[News Focus] IPTV business in Korea faces challenges despite increasing revenue
According to data released by the Korea Communications Commission on Tuesday, the combined revenues of 342 broadcasting operators were 18.1 trillion won ($ 16 billion) in 2020, up from 340 billion won, or 1.9 trillion won. %, compared to 17.7 trillion won a year earlier.
The slight year-over-year increase was led by IPTV, whose 2020 revenue amounted to 4.2 trillion won, up 11.1 percent from the 2019 figure. In addition, terrestrial television channels contributed to the rise in combined revenues. Korean terrestrial networks, which had posted operating losses for three consecutive years, resumed their losing streak last year with revenue of 3.5 trillion won, up 1.4% from to the previous year.
Other segments, however, have struggled to consolidate their revenues. By media type, program providers recorded revenues of 7 trillion won last year, little change from the previous year. System operators saw their combined revenue decline 4.4% to 1.9 trillion won, and content providers also suffered a 2.6% drop in revenue with 2020 revenue. amounting to 614 billion won.
Although IPTV managed to show higher revenues last year, the broadcast industry continues to face strong headwinds brought about by the rapid shift in viewer preferences from traditional broadcast services to platforms. mobile and digital, led by YouTube and Netflix.
The coronavirus pandemic has also given a decisive boost to the rapid expansion of new broadcast services. Since the Korean government imposed social distancing measures, more and more people tend to work from home and stay indoors. This is driving the growth of home video services resulting in increased usage time for streaming videos.
This change is reflected in the continued decline in advertising revenues for broadcasting companies. Last year, combined advertising revenue was 2.7 trillion won, down 283 billion won, or 9.5%, from 2019.
The satellite service saw its advertising revenue drop 33.6% during the period, while operators in other broadcast segments also found themselves with sharply reduced advertising revenue.
Terrestrial television stations, which had dominated the broadcasting industry, continued to struggle with falling advertising revenues amid sweeping changes in the industry. Terrestrial TV channels’ advertising revenue last year was 98.6 billion won, down 9% from 2019. Terrestrial TV’s share of the advertising market fell to 36.9 billion won. % in 2020, but that does not offer much comfort given that the segment commanded a share of 63.6% in 2011.
Outlook for mixed IPTV
However, the relatively strong performance of IPTV last year does not mean that it is heading for a smooth path. IPTV service operators are now locked in a battle with content providers, in particular CJ ENM, over the payment of content fees.
Last month, CJ ENM proposed a 25% increase in the content fees it collects from IPTV providers, saying the current prices are too low compared to fees paid by other platform providers.
Citing government data, CJ ENM argued that IPTV operators only earmark 16.7 percent of their revenues for real-time programming fees. “Other providers of platforms involving digital music, webtoons and movies share 50-70% of the content fees they receive from users with content providers,” the company said.
The Korea IPTV Broadcasting Association, which represents the country’s three major IPT providers, KT, SK Broadband and LG U +, issued a statement in response to CJ ENM’s request and called it “a price increase to a abnormal level ”.
The IPTV organization claimed that CJ ENM was threatening to stop providing its programs to IPTV operators unless its demand was met, while highlighting the alleged problems with CJ’s program pricing policy.
On June 12, CJ ENM shut down its programming service to LG U + after failing to agree on the price. LG U + said the failed negotiations were due to CJ ENM’s call for a 175% increase in program fees from last year.
IPTV operators have stated that they are allowed to broadcast CJ ENM programs only on real-time channels and that the video-on-demand service is only available on CJ ENM’s over-the-top service, Tving , a policy which, according to them, discriminates against IPTV operators and undermines the rights of viewers.
Koo Hyun-mo, CEO of internet and telecommunications giant KT, told reporters on Monday that CJ ENM’s latest demand for a price hike was “extreme.” CJ ENM is said to have asked KT to agree to a 1,000% increase in content fees for the streaming service.
KT’s current payment for CJ ENM programs has been reported at 2 billion won. If the level of price hikes remains current, CJ ENM is reportedly aiming to collect 20 billion won in content fees from KT.
Given the tone of KT chief Koo, the prospects for an out-of-court settlement on the new pricing are grim.
At a digital media content forum in Seoul on Tuesday, government officials and industry experts discussed ways to resolve growing disputes in the broadcasting industry, especially disagreements over pricing. optimal programming to be broadcast on pay-TV and streaming platforms.
Experts called on the government to deregulate the market, allowing operators and content providers to freely set prices for their services without the intervention of state regulators.
Shim Sang-min, a professor at Sungshin Women’s University in Seoul, argued at the forum that the government should lift its price controls involving pay-TV operators, as foreign operators are also doing business in the market. national digital media and impose too much public accountability on operators can hamper their commercial potential.
A lawyer at the forum said the government should take a close look at the current regulatory framework on platform providers to encourage competition.
Government officials, meanwhile, stressed the importance of cooperation between IPTV operators and content providers.
“As the market structure undergoes drastic changes, the parties involved are now clashing,” said Minister of Science and ICT Lim Hye-sook. “But we must work together to find a solution in the spirit of co-prosperity and cooperation.”
By Yang Sung-jin ([email protected])