As cable TV system operators (SOs) see profitability deteriorate rapidly amid the spread of global over-the-top (OTT) services and a slump in the pay TV market, the Broadcasting and Communications Development Fund they pay to the government has now exceeded the industry's total operating profit. Even as the business environment collapses, the fund is levied based on sales, prompting complaints in the industry that "we are in the red after paying the fund."
According to the industry on the 16th, D'Live failed to fully pay the development fund assessed last year by the deadline and reportedly paid only part of it early this year. The fund imposed on D'Live is estimated at about 4.5 billion won, or 1.5% of its 2024 broadcasting sales of 300.9 billion won. Considering that D'Live's operating profit last year was only 179.82 million won, the expense levied as the development fund amounted to 25 times its operating profit.
D'Live posted about 5 billion won in operating profit as recently as 2023, but its operating profit plunged to around 100 million won in 2024 due to the pay TV market slump. By contrast, the development fund did not decrease steeply. The fund is assessed at 1.5% of broadcasting sales, and D'Live's broadcasting sales declined only 1.6%, from 306 billion won in 2023 to 300.9 billion won in 2024.
This problem is not limited to individual operators. According to the Korea Cable TV Assosiation, SOs' total operating profit from broadcasting businesses plunged about 97% in 10 years, from 450 billion won in 2014 to 14.9 billion won in 2024. Over the same period, the operating margin fell from 19.3% to 0.9%. In effect, the structure now leaves almost no money on the table.
By contrast, the development fund that SOs paid to the government in 2024 reached 25.7 billion won. That is 10.8 billion won more than the industry's total operating profit. In other words, they paid more into the fund than they earned from business. In the cable TV industry, some even say, "After paying the fund, quite a few companies fall into the red."
Actual management conditions are also dire. As of 2024, 38 of the 90 SOs nationwide posted losses. The industry believes the number of loss-making operators is likely to increase further in 2025, for which total figures have not yet been compiled. With subscriber declines, weak advertising, and a burden of content expense overlapping—and the spread of OTT continuing—the foundation of the traditional pay TV business is rapidly eroding.
What the industry especially opposes is how the development fund is assessed. SOs must pay 1.5% of broadcasting sales into the fund regardless of whether they are in the black. Even without revenue, if there are sales, they are obligated to pay. The levy rate, originally 1%, was raised to 1.5% in 2017 through a notice revision by the Ministry of Science and ICT. The industry has consistently complained that, as cable TV sales decline, the authorities simply increased the levy rate to prevent the fund from shrinking.
Fairness concerns are also growing. The home shopping industry pays the fund based on operating profit, while SOs shoulder the burden based on sales. Observers inside and outside the industry note that the burden structures are excessively different even within the same broadcasting ecosystem. The industry says switching the basis for SOs' development fund from sales to operating profit is possible through a notice revision without changing the law. A cable TV industry official said, "The Korea Media and Communications Commission can revise the notice and consult with the Ministry of Economy and Finance."
The cable TV industry argues that the current crisis is not simply business weakness but a structural problem caused by overlapping changes in systems and market conditions. Public broadcasters such as KBS receive a one-third reduction in the development fund for public interest reasons, but SOs, despite performing public roles such as operating regional channels, receive no reduction in collection rates or relief benefits.
A pay TV industry official said, "Unless there is at least a reduction for loss-making operators or an adjustment to the assessment basis, there is growing concern that the very existence of region-based pay TV operators could be shaken." Recently, Hwang Hui-man, head of the Korea Cable TV Assosiation, also noted, "The crisis facing system operators is not about individual companies but a structural crisis caused by a policy vacuum."