Ad Sponsors to Pay 18.9% More Next Year

The Korea Broadcasting Advertising Corporation (KOBACO) plans to raise the advertising fees from next year. In protest, advertisers have signed up for only half of this year’s volume of TV and radio advertisements.

The corporate clients of KOBACO have publicly vowed to stop buying further ad spots for next January, unless the state-run corporation revises its unilateral hike schedule.

According to a recent survey of the Korean Advertisers’ Association (KAA), the advertising fees for TV commercials will go up by as much as 18.9% next year, while KOBACO announced that it would increase it by 7.9% on average.

KOBACO Pressuring Individual Corporations for More Contracts –

The KAA confirmed yesterday that advertiser’ orders for TV and radio ad spots for next January amounted to 95 billion won (approximately $95 million) this year, or a 43% drop compared with this year’s volume.

Speaking for the KAA, director Kim Gi-won explained, “Our members constitute the 30 biggest corporations in Korea. Our members voted to stop placing orders for next January. That’s why the contract volume dropped. Even if we buy additional spots next year, they will not exceed 120 billion won.”

The KOBACO said, “The orders we have received until December 18 amount to 34 billion won. For the last January, we sold 36 billion won worth of spots. We don’t see much difference. Further, we haven’t tallied the orders for long-term contracts.”

Contrary to the public gesture, KOBACO has fanned out its employees to contact individual corporations to solicit more orders, putting a huge psychological burden on them.

An advertising department staff member of a corporation confessed, on condition of anonymity, “Recently a KOBACO officer called me and explained why it had to raise the fees. I feel uneasy about it. I am concerned [KOBACO] might exclude our advertisements from prime time spots. KOBACO has the exclusive right to assign individual advertisements to ad spots.”

Looming Blank Ad Time for February–

Despite the nominal increase of 7.9%, corporations complain that they will end up paying higher fees. KOBACO has lowered fees for unpopular spots, but it has sharply raised fees for prime time and popular programs.

A recent KAA survey attests to the argument. It studied the fees its members pay during the third week of December for 57 major TV and radio shows run by three national broadcasting companies. Then it compared the data with the ad fees they will have to pay for the same programs during the third week of next January. According to the results, the KAA members will pay less next year only for four news programs, while ending up paying over 15% more for 10 other programs. A famous show will charge ad sponsors as much as 18.9% more next year.

KOBACO explained, “It’s reasonable to charge different rates for different programs. On average, the increase is just 7.9%.”

KAA vice chairman Kim Yi-hwan countered the allegation, saying, “KOBACO is trying to dump the cost of constructing the digital broadcasting infrastructure. But the effects of TV commercials keep diminishing. We cannot take the burden. Unless KOBACO revamps its unfair sales practices, we will not place orders for next February, either.”

larosa@donga.com