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FTA: Golden opportunity for broadcasting industry?

Following is the twelfth of a series of articles on the free trade agreement reached between Korea and the United States. - Ed.

The free trade agreement between Korea and the United States concerning broadcasting and audiovisual services is expected to bring substantial changes in the market environment, pushing the local industry to be more competitive in securing viewers.

Until the free trade agreement reached April 2, the two countries agreed to allow 100 percent ownership of program providers for U.S. firms that establish a Korean subsidiary. Current Korean law prohibits foreign companies from directly holding more than 49 percent of shares of a local broadcasting business. Within five years, however, American companies will be permitted to own 100 percent of a local broadcasting business by indirect investment through the subsidiary under their control. The FTA has yet to be approved by both countries' legislative bodies.

Local experts say the deal will open a new phase for Korean broadcasting industry, making it more competitive. But cable broadcasters have fiercely reacted, saying they are not ready. "I think that the free trade deal will bring a positive impact to the country's broadcasting industry. The guideline that allows 100 percent foreign ownership of program providers for U.S. firms is expected to increase the competitiveness of local players who are now forced to compete with foreign firms", said Park Chun-il, professor of communication at Sookmyung Women's University.

"Now, capital investment is required to give the local broadcasting industry chances to produce better programs and content. The process will encourage big companies to take over smaller ones in order to build up size and raise capital".

The local industry, however, has derided the idea.

"The FTA guideline, in fact, opened a door for foreign firms to control the Korean market in the future. Some say that the agreement will offer a golden opportunity for local broadcasters to develop more quality content and programs. However, it is nearly impossible to compete with U.S.-made productions that are controlling 46 percent of the world's broadcasting industry", said Kim Jin-kyung, head of the PR team at the Korean Cable TV Association.

The cable TV association said that U.S. made programs already account for 78.9 percent of imported programs, and the dominance of foreign content will be expanded if the market fully opens its door. The industry claimed that foreign firms would increase the prices of popular programs, such as Hollywood movies, TV series, animation and entertainment programs.

"It might sound like local cable TV channels are getting a chance while signing a partnership with one of the giant media companies. But what will happen when the foreign firm decides to start its own channel, abandoning its local partner? There is no chance for the local company to survive in the industry", said Lee.

Meanwhile, CNBC, one of world's major business TV channels announced its partnership with Digital Chosun, an affiliate of Chosun Ilbo, one of the major dailies in Korea, on Tuesday. The announcement marked the first case of a foreign firm having a strategic alliance with a local program provider after the free trade deal.

The two companies agreed to share the platform - TV channel, mobile and online distribution - that the local media firm has built on and also to co-produce programs with common interests.

Jeremy Pink, president and managing director of CNBC Asia Pacific, said it was the country's developed platform, especially advancement of mobile products, that made the market attractive for his company.

"We are looking at the development and emergence of multichannel television, and it is a very interesting process for broadcasters. CNBC in Asia will put major focus on the development of mobile products, and this is certainly a model market for developing mobile products in general", Pink said in a press meeting in Seoul on Tuesday.

Pink declined to comment on the company's further plans - such as launching its own broadcasting channel in Korea - saying the company needs to study the market more, but he did acknowledge the potential of the market.

"This type of market, because it is technologically so superior to other ones, is certainly the one that already attracts interests from the global organizations, and also from the FTA agreement, I think, it will have more attraction", said the CNBC president.

CNBC is wholly owned and managed by NBC Universal, which is the broadcasting unit of GE. Joh Byung-ryul, executive director of communication and PR at GE Korea, said foreign media groups are paying attention to Korea's broadcasting and entertainment industry.

"But it is hard to tell in detail since they are not disclosing the contents of their plans and how they are being reviewed", Joh said.

Local media groups are seeking cooperation with foreign media giants to aggressively cope with the changing market environment.

JoongAng Ilbo, a local newspaper, reportedly is planning to expand into the broadcasting industry via a partnership with CNN, and Munhwa Broadcasting Corp. already signed an agreement with Warner Brothers to run a service that provides movie downloads through the internet.

Some local cable TV players like Onmedia, seem to be trying to look confident over the expected challenge.

"The media is saying that Korean providers will face threats from foreign firms entering the market, but it is more like a rumor. It might be possible for two to three giant foreign media groups to enter the Korean market, but it isn't likely to be done soon", said Lee Young-kyun, PR director of Onmedia.

"Since it requires the (foreign media) to actually study the market. and that will take more than a year or so, I think it would give the (local broadcasting industry) time to figure out what to do in the future in the meantime", said Lee.

By Cho Chung-un

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