Concerns are rising that the recent 'blackout' incident that occurred in cable television could spread to internet television (IPTV). Earlier this month, CJ OnStyle claimed a reduction in transmission fees and suspended home shopping broadcasts for three cable TV companies, including Dlive. Recently, it has been reported that CJ ENM has pressured IPTV companies for an increase in usage fees for its channel programs. Some are criticizing this as an abuse of power that disrupts the paid broadcasting ecosystem, which is struggling due to the global online video service (OTT) offensive.
According to the industry on the 18th, CJ ENM has recently demanded that IPTV operator LG Uplus raise the usage fees for its channel programs by more than 15%. CJ ENM is a multi-channel program service provider (MPP) that offers 14 channels, including tvN, tvN Story, Olive, Mnet, and Tooniverse. The rate of increase demanded by CJ ENM is about three times higher than the content fee increase rate in the IPTV industry in 2023. According to the Korea Communications Commission, the content fee (channel program usage fee) in the IPTV industry for 2023 was 932 billion won, which is a 5.4% increase compared to the previous year.
The IPTV industry believes that the rate of increase demanded by CJ ENM is excessive. An IPTV industry official noted, "The number of IPTV subscribers has not significantly increased, and asking for a double-digit increase in channel program usage fees is excessive." According to the Ministry of Science and ICT, as of the first half of this year, there were approximately 21.07 million IPTV subscribers, which is only a 1.2% increase compared to the same period last year (approximately 20.81 million).
According to the industry, CJ ENM previously demanded a channel program usage fee increase of over 20% from LG Uplus in 2021, threatening to suspend the supply of its channel programs if the demand was not met for the 'Uplus Mobile TV.' In 2020, CJ ENM allegedly warned of a blackout by demanding a 20% increase in channel program usage fees from Dlive, which would halt broadcasts of the 14 channels it operates.
In both instances, there was a dramatic agreement through mediation by the Ministry of Science and ICT, but the details of the agreements regarding increased program usage fees were not publicly disclosed. An official from the pay broadcasting industry stated, "CJ ENM's demand for excessive increases from Dlive, which is in a weak financial situation, and LG Uplus, the third-largest business in the IPTV industry, seemed aimed at proactively raising prices through operators with relatively low bargaining power. It is expected that similar price increases will be demanded from other companies in the future."
The problem is that the pay broadcasting industry has few means to respond to CJ ENM's 'blackout' action. In the case of terrestrial channels, there are provisions in the Broadcasting Act that allow the government to issue a broadcast resumption order if a program provider suspends broadcasts. However, the general channels operated by CJ ENM do not fall under this category. Additionally, even if it constitutes prohibited behavior under Section 85-2 of the Broadcasting Act by refusing, suspending, or limiting access to channel and program provision without just cause, the absence of the chairman of the Korea Communications Commission makes it difficult to make swift decisions on sanctions. If it is deemed prohibited behavior, a penalty surcharge of up to 2% of related business revenue may be imposed. Last year, CJ ENM's broadcast business revenue was 867.9 billion won.
Lee Jong-kwan, senior expert at the law firm Sejong, stated, "Contracts between companies are voluntary, making it hard for the government to intervene, and even if a blackout occurs, the legal basis for the government to take action and issue corrective orders is insufficient." He added, "While sanctions are possible if the behavior falls under 'prohibited behavior' according to the Broadcasting Act, it typically takes several months for the Korea Communications Commission to make such judgments." He also noted, "Now that there is no chairman of the Commission, it may take even longer, and if pay broadcasters endure for a long time without channel supply, they could lose subscribers, making it difficult to sustain such a situation."
Some have pointed out that CJ ENM is shaking the paid broadcasting ecosystem for the improvement of its own revenue. An adjunct professor at Chungang University, Ahn, stated, "With the increased influence of global OTTs, CJ ENM, which is under pressure, is trying to improve revenue. If the channel program usage fees rise significantly, the usage fees of smaller program providers with less bargaining power are likely to drop as well." Professor Ahn further emphasized, "CJ ENM's excessive efforts to enhance profitability may constitute abuse of power that disrupts the paid broadcasting ecosystem."
CJ ENM noted, "Currently, most of the PP industry, including us, is in a difficult situation as the content supply contract for 2024 has not been signed for over a year. We hope the content supply contract will be recognized for its fair value and signed promptly."
Meanwhile, CJ OnStyle, which is part of CJ ENM's commerce sector, suspended home shopping broadcasts to three cable TVs, including Dlive, Arum Broadcasting, and CCS Chungbuk Broadcasting, from midnight on the 5th. CJ OnStyle has reportedly demanded a 60% reduction in transmission fees for home shopping broadcasts from these companies.