'Content Supply Suspension' CJ ENM: "LGU+ Does Not Share Basic Data Either... Need to Fix Low-Price Practices"

[Asia Economy Reporter Joselgina] LG Uplus and CJ ENM have clashed over the 'U+ Mobile TV usage fee negotiation breakdown' that led to the suspension of content supply, with LG Uplus urging CJ ENM to take responsible action, and CJ ENM immediately rebutting. CJ ENM claims that the fundamental cause of the negotiation failure lies not in excessive fee increases but in LG Uplus's uncooperative attitude, including not even sharing subscriber numbers.

According to the two companies on the 13th, as of midnight the previous day, real-time 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, among others. CJ ENM had warned LG Uplus that if negotiations were not reached by the 11th, program broadcasting would be halted from the 12th, and ultimately, the two companies failed to narrow their differences until the last moment, resulting in a blackout.

In a statement released the previous afternoon, CJ ENM said, "Since 2012, we have provided our channels' real-time broadcasts and VOD services on LG Uplus OTT. During the 2021 contract discussions, we could not find common ground, so we reluctantly decided to terminate the real-time 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 ▲ and 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 received no response. This meant there was no minimum foundation to start negotiations." They added, "With no progress in negotiations, we had to internally estimate subscriber numbers and propose supply fees accordingly, but LG Uplus informed us they could not agree to this."

Furthermore, CJ ENM defined the negotiation as a matter of "how to classify LG Uplus OTT service." While LG Uplus defines the service as 'mobile IPTV,' which is their paid IPTV platform moved to a mobile environment as an additional service, 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 an additional fee, and anyone can subscribe or unsubscribe to the OTT 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 usage fees. Until now, CJ ENM has negotiated content fees linked to IPTV but has requested separate contract negotiations starting this year.

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

Regarding criticism from inside and outside the industry that the content fee increase is "excessive," CJ ENM drew a clear line, stating, "'Excessive fee increase demands' are not the essence of this negotiation breakdown." CJ ENM argues that the amount received as content fees has been low, so the rate of increase is not significant.

The content usage fee CJ ENM requested 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 between CJ ENM and LG Uplus in 2019 and 2020 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. They stated, "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, saying, "We hope to find meaningful and productive new common ground with LG Uplus."

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