The structure of transactions in which multiple channel operators (MPOs) repeatedly schedule the same content across affiliated channels and bundle them for supply is increasing the content fee burden on pay-TV operators and limiting viewers' actual choices. Despite courts ruling that program supply contracts end when the contract period concludes, concerns have been raised that government guidelines effectively make it difficult to terminate contracts, thereby distorting the market.
On July 30, Yoo Seong-jin, a professor at Soongsil University, presented findings from an analysis of nine MPOs and 43 channels at a special seminar hosted by the Korean Association for Journalism Studies titled 'Improving the Pay-TV Channel Transaction Market.'
The analysis revealed that the highest duplicate programming rate among channels within the same corporation reached 98%. Five MPOs had duplicate programming rates exceeding 80%, and when considering channels with over 80% duplicate programming as the same channel, it was found that a movie channel from one MPO was nominally three channels but effectively only one.
Professor Yoo pointed out that the core issue lies not in the duplicate programming itself but in the method of bundling affiliated channels as a single product for transactions. While contracts are technically structured as individual agreements for each channel, negotiations often prioritize popular channels, leading to a structure where the entire set of affiliated channels is supplied together, making individual channel negotiations and fee assessments based on performance virtually impossible.
This transaction structure is resulting in increased cost burdens for pay-TV operators. Last year, the payment rate for content fees relative to total subscription fees for system operators (SOs) rose to 90.2%, with some operators reporting a payment rate of 116.2%, indicating that they could not cover content fees solely with the subscription fees collected from customers.
Professor Yoo stated, "Duplicate channels are occupying limited content resources, weakening the competitiveness of small program providers (PPs)." He noted that the revenue market share of 116 small PPs has remained at an average of 9.9% over the past five years, leading to a 'decline in qualitative diversity' as new entrants face barriers to market entry and viewers' actual choices diminish.
As a solution, he suggested enhancing the effectiveness of existing regulations prohibiting bundled sales rather than introducing new regulations. If an MPO refuses to engage in individual channel contracts, this should be recognized as grounds for channel termination, and it should be assessed whether individual channel negotiations are genuinely feasible and whether fees are determined based on performance metrics such as viewership. Additionally, he emphasized the need for regulatory agencies to regularly disclose duplicate programming rates and the actual number of channels to reflect in content fee assessments and PP evaluations.
* This article has been translated by AI.
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