"More Than Half of Sales"... Broadcasting Fees Squeezing Home Shopping Performance

Home Shopping Posts 'Gloomy Report Card' for Q1 This Year
Lotte and Hyundai Q1 Operating Profit Down 10% YoY... GS Drops Over 30%
Unanimous Concern Over Transmission Fees: "Urgent Need for Calculation Standards"
"Before Technically Expanding SME Sales Channels, Revising Transmission Fee Structure Comes First"

The home shopping industry is facing a "disappointing report card" for the first quarter of this year. The industry unanimously stated that while they must fully focus on responding to the rapidly changing distribution environment, the burden of transmission fees paid to paid broadcasting operators such as Internet Protocol TV (IPTV) and System Operators (SO) is holding them back.

According to the distribution industry on the 10th, Lotte Home Shopping recorded an operating profit of 31 billion KRW in the first quarter of this year, down 9.7% from 34 billion KRW in the same period last year. During the same period, sales increased by 6.6% to 275 billion KRW from 258 billion KRW in the previous year, but operating profit actually decreased. Hyundai Home Shopping also recorded an individual operating profit of 35.3 billion KRW in the first quarter of this year, down 9.9% from 39.2 billion KRW in the same period last year. GS Home Shopping, which announced its results earlier on the 4th, saw its first-quarter operating profit plunge 30.4% to 25.9 billion KRW from 37.2 billion KRW in the same period last year. CJ OnStyle, which is about to announce its first-quarter results, is experiencing a similar atmosphere. Last year, the operating profits of these four home shopping companies amounted to 491.9 billion KRW, down 20.4% from the previous year.

All of them cited "excessive transmission fees" as the main cause of the deteriorating performance. Transmission fees, which have increased every year and now account for more than half of sales, are said to be negatively affecting their performance. According to the Korea Communications Commission's "2020 Broadcasting Business Operators' Property Status Disclosure Major Trends," home shopping companies' transmission fees in 2020 exceeded 2 trillion KRW, totaling 2.0234 trillion KRW. This is about 53.1% of the total home shopping sales of 3.8108 trillion KRW in the same year. According to the Korea TV Home Shopping Association, last year, transmission fees for home shopping companies increased by 7.7% compared to the previous year, reaching about 56.5% of total sales.

Home shopping companies say that securing the "golden channel" between terrestrial broadcasters and comprehensive programming channels is directly linked to sales, making it a critical issue. However, the transmission fees paid to paid broadcasting operators as a "seat rent" to secure this position are being decided unilaterally, causing a heavy burden. As the distribution and media environment rapidly changes, they must introduce new methods of selling through TV channels and diversify sales methods through online and mobile platforms, requiring concentrated investment. The excessive burden of transmission fees is holding them back. An industry insider said, "Recently, home shopping companies have been venturing into new businesses using metaverse (extended virtual worlds), but these are long-term attempts that are unlikely to generate immediate profits," adding, "Even these efforts face difficulties because they must operate within limited resources."

The home shopping industry has also expressed concerns in the same context regarding the "establishment of a dedicated T-commerce channel for small and medium-sized enterprises (SMEs)" recently proposed to the new government by the SME sector and others. They argue that adding one more competing channel in a situation where 17 channels are already oversaturated and all are fiercely competing to secure golden channels only exacerbates the structural problem. This is not only a matter of survival for home shopping companies but also negatively impacts SMEs that need to sell products across the industry. Currently, the proportion of SME products in TV and data home shopping programming is at least 50% or more. A home shopping industry official stated, "It is necessary to establish calculation standards for transmission fees that reflect sales and subscriber numbers," and added, "If there is a genuine concern for expanding sales channels for SMEs, the structural problems across the industry must be addressed first."

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