Paid Broadcasting Establishes Major Principle of 'Contract First, Supply Later'

Ministry of Science and ICT Holds Win-Win Council Meeting to Finalize and Announce Guidelines

[Image source=Yonhap News]

[Asia Economy Reporter Eunmo Koo] The government has laid the groundwork to shift the long-standing practice in the paid broadcasting market from "supply first, contract later" to "contract first, supply later." Additionally, measures have been established to ensure fairness in channel contracts and terminations between paid broadcasting operators and broadcasting channel usage operators (PPs) by enabling these processes to be conducted based on objective criteria, as well as to enhance the objectivity and rationality of channel evaluations that serve as the basis for channel contracts and terminations.

The Ministry of Science and ICT (MSIT) announced on the 29th the finalized revision of the "Guidelines on Channel Contracts and Content Supply Procedures in the Paid Broadcasting Market," which includes these provisions.

According to the announced guidelines, channel contracts must be concluded before the expiration of the contract period, establishing "contract first, supply later" as the principle. However, considering that most channels have not yet concluded contracts for 2022, a grace period will be provided. The timing of application is expected to be finalized after the MSIT Minister discusses with the Korea Communications Commission, taking into account standards for compensation calculation and protection measures for small and medium-sized PPs, and consults with paid broadcasting operators and PPs.

Oh Yong-soo, Director of Broadcasting Promotion Policy at MSIT, stated, "We will correct the entrenched practice of supply first, contract later to the principle of contract first, supply later, so that high-quality content can be delivered to viewers through paid broadcasters. However, considering the practical reality that major PPs have not yet concluded contracts for next year, transitional supply-first operations will be unavoidable until around the first half of next year."

[Image source=Yonhap News]

Furthermore, the government will enhance the objectivity of channel evaluations, which serve as the basis for channel contracts and terminations, through the guidelines. Paid broadcasters will evaluate all PPs that aired during the period from January 1 to December 31 each year, classifying them into 12 channel groups such as movies, foreign dramas, and domestic dramas. The evaluation consists of 11 items across five categories: viewership ratings (30 points), programming (30 points), production capability (10 points), content investment (20 points), and operational capability (10 points). The guidelines require specifying the scoring for each evaluation item, the method of scoring, and detailed criteria for the scoring method.

These channel evaluation criteria must be disclosed to PPs at least three months before sending the evaluation-related data request forms. The data request forms must be sent to PPs by the earlier of either three months before the previous contract expires or one month before the start of the channel composition-related evaluation.

Paid broadcasters must complete the evaluation by March 31 each year and notify the results by April 10. PPs may file objections within 10 days of receiving the notification. Paid broadcasters must review and finalize the results within seven days of the objection deadline.

Regarding channel contract termination, the requirements have been clarified to allow termination upon contract expiration after a reasonable channel evaluation and withholding of contract renewal. Paid broadcasters may withhold contract renewal for channels that, for two consecutive years, either fall within the bottom 10% of their channel group’s average score or, if the channel group has fewer than 10 channels, receive the lowest evaluation in the group.

PPs are given the opportunity to provide explanations regarding channel contract changes. Paid broadcasters must provide PPs with at least one week for the explanation process and notify them in writing by official letter at least 45 days before the contract expires. Additionally, viewers must be notified at least one month before any broadcast suspension.

The MSIT stated, "With the finalization of these guidelines, we have established a basic framework for discussions on content compensation standards. We plan to begin substantive discussions on content compensation standards starting next year and propose the establishment of a 'Content Compensation Standards Council (tentative name, also known as the Roundtable),' which will include paid broadcasters, PPs, terrestrial broadcasters, news and general programming PPs, and others, expecting active participation to develop reasonable standards."

They added, "We will actively strive to establish compensation standards within next year so that the principle of contract first, supply later can be applied without fail starting from 2023 contracts. We also plan to continue discussions with the paid broadcasting industry regarding the 'PP Evaluation Criteria and Procedure Standard' established this time, improving and supplementing any shortcomings that may arise during its application and implementation."

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