The cable TV industry has long been in an unfair environment and is facing a crisis of survival. It must be improved that the Broadcasting and Telecommunications Development Fund (hereafter referred to as the development fund) is imposed on operators that have turned their operating profit into a loss.
Hwang Hee-man, president of the Korea Cable TV Association, met with reporters on the 21st in Gwanghwamun, Jung-gu, Seoul, and stated this. Hwang said, "The current regulatory situation, where more money must be paid as development funds than the operating profits of 90 cable comprehensive broadcast (SO) companies, must change."
According to the Korea Cable TV Association (hereafter referred to as the Cable TV Association), the total operating profit of 90 cable comprehensive broadcast (SO) companies across the country last year was 14.9 billion won, which is a 96.3% decrease compared to 2015, ten years ago. Out of the 90 SO companies, 52 recorded losses. However, the total development fund paid to the government by all SO companies last year was 25 billion won, which was 10.1 billion won more than their combined operating profit. The development fund is levied at 1.5% of broadcasting revenue, regardless of whether a company is in the red. The broadcasting development fund rate, which was previously 1%, was raised through a revision of the notification by the Ministry of Science and ICT in 2017. This has raised criticism from the industry that, due to the worsening cable TV market, the tax rate was increased to prevent a drop in tax revenue.
Hwang noted, "I have raised concerns about fair competition among media due to the rapid market encroachment of global online video services (OTTs) several times, but I think there has been almost no substantial policy change that resonates in the management field," and added, "Although the imposition of the development fund is soon to be determined, there are no signs of progressive policy improvements this year either, and I am raising my voice until the end."
Hwang mentioned that disputes over home shopping transmission fees and rising costs of terrestrial broadcasting retransmission have also become burdens for the cable TV industry. He said, "Issues such as disputes over (terrestrial) channel supply and home shopping transmission fees are continuously causing conflicts between industries," and added, "Cable SO companies are already in a dire situation." According to the Cable TV Association, last year, 53 cable SO companies had a revenue share of over 30% from home shopping transmission fees, which is about double compared to 2015 (27 companies). Last year, the cost of retransmitting terrestrial broadcasting was 123.1 billion won, which is a 38.5% increase compared to 2017 (88.9 billion won). Last year, the operating profit margin for all 90 cable SO companies was 0.55%, a drop of more than 10 percentage points from 2017 (10.81%).
Hwang emphasized that maintaining and preserving local culture is the primary purpose and reason for the existence of cable TV. He stated, "If all cable SO companies disappear and national broadcasting becomes homogenized and centered on the metropolitan area, regions will perish," and insisted, "Structural reform to save cable SOs is not an option but a necessity. If we miss this year, recovery will be impossible."
To solve these issues, the Cable TV Association announced policy alternatives to save cable SO companies. Professor Kim Yong-hee of the Department of Business Administration at Sunmoon University, who conducted research on this topic for the Cable TV Association, said, "If the development fund is exempted for loss-making cable SO companies this year, an expense reduction of about 9.7 billion won is expected, and the operating profit margin will improve from last year's 0.55% to 0.91%, an improvement of 0.36 percentage points." He added, "In the long term, the development fund system should be completely reformed to either lower it by the amount invested in regional channels or exempt it entirely." Professor Kim continued, "The mandatory retransmission range for terrestrial broadcasting should be limited from the three major terrestrial broadcasters to only KBS, and a cap on retransmission fees should be introduced to curb cost increases."