[Comprehensive] "2.7 Times, Excessive Demand" Criticism Met with CJ ENM's Rebuttal... Intensifying 'Content Usage Fee' Conflict

[Asia Economy Reporter Seulgina Cho] "CJ ENM's excessive fee increase demand is the cause of the negotiation breakdown. (LG Uplus)"

"LG Uplus consistently ignored requests to come to the negotiation table, and this is the reason for the negotiation breakdown. (CJ ENM)"

As LG Uplus urged CJ ENM to take responsible action regarding the 'U+ Mobile TV fee negotiation breakdown' that led to the content supply suspension, CJ ENM immediately rebutted, intensifying the dispute. CJ ENM claims that the fundamental cause of the negotiation breakdown is not the excessive fee increase but LG Uplus's insincere attitude, including not sharing even subscriber numbers.

According to both companies on the 13th, as of midnight the previous day, live broadcasting of 10 CJ ENM channels on U+ Mobile TV was completely suspended. The suspended channels include tvN, tvN Story, O tvN, Olive, Mnet, Tooniverse, and others totaling 10 channels. CJ ENM had warned LG Uplus that if negotiations were not reached by the 11th, program broadcasting would be suspended from the 12th, and ultimately, the two companies failed to narrow their differences until the last moment, leading to the blackout situation.

◆CJ ENM: "The reason for the negotiation breakdown is LG Uplus's ignoring strategy"

In a statement released the previous afternoon, CJ ENM said, "Since 2012, we have provided our channels' live broadcasts and VOD services to LG Uplus OTT. During the 2021 contract discussions, we could not find common ground, so we reluctantly decided to terminate the live channel service. We sincerely apologize for the inconvenience caused to users."

They identified the key issues in the negotiation as ▲ the calculation of OTT subscriber numbers ▲ the definition of OTT service.

First, CJ ENM stated, "To calculate content supply fees, understanding the subscriber scale is the most basic step. Since March, through five meetings and official letters, we requested LG Uplus to disclose the number of subscribers receiving our channels on their OTT service, but we received no response. There was no minimum foundation to start negotiations."

Additionally, CJ ENM defined the negotiation as "a matter of how to define LG Uplus OTT service." LG Uplus defines the service as 'mobile IPTV,' which is their paid IPTV platform moved to a mobile environment as an additional service, whereas CJ ENM insists it is a clear 'OTT service' like Netflix or Wavve.

CJ ENM pointed out, "To use OTT separately from LG Uplus IPTV, users must pay additional fees, and anyone can subscribe or unsubscribe regardless of IPTV subscription. Since the service has a different fee structure, separate subscriber routes, and additional content, LG Uplus's claim that it is merely an IPTV add-on service lacks persuasiveness."

How the service is defined inevitably affects discussions on the appropriate scale of content fees. Until now, CJ ENM has negotiated content fees linked to IPTV but has requested separate contract negotiations starting this year.

CJ ENM raised its voice, saying, "LG Uplus consistently ignored our requests to come to the negotiation table, which is the reason for the negotiation breakdown. Due to LG Uplus's arbitrary service definition and refusal to share basic data (subscriber numbers), we had no choice but to suspend live channels."

◆CJ ENM, which demanded a 2.7-fold increase, denies 'excessive increase' criticism

Regarding the content fee increase, criticized inside and outside the industry as "excessive," CJ ENM drew a line, saying, "'Excessive fee increase demand' is not the essence of this negotiation breakdown." CJ ENM argues that the amount previously received was too low, so the increase rate is not meaningful.

The content fee CJ ENM demanded from LG Uplus for U+ Mobile TV this time is confirmed to be 2.7 times higher than the previous year, a 175% increase. The fee increases agreed upon in 2019 and 2020 between CJ ENM and LG Uplus were 9% and 24%, respectively. Typically, the increase rate between platforms and major PP is within 10%.

CJ ENM also clarified that their recent actions aim to receive proper content fees. CJ ENM criticized, "The practice of using content cheaply as an add-on service to increase telecom subscribers must be improved from now on. Considering that LG Uplus offers unprecedented benefits to global OTT companies that domestic broadcasters cannot even imagine, we are disappointed with LG Uplus's stance in this negotiation."

However, CJ ENM left room for negotiation, stating, "We hope to find meaningful and productive new common ground with LG Uplus."

Source: LG Uplus

Earlier, LG Uplus issued a statement immediately after the content supply suspension, claiming that CJ ENM's excessive fee increase demand was the cause of the negotiation breakdown and that CJ ENM is responsible for the inconvenience to users.

LG Uplus said, "We proposed double-digit increase offers several times for a smooth resolution, but CJ ENM demanded a 175% increase compared to the previous year. They insisted on the fee increase by using the suspension of live channel broadcasting as a card, holding U+ Mobile TV customers hostage." They added, "We requested the basis for the increase rate calculation, but CJ ENM verbally replied that they could not answer. Until just before the suspension, we requested reasonable proposals from CJ ENM, but there were no additional proposals, and they notified the suspension in the afternoon of the same day."

LG Uplus further stated, "We suspect that insisting on excessive fee increases is a strategy to secure many subscribers by broadcasting content only on their own OTT, 'TVING,' if not accepted. CJ ENM's unilateral fee increase demand, leveraging content competitiveness, is expected to negatively impact the domestic media industry." It is known that CJ ENM demanded ten times the previous amount from KT.

Earlier, the Korea Small Broadcasting Channel Association also issued a statement condemning CJ ENM. They said, "The tyranny of major PPs demanding high fee increases using killer content as a weapon results in the worst outcome, depriving small PPs of even the minimum content fees they deserve. We must limit the annual program fee increase rate of major PPs and focus more on expanding resources to guarantee the survival rights of small PPs."

◆KT Season likely to follow suit with broadcast suspension... Content fee conflict intensifies

Following LG Uplus, it is considered only a matter of time before CJ ENM channels' live broadcasts are suspended on KT Season. KT has not yet received a supply suspension notice. However, KT also holds the position that CJ ENM's demands are excessive and unacceptable, so the conflict is expected to escalate.

Some even point out that CJ ENM prioritized notifying the suspension of U+ Mobile TV broadcasting, which is not subject to the Broadcasting Act, to gain leverage in IPTV program fee negotiations with telecom companies. Recently, CJ ENM and the three IPTV companies (KT, SK Broadband, LG Uplus) have also clashed over the overall content fee levels for IPTV, not just mobile. Despite the Ministry of Science and ICT's mediation last month, CJ ENM publicly criticized the IPTV industry, saying "the three IPTV companies are stingy in paying fees," and the IPTV Association retorted, "(CJ ENM is) full of arrogance and greed," showing the conflict is intensifying day by day.

The government stated that it respects autonomous negotiations between companies while ensuring that users' viewing rights are not infringed.

The Korea Communications Commission issued a statement late on the night of the 11th, just before the live broadcast suspension, saying, "The calculation of fees for broadcast channels is a matter of autonomous negotiation between the parties, but if live channels are suspended, inconvenience to the public who have been watching is expected. We plan to comprehensively review user inconvenience caused by CJ ENM channel supply suspension, unfair practices during negotiations, and whether any legal prohibitions apply, in cooperation with the Ministry of Science and ICT."

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