South Korea’s cable TV system operators (SO) have decided to guarantee 80 percent of the previous year’s channel fees each year to boost programme providers’ (PP) stability in content production and scheduling.

The SO council of the Korea Cable TV Broadcasting Association on Aug. 13 disclosed the plan at a briefing on the revised guidelines for calculating content payments in the SO industry.

The key change is to apply the 80 percent guarantee of prior-year fees for each channel every year. Under the existing guidelines, 80 percent is guaranteed in the first year, 60 percent in the second year and 40 percent in the third, with evaluation criteria fully applied from the fourth year.

Under the revised plan, SOs will first set the overall content payment pool for the year reflecting changes in SO revenue. They will then allocate 80 percent of the previous year’s fees to each channel first. Evaluation results such as audience share and channel assessments will be applied only to the remaining funds.

The revised guidelines also strengthen incentives for expanding PP investment in producing and buying TV content. Channels that increase programme production and purchase costs from the previous year will receive an additional 3 to 15 percent on top of the calculated fee, depending on the size of the increase.

An increase of 10 percent or more and less than 30 percent will receive 3 percent, 30 percent or more and less than 50 percent will receive 6 percent, 50 percent or more and less than 70 percent will receive 9 percent, and 70 percent or more and less than 90 percent will receive 12 percent. An increase of 90 percent or more will receive up to an additional 15 percent. Investment in content not first supplied to a TV channel, such as content premiered first on an over-the-top service (OTT), will be excluded from the calculation.

The guidelines also introduce bonus points for PPs that maintain TV-first release and holdback. Content that maintains holdback until after midnight on the day after the broadcast ends will receive a 1 to 10 percent bonus depending on ratings. Content with ratings of 1 percent or higher will receive up to 10 percent.

By contrast, a penalty will apply if a business holding intellectual property (IP) for broadcast content distributes it simultaneously or early on competing platforms such as OTT services, free ad-supported streaming TV (FAST) and YouTube without a separate holdback.

A 7 percent penalty will apply if live broadcasts are simulcast on competing platforms. Even without live simulcasting, a 5 percent penalty will apply if video-on-demand (VOD) is released before midnight on the day after broadcast ends. If applying the penalty would push fees below 80 percent of the previous year’s level, the 80 percent guarantee will take priority.

An SO industry official said, "By guaranteeing 80 percent of the previous year’s fees every year and expanding incentives for TV content investment, we hope content companies can grow in a stable way and viewers can continue to receive diverse and beneficial content."

The official added, "As changes in the media environment are making it difficult for both pay-TV operators and content businesses, we will work to ensure fair and reasonable programme supply contracts take root."

The SO council plans to gather opinions from content businesses on the revisions until Sept. 4.