[2021 National Audit] Naver·Kakao Webtoon Alleged Abuse of Power 'On the Table'... "Will Improve" (Summary)

Kim Jun-gu, CEO of Naver Webtoon (from the right), and Lee Jin-su, CEO of Kakao Entertainment, appeared as witnesses on the 1st at the National Assembly's Culture, Sports and Tourism Committee audit in Yeouido, Seoul. Photo by Yonhap News

[Asia Economy Reporters Kang Nahum and Boo Aeri] On the first day of the National Assembly’s Culture, Sports and Tourism Committee’s audit, allegations of abuse of power against creators by webtoon companies such as Naver Webtoon and Kakao Entertainment came under scrutiny. While the representatives of these companies promised to enhance the rights of creators, they actively defended themselves against controversies over high commission rates.

The Culture, Sports and Tourism Committee of the National Assembly began its audit of the Ministry of Culture, Sports and Tourism at 10 a.m. on the 1st. The first target of the ruling party’s announced ‘platform audit’ was the webtoon companies Naver Webtoon and Kakao Entertainment.

With Kim Jung-gu, CEO of Naver Webtoon, and Lee Jin-soo, CEO of Kakao Entertainment, appearing as witnesses, lawmakers raised critical voices over suspicions that these platforms abused their power against creators regarding commissions and copyrights.

Democratic Party lawmaker Yoo Jung-joo pointed out, “In 2018, the Fair Trade Commission reviewed the webtoon serialization contracts used by 26 webtoon service providers and requested corrections for 10 types of unfair terms unfavorable to authors, but after nearly three and a half years, there has been no change.”

In fact, a contract between a certain company and a creator obtained by lawmaker Yoo contained unfair clauses such as, “All intellectual property rights including copyrights and trademark rights of works and comics produced under the contract belong to or are transferred to the company, and the author agrees not to exercise rights that cannot be attributed or transferred to the company by law.”

Yoo said, “There are not just one or two creators who have to sign such contracts. Probably, rookie authors have to sign under even harsher and more coercive circumstances,” describing it as virtually a ‘slave contract.’

He also criticized, “It has been almost 20 years since Daum Webtoon (Kakao Webtoon) and Naver Webtoon emerged, but it is questionable when the market structure that monopolizes the market favoring only giant distribution companies will change.”

Concerns were also raised about the revenue sharing of advertising income between platforms and creators. Democratic Party lawmaker Jeon Yong-gi said, “Kakao Entertainment claims that the platform does not take advertising revenue, but protests from web novel authors continue,” pointing out, “There have been testimonies that web novel authors receive no settlement for ad clicks viewed by readers.”

Industry grievances were also voiced. Kim Dong-hoon, chairman of the Webtoon Writers’ Union who appeared as a reference witness, said, “Due to the multiple layered distribution structure, after giving shares to the giant platforms and content providers (CPs), authors are left unable to earn even a minimum living wage,” adding, “Some platforms even hold shares in production companies, so the reality is that authors bear the burden through this multiple layered structure.”

In response to these criticisms, Lee Jin-soo, CEO of Kakao Entertainment, said, “In the early market, there were only a few hundred authors, but the number has rapidly increased every year, and now the cumulative number of authors has reached 45,000,” adding, “Although tremendous growth has been achieved, the number of authors and CPs has greatly increased, and we are not fully aware of all contracts between them.”

He said, “Since we proceed with upfront investments and bear risks, the profit margin is not as large as commonly known,” and added, “Taking this national audit as an opportunity, we will conduct a thorough investigation of subsidiaries and affiliates within Kakao Entertainment to review contracts and collaboration structures.”

Lee also actively defended the high commission rate of up to 45%. He said, “Even if we say the split is 45 to 55, the actual share going to creators averaged 66% over seven years,” and “This year, there have been cases where settlements reached as high as 74%.”

Kim Jung-gu, CEO of Naver Webtoon, said, “In the case of Naver Webtoon, 88% of authors have direct contracts with Naver or Naver Webtoon, so I think the commission issue is less relevant,” and added, “Nevertheless, if there are difficulties or grievances that authors have not yet recognized, we will study and improve these areas.”

Regarding the criticism that unfair practices such as exclusive contracts for secondary works are widespread in the drafting of standard contracts, the representatives promised to conduct a thorough investigation of related cases in their subsidiaries. Lee said, “We will do our best to improve as a leading model by embracing the spirit of the Fair Trade Act.”

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