[The Editors' Verdict] The Double Standards in the Content Industry

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[Asia Economy Reporter Myung Jin-kyu] The controversy over soaring content prices due to Google's in-app payment issues is intensifying. Following complaints from content providers (CPs) that prices are "too expensive," civic groups have also stepped forward, stating that "consumers are suffering from the sharp rise in content prices." Since 30% of the payment amount must be paid as a commission, prices for all content?including movies, music, books, and webtoons?inevitably rise.

Assuming many have complaints, I asked major platform companies for their opinions whenever I met them. Some said, "30% is a bit excessive," but most responded, "If it weren't for Google and Apple, the massive app ecosystem we have today wouldn't have been created."

They explained that investment is necessary for services, and appropriate revenue (commissions) is needed for that. They especially emphasized that through platform services, new markets were created or existing markets expanded, increasing profits for all participants.

While there may be debates about the appropriate compensation, the majority agreed that payment must be made for the creation of new infrastructure. An executive from Company A explained, "Companies operating commission-based platform services like Baemin and Kakao Taxi all face the same concerns," adding, "As platforms grow, massive investments are required to operate them stably." He emphasized that if any party demands excessive compensation, they will eventually be driven out of the market.

This is a call to follow market logic, but in the domestic app market, Google holds 71.9% and Apple 13.6%, making them absolute leaders. Since there are no alternatives to Google's Android and Apple's iOS, they are monopolistic operators. The possibility of being driven out of the market for charging excessive fees is extremely low.

Changing the subject, I asked whether telecom companies demanding network usage fees from CPs is similar to platform operators charging commissions. The answer was clear. All said, "Charging CPs the same fees while charging internet users violates net neutrality." They explained that telecom companies directly providing services like online video streaming (OTT) and music raises fairness issues. The price competitiveness of their own services, which do not have to pay network usage fees, increases.

According to the Ministry of Science and ICT, last year, three companies?Google, Netflix, and Meta (Facebook)?accounted for 37.8% of domestic internet traffic. In a 2020 survey, these three companies accounted for 33.9% of traffic, increasing by 4 percentage points in one year. Google ranked first, with 51.5 million users accounting for 27.1% of traffic. Netflix had 1.68 million users generating 7.2% of traffic. Facebook had 6.77 million users accounting for 3.5% of traffic.

For Naver and Kakao, used by the entire nation, 40.29 million and 40.59 million users accounted for 2.1% and 1.2% of traffic, respectively. Naver and Kakao recorded a combined 3.2% of traffic in 2020, increasing by only 0.1 percentage points in one year.

The concentration of traffic on Netflix services is due to more people watching 4K content on TVs. Watching the same content on a smartphone for one hour consumes about 1.5 gigabytes (GB), but watching in 4K on a TV consumes about 7.2 GB?about five times more. In the case of KakaoTalk, even exchanging messages all day amounts to only tens to hundreds of megabytes (MB). From the telecom operators' perspective, it is understandable that companies using most of the infrastructure built with trillion-won investments pay no compensation.

Although the discussion seemed to flow like a double standard, there is a clear difference in positions among internet operators, platform operators, and CPs. The conversation ultimately returned to the age-old "chicken and egg problem." Telecom operators say, "CPs could do business because of world-class network investments," while CPs say, "Who would pay to use the internet if there were no services?" Both are correct. The solution to the problem begins with mutual recognition.

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