Home Shopping Performance Shock Becomes Reality... 송출수수료 Negotiation Difficulties Expected

Home Shopping 4 Companies' Operating Profit Halved Year-on-Year
Impact of Weak TV Viewing Consumption and Rising Transmission Fees
Calls for Relief Growing... "60% of Sales Are Fees"

Concerns over the deteriorating performance of home shopping companies are becoming a reality. The sharp decline in TV viewership and the rapid growth of other channels such as e-commerce have dragged down home shopping performance amid a consumption slump caused by the economic recession. Increased transmission fees are also a significant burden for home shopping companies.

Lotte Homeshopping Headquarters Building Exterior.

According to the home shopping industry on the 12th, the combined operating profit of the top four home shopping companies (Hyundai, GS, CJ, Lotte) in the second quarter of this year was 56 billion KRW, down by nearly half (47%) from 106.5 billion KRW a year earlier. Sales decreased by about 7%, from 1.2238 trillion KRW to 1.1278 trillion KRW.

All home shopping companies showed sluggish performance, but among them, Lotte Home Shopping and Hyundai Home Shopping experienced the largest decline in operating profit. Lotte Home Shopping recorded an operating profit of 2 billion KRW in the second quarter, a sharp drop of 93% compared to the same period last year. The company had already reported a performance decline of over 80% year-on-year in the first quarter, and the results worsened in the second quarter. The suspension of early morning broadcasts (2 a.m. to 8 a.m.) throughout the second quarter was a painful factor. Hyundai Home Shopping recorded an operating profit of 8 billion KRW in the second quarter, plummeting more than 70% compared to the second quarter of last year, shocking the industry. The company stated that profits shrank significantly due to an increase in transmission fees amid a reduction in high-margin product categories such as living and rental items.

The biggest reason for the contraction of the home shopping industry is the decline in the number of TV viewers. Although sluggish consumption due to high inflation and high interest rates also affected the performance decline, the reduction in TV viewing itself is due to people becoming more accustomed to mobile environments. Even the main consumer group of home shopping, the 40s and 60s age group, is becoming more familiar with mobile devices. This is also why the profits of Lotte Home Shopping and Hyundai Home Shopping were particularly weak. These two home shopping companies have a relatively larger proportion of TV sales compared to GS Home Shopping and CJ OnStyle. As of the end of last year, TV sales accounted for more than half of total sales at Lotte Home Shopping (57.4%) and Hyundai Home Shopping (56.6%), while GS Home Shopping (38%) and CJ OnStyle (36.3%) had lower proportions. This is the result of proactive investment in the mobile sector following the decline in TV viewership.

Home shopping companies are likely to continue posting poor results in the second half of the year as well. This is because TV home shopping’s competitiveness is weakening compared to other channels. To overcome the difficult business environment in the second half, GS Home Shopping plans to accelerate the transition to mobile while increasing exclusive products to expand loyal customers. CJ OnStyle will focus on increasing exclusive products and strengthening the mobile sector based on its 'one platform strategy.' Lotte Home Shopping is expected to improve performance with the resumption of early morning broadcasts in the second half and also to monetize its own intellectual property (IP), Bellygom. Hyundai Home Shopping is likely to focus on cost management as profitability has significantly declined.

As the decline in home shopping companies’ performance is larger than expected, conflicts over transmission fees with paid broadcasting operators such as Internet Protocol TV (IPTV) and cable TV (SO) are expected to intensify. With fee negotiations scheduled with major IPTV companies that were postponed in the first half, the home shopping side is predicted to emphasize the need for fee relief by highlighting their shrinking performance and industry coexistence. On the other hand, paid broadcasting operators argue that transmission fees cannot be reduced because sales generated when customers view products on TV and then purchase them via mobile must also be considered.

Transmission fees refer to the channel carriage fees that TV home shopping companies pay to paid broadcasting operators. Earlier this year, the Ministry of Science and ICT (MSIT) mandated under the ‘Home Shopping Broadcast Channel Usage Contract Guidelines’ that home shopping companies and paid broadcasting operators negotiate fees through mutual agreement. Although some adjustments were made regarding contentious issues such as fee reflection factors, the gap between the two sides has not narrowed. A home shopping industry official said, “The government’s current stance is, ‘If negotiations fail and broadcasting is interrupted (blackout), we will look into it then,’ so it is not very effective at this point.”

Home shopping companies unanimously say that the increase in transmission fees is directly linked to their survival. Especially for T-commerce (TV + commerce), which is smaller in scale than home shopping, an emergency management system is in place, making fee relief urgent. According to the Korea Communications Commission, last year home shopping companies’ TV sector sales amounted to 37.094 trillion KRW, with transmission fees accounting for 60% of that. From the home shopping perspective, no matter how many products are sold through TV, the actual money received is minimal. With transmission fees rising sharply in a short period, the total transmission fees paid by 12 home shopping companies to paid broadcasting operators last year reached 2.4101 trillion KRW, an increase of 1 trillion KRW compared to five years ago.

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