Gov’t Set to Raise License Fees for KBS and Allow Commercials During Show

The government announced a new plan yesterday to finance digitalization of terrestrial broadcasting, for KBS in particular. Under the new scheme, KBS viewers might be required to pay higher license fees, and TV channels could air commercials during their programs.

On that day, government officials held an economic policy coordination meeting presided by Deputy Prime Minister Kwon O-kyu at the government complex in Gwacheon, where they agreed to finance 2.0242 trillion won, an estimate by network TVs for the transition to digital broadcasting by realizing or raising license fees and placing commercials within a show.

Such changes in a TV ad system, which will require higher advertisement costs, have long been demanded by terrestrial broadcasting companies, but have failed to win support from consumers. In particular, some point out unfairness of the government plan for additional funding to network TVs, which have recorded tens of billions of won in revenues almost every year since 2000 when digitalization began.

Transition Cost for Digital Broadcasting: A Mere Excuse?-

KBS said in its May 7 document titled “KBS moving toward license fee realization” that the public broadcasting company could not successfully launch digital broadcasting in the target year of 2012 without a significant raise in license fees. It is set to review the plan in its boardroom by June, submit it to the Korean Broadcasting Commission (KBC) and to pass it by the floor during the September National Assembly plenary session.

According to KBC, network TVs should incur additional costs for the completion of digitalization in 2012. It is estimated to cost KBS 717.4 billion won, MBC headquarters 322.6 billion won, and SBS 284.5 billion won. The companies have worked on such procedures since 2000 with 441.3 billion won invested by KBS, 189.2 billion won by MBC headquarters, and 354.4 billion won by SBS.

However, some sources in the industry find the demand by KBS for increased license fees as a mere excuse to relieve itself of financial troubles caused by overly lax management, citing reasons such as untested projection costs and tens of billions of net profits posted by network TVs amid their digitalization efforts. All three major network channels have turned tens of billions of won into net profits since 2000, the year digital conversion started, except for 2004 when only KBS ran a deficit.

In addition, terrestrial broadcasting companies have already been subsidized for digitalization since 2001, in measures such as financial assistance to HDTV program production, reduced duties for digital broadcasting equipment and fewer requirements for contribution to the Broadcasting Development Fund. That being said, higher fees or system changes could impose heavy burden on consumers.

President Kim Kuk-jin of the Media Future Institute said, “The digital transition costs need to be thoroughly examined. The link between higher license fees and transition costs is not clear, and many things remain questionable.”

Kim Hyun-joo, a media professor at Kwangwoon University, asserted that KBS should clarify how, why and where to spend increased revenues from higher fees to convince the public, which obviously is not the case now. The scholar added that the demand for raising fees should come after it ensures a detailed explanation for the usage of excess revenues upon the competition of digital conversion and transparency in corporate management.

Lax Management of KBS-

Among the network channels, KBS in particular is under attack for its lax management and obsession with raising license fees without giving proper options to step up pubic service.

In its recent report on KBS settlements for the 2006 fiscal year, Korean Broadcasting Commission pointed out that KBS fell short on efforts to save labor costs and rational spending. It also said KBS recorded the highest increase in labor costs, which indicates its insufficient effort toward business innovation and cost reduction.

The document also discussed the possibility of a controversy that the public corporation deliberately increased costs in line with growing revenues, pitting 0.8 billion won in net profits against 46.5 billion won in off-budget income.

KBS was caught in a scandal last year when a female employee embezzled about 0.9 billion won. In February of this year, a reporter misappropriated a program production budget. The company was also accused of mismanagement as it doubled expenses of its directors in March.