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Media merger Holy Grail or poisoned chalice?

2010/05/17 | 580 views | Permalink | Source

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4 newspapers in all-or-nothing fight for cable channel licenses to secure next business model

By Kim Tong-hyung
Staff reporter

President Lee Myung-bak is aiming for a drastic change in the current mass media structure in two ways ― the creation of mega-media groups encompassing newspapers and television channels and the privatization of KBS and MBC.

For whatever reason Lee is determined and one of the most considerable changes is on the horizon ― picking winners among the established newspaper companies to establish two new "comprehensive" TV channels.

Although there are pros and cons regarding the profitability of such new channels, three big newspapers ― Chosun, Joongang and Donga all controlled by a major stakeholder ― as well as Maeil Business Daily hope that this opportunity will provide them with a new business model that will take them beyond what is widely seen as the impending demise of print news media.

The government has been pushing an ambitious plan to deregulate the media industry during the past two years, eliminating the traditional ban on media cross-ownership, which prevented a single company from owning both a newspaper and a television station.

The ownership restrictions involving television stations were eased to lure bigger companies to invest in the broadcasting sector. Previously, only companies with less than 3 trillion won (about $2.6 billion) in assets were able to own television news channels, but the revision of the broadcasting law last year raised the ceiling to 10 trillion won.

Critics are concerned that the compromised diversity in media ownership could hurt discourse, especially when they see the line between profit and reporting becoming blurry at traditional news organizations in a tightening advertising market.

In response, government officials maintain that deregulation is critical for the growth of the media industry and to enable the creation of globally-competitive companies that could hold their own against the likes of Disney and Fox.

But it doesn't appear that Korea will be getting its own Rupert Murdoch anytime soon, as the country's corporate heavyweights don't seem convinced that a full-blown television operation could turn into a golden goose.

The Korea Communications Commission (KCC), the country's converged regulator for broadcasting and telecommunications, will allocate an undetermined number of licenses for new cable channels, allowing them to provide comprehensive programming including news and entertainment, by the end of the year. The agency will also allow a larger number of news-only cable channels as well, and expects to finalize the licensing schedule by next week.

Those willing to exploit the new freedom for media concentration include the country's "big-three" newspapers ― Chosun Ilbo, JoongAng Ilbo and Dong-A Ilbo ― which combine to make up 70 percent of the country's circulation. Also eyeing a license for a comprehensive cable channel is the Maeil Business Daily, which already owns cable news channel, MBN.

And there is a larger group of news organizations that are mulling news-only channels, which will be cheaper to operate.

However, the excitement over a reshaped market is somewhat muted as the likes of Samsung, LG and SK say they are not interested in the media grab.

"An important question to ask is whether the involvement of more companies in television will expand the industry or rather just crowd the current market and make it messier. Talk all you want about global media companies, but the domestic market isn't exactly flowing with milk and honey", said an official from the LG group of companies, who didn't want to be named.

"The initial expense of starting a new television business will be significant and there are also uncertainties about profitability ― the television industry has been suffering since the rise of the Internet. The 10 trillion won cap prevents the biggest firms from becoming majority shareholders in the new television stations and there could be arguments between the non-media firms and newspapers in the same consortium over who will get greater control of the television operations".

The talk within the industry is that it would take about 500 billion won to launch a comprehensive programming channel and 100 billion won for a news-only channel.

Some industry watchers have been wondering whether the CJ Group, which already commands huge viewership through its cable entertainment channels, will step up to be a bigger player in the television industry. However, CJ Media, the group's media unit, is continuing to say it has no interest in operating another comprehensive cable channel.

Signs of hesitation on the trigger finger?

Although the KCC plans to announce the timeline for the licensing process for the new cable channels this Wednesday, a more complicated matter for the agency would be deciding how many licenses issue. Also challenging is how to determine the qualification requirements for the companies that will be allowed to bid.

Meeting with reporters earlier this year, KCC Chairman Choi See-joong said the agency could decide to pick just one consortium for a comprehensive cable channel or even let all four news papers battle it out. However, it would be ideal to have three companies each in terrestrial broadcasting comprehensive cable channels and news-only cable channels, he said.

The KCC had originally planned to settle the licensing process for the new cable channels by the end of last year, but the discussions have been delayed since.

Some observers criticize that the KCC's hesitance is having a "" effect on media outlets ahead of the June regional elections. And the sarcastic theories circulating the KCC corridors include that the losers in the competition for comprehensive cable channels will be gift-wrapped YTN, a 24-hour cable news channel, and OBS, an Incheon-based terrestrial broadcaster, instead.

The aforementioned four newspapers in the comprehensive cable channel race are all distinguished by their conservative views and considered the main media backers of the Lee administration. The newspapers are desperate to leverage their dominance to other markets with the traditional newspaper market bleeding red ink.

It remains to be seen how the KCC will run the beauty contest, but the size of readership and financial health of the newspapers will undoubtedly count in the points.

It is hard to say which is leading among the four newspapers. First, the equation is complicated because the government may face a bitter backlash from the dropouts.

Chosun is the country's most-read newspaper by a significant margin, and is coming off a lucrative 2009, when its net profit nearly doubled from a gloomy 2008, according to industry officials. It is estimated that the company has more than 327 billion won in retained earnings.

In comparison, JoongAng Ilbo, the perennial runner-up, went through a tough period last year, reporting a loss of about 10 billion won, and Dong-A also lost about 9 billion won. However, the newspapers aren't letting a down-year affect their television appetite; with JoongAng Chairman Hong Seok-hyeon even offering to chip from his private wealth should money become an issue.

4개 주요 신문 종편 채널에 몰빵

이명박 정부는 미디어 산업을 재편을 두 가지 방향에서 구상하고 있다. 신문과 방송의 교차소유를 허용하여 언론시장을 활성화하는 것이 우선이고 장기적으로는 KBS2와 MBC의 민영화를 검토할 수도 있다는 입장이다.

물론 가장 주목을 끄는 것은 신문-방송 교차소유 허용의 결과로 탄생하게 된 케이블 종합편성채널의 사업권을 따내기 위한 언론사간의 경쟁이다. 조선, 중앙, 동아, 매일경제 등의 메이져신문들은 2개 내외가 될 것으로 예상되는 종편채널의 사업권을 따내기 위해 동분서주하고 있다.

정부의 미디어 개편 방안에 대해 찬성의 입장만 있는 것은 아니다. 신문, 방송 교차 소유 허용이 미디어 소유 구조와 담론의 다원성을 저해할 우려가 있다는 주장은 끊임없이 제기되어 왔다. 이에 대해 정부는 규제완화가 미디어시장의 성장을 위해 필수적이란 입장이며 이를 통해
Major Seoul-based newspapers such as the Chosun Ilbo, JoongAng Ilbo, Dong-A Ilbo and Maeil Business Daily, with their head offices seen from left, have aspirations for doubling as television powers. / Korea Times file

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