South Korea's rights society KOMCA objects to new rates applied to OTT services

 By Emmanuel Legrand

South Korea's Ministry of Culture, Sports and Tourism has published new royalty rates applicable to OTT (over-the-top) video streaming services, following almost a year of conflict between right society Korea Music Copyright Association (KOMCA) and OTT services, and a broad consultation by the Ministry of Culture. However, the rates have been criticised by both sides, which argued that they fell short of their expectations.

  From the start of 2021, OTT services will pay a royalty of 1.5% of their revenues for music used in cinematographic works or videos, while content that mainly includes music, such as music shows or live performances, will be subject to a 3% fee. The 1.5% fee for non-musical shows will gradually increase year by year to reach 1.995% by 2026, while the 3% rate will also increase to 3.999% by 2026.

  The existing royalty rate for retransmission of broadcasting works will also be raised to 0.75% starting next year to increase to 0.999% by 2026, according to Korea Joongang Daily. The new rates are lower than what KOMCA wanted to implement (2.5%, similar to what Netflix pays currently) and higher than the 0.625% that OTT companies, regrouped within the OTT Music Copyright Committee, set up in July 2020, were asking for. South Korea's main local OTT services include Watcha, Tving, wavve,Kakao TV and Lotte Culture Works, operator of local OTT service Seechu.

Considering both sides of the argument

  The rate determination was a result of a four-month process by the Ministry of Culture, which included a consultation with 18 stakeholders, including KOMCA and the Music Industry Development Committee, set up in July to represent rights holders. It also included benchmarking rates applied in other countries such as Germany, France, Japan and Canada.

  “The Ministry of Culture, Sports and Tourism considered both sides of the argument and balanced them out so that the new online video service industry, which is growing due to content distribution and dispersion, settles down well, while the rights of Hallyu content creators are justly protected to make sure that Hallyu continues,” the Culture Ministry said.

  “The annual adjustment coefficient was included in consideration of the fact that the clause was newly set up, the situation in the local market and the realistic conditions of the users, or the OTT services. The annual adjustment coefficient will help gradually introduce the [royalty] rate and also help the new regulation settle into society.”

Rights holders not satisfied

  KOMCA considered in a statement that the amendment "seems like the result of considering the local OTT services’ side a lot,” and argued that the 2.5% royalty rate for video content such as films and entertainment shows "is the universal rate internationally." It added: "We firmly advocated for that, but to see 1.5% as the rate leaves us dissatisfied.” KOMCA said it will submit a file a motion to ask for the rates to be reviewed.

  The OTT coalition said it planed to take "strong measures against the decision made by the Ministry of Culture, Sports and Tourism for not only damaging the balance between parties involved but also for abusing its discretionary power to go against the legal justification as required by the Copyright Act.”

  In a statement, the coalition added: “The Culture Ministry has completely undermined the dynamic and potential of OTT as a growing industry that changes fast amid competition. Local OTTs must survive amid fierce global competition and thus need to evolve in various forms or develop diverse models to ensure its uniqueness, which the ministry has completely overlooked. Should the Culture Ministry fail to accept our just demand [to review and amend the decision], then we will have no choice but to resort to legal measures including filing for an administrative litigation.”