within the limited pay-TV resources."

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