Concerns are growing that the recent 'blackout' incident that emerged in cable TV could spread to Internet Protocol television (IPTV). Earlier this month, CJ OnStyle halted home shopping broadcasts to three cable TV operators, including DLive, while claiming a reduction in transmission fees. Recently, CJENM reportedly pressured IPTV operators to increase the fee for using its channel programs.
According to industry sources on the 18th, CJENM has recently demanded that IPTV operator LG Uplus increase the fee for using its channel programs by more than 15%. CJENM is a multi-channel broadcasting service provider (MPP) that provides 14 channels, including tvN, tvN Story, Olive, Mnet, and Tooniverse. The rate increase demanded by CJENM is about three times higher than the content payment increase rate in the IPTV industry for 2023. According to the Korea Communications Commission, the content payment in the IPTV industry (channel program usage fee) for 2023 was 932 billion won, which is a 5.4% increase compared to the previous year.
The IPTV industry sees the rate increase demanded by CJENM as excessive. An IPTV industry official noted, "The number of IPTV subscribers has not significantly increased, so demanding a double-digit increase in channel program usage fees is excessive." According to the Ministry of Science and ICT, the number of IPTV subscription lines in the first half of this year was about 21.07 million, a 1.2% increase compared to the same period last year (about 20.81 million).
The industry reports that in 2021, CJENM demanded a channel program usage fee increase of more than 20% compared to the previous year from LG Uplus, threatening to stop supplying its channel programs if the demand was not met. In 2020, it requested DLive to raise the channel program usage fee by 20%, reportedly indicating a blackout of the 14 channels operated by CJENM.
In both instances, dramatic agreements were reached through mediation by the Ministry of Science and ICT, but the details of the agreements regarding the increase in program usage fees were not disclosed to the public. An official from the paid broadcasting industry pointed out that "CJENM's excessive demands for increases from the cable TV operator DLive, which is financially weak, and LG Uplus, the third largest operator in the IPTV industry, indicate an intention to proactively increase prices through negotiably weaker operators." They added, "It seems likely that similar price increase demands will be made to other companies in the future."
The problem is that the paid broadcasting industry has few means to respond to CJENM's 'blackout' action. In the case of terrestrial channels, the government can issue an order to resume broadcasting if a program provider suspends transmission, as stipulated by a provision in the Broadcasting Act. However, the general channels operated by CJENM do not fall into this category. Furthermore, even if it constitutes a 'prohibited act' as stipulated in Article 85-2 of the Broadcasting Act for refusing, suspending, or limiting access to channel or program provision without justifiable reason, the absence of a chairman at the Communications Commission makes swift sanction decisions difficult. If it falls under prohibited conduct, a penalty surcharge of up to 2% of the relevant business revenue may be imposed. Last year, CJENM's broadcast business revenue was 867.9 billion won.
Lee Jong-gwan, chief specialist at law firm Sejong, said, "Since contracts between operators are free, it is difficult for the government to intervene. Furthermore, even if a blackout occurs, there is insufficient legal basis for the government to intervene and issue corrective orders." He noted, "Although sanctions are possible when it qualifies as a 'prohibited act' under the Broadcasting Act, it typically takes several months for the Communications Commission to make such determinations." He added, "Now, with the absence of a chairman, it may take even longer, and if paid broadcasting operators endure a prolonged period without channel supply, they may lose subscribers, making it difficult to hold out."
Some suggest that CJENM is shaking the paid broadcasting ecosystem to improve its profitability. An adjunct professor at Chung-Ang University Graduate School of Communication, Ahn, stated, "With the expanding influence of global OTTs putting CJENM in a defensive position, they seem to be seeking profitability improvements." Ahn continued, "If the channel program usage fees rise significantly, the usage fees for smaller PP operators with less negotiating power may decrease accordingly." Ahn concluded that CJENM's excessive efforts to improve profitability could amount to excessive demands that disrupt the paid broadcasting ecosystem.
Meanwhile, CJENM's commerce division, CJ OnStyle, reportedly halted home shopping broadcasts to three cable TV operators, including DLive, Areum Broadcasting, and CCS Chungbuk Broadcasting, as of 12 a.m. on the 5th. CJ OnStyle is said to have demanded a 60% reduction in home shopping broadcast transmission fees from these operators.