ASIA: Korean TV feud upsets ad rates

A feud has broken out between Korea’s largest commercial TV network, state-owned Munhwa Broadcasting (MBC), and KOBACO, the government agency that sets advertising rates and acts as exclusive sales agent for all commercial networks.

How this feud is resolved could have far-reaching effects on the way TV airtime is sold in Korea – Asia’s third-largest advertising market – and introduce competition to airtime sales for the first time since 1981.

Events were triggered by an MBC news programme on January 10 criticising KOBACO’s 20-year monopoly. It argued that MBC should set its own ad rates and sell for itself. The following day KOBACO suspended sales of MBC airtime and posted notices at its headquarters barring MBC representatives from entering and stating: “We will fight back against the treacherous MBC.”

Airtime sales in MBC’s “special programmes” rapidly declined. The blow was severe as it came before Korea’s Lunar New Year holiday, traditionally a high point for sales in a slow month. According to MBC, airtime sales in its own “specials” hit zero on January 20 and 21. KOBACO sold over 85 per cent of available airtime for the rival KBS2 network and over 97 per cent for the SBS network. During the same period in 2000, KOBACO sold virtually all of MBC’s ad airtime.

MBC broadcast news of what was happening, obliging KOBACO to recant, resume sales, and change the managers of its MBC sales division. But that proved small comfort to MBC, which filed a complaint with Korea’s Fair Trade Commission and wants compensation for lost sales, estimated at 4bn won (&£2.14m) for the new year alone.

The debacle riled KOBACO’s in-house trade union, which has posted banners in KOBACO offices demanding top management take responsibility for the faux pas.

However, ad sales may not yet have returned to normal. “We believe that KOBACO is still hurting our business by manipulating prices and failing to pass on airtime orders to us,” says MBC director of advertising planning Seong-Che Chong. “We are waiting for the FTC’s findings and will then decide whether to take KOBACO to court and sue for damages,” he adds. KOBACO declined to comment.

January and February are months when demand for commercial airtime is at its lowest and so the reduction in MBC availability had little effect for most advertisers. But for much of the year demand for air time can outstrip supply. “Anything that distorts the availability or the price of airtime is ultimately bad news for advertisers,” says one agency executive. KOBACO’s initial reaction reflects acute sensitivity about its future, since the Korean government has been considering changes in legislation covering airtime sales. But with a log-jam of legislation, and a presidential election next year, it may be a while before any change comes to pass. “The whole incident demonstrates that it makes no sense for the government to run the commercial side of the broadcasting industry,” says a Korean industry commentator.

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