4 TV stations' survival depends on whether firms will accept premium ad fees

By Yoon Ja-young

The new TV channels launched last December are suffering pitiful viewer ratings. They are being paid more than their ratings deserve but they can't continue going against market principles, according to industry analysts.

The nation's four new TV channels — TV Chosun, jTBC, Channel A and MBN — run by the country's four conservative newspapers of Chosun Ilbo, Joongang Ilbo, Donga Ilbo, and Maeil Business Newspaper, made their in December despite much criticism that the licensing was almost like a gift for the main supporters of the increasingly unpopular President Lee Myung-bak administration.

Around 50 days have passed since their birth but the ratings are dire. According to TNmS, a ratings survey institute, TV Chosun had a 0.199 percent viewer rating on Jan. 18. Ratings of Channel A and MBN stood slightly higher than 0.2 percent and jTBC, considered the strongest player among the four, marked 0.406 percent. It means the aggregate viewer rating of the four channels stands at around 1 percent.

What is worse is that their ratings fell in January. jTBC marked a 0.597 percent rating in the first week of December, standing at close to 0.5 percent for the next two weeks but it is on a downward curve. MBN recorded over 0.4 percent in the first week and both TV Chosun and Channel A had ratings above 0.3 percent but the figures are not improving.

The market has begun doubting the competitiveness of the new channels, which are being shunned by viewers despite favors from the current administration. They were assigned channel numbers close to those of the country's public broadcasters, from 14 through 20, on top of making it obligatory for cable operators to carry them.

There are some distinct aspects of the new channels, the most unique being that they are allowed to show types of content, much like general public broadcasters, unlike other cable networks which have very specific restrictions such as sports, dramas, fishing and so forth. Owing to their ability to present programs without limitations on content, they are seen as being much more attractive and competitive than ordinary cable channels.

Despite the minimal ratings, the new channels have been demanding that advertisers pay up to 70 percent of what they usually offer terrestrial broadcasters.

"The most important criterion for pricing advertisements would be comparing their ratings with that of the terrestrial broadcasters. The ratings of those broadcasters average 15 percent each but those of the new channels stand at below 1 percent. It is nonsense to ask for 70 percent of what terrestrial broadcasters charge," said Choi Chan-seok, an analyst at KTB Investment and Securities.

The unjustified demands can't be made for long. Every industry is affected by market principles and this one is no exception. According to industry sources, some new channels have already lowered their pricing to 30 percent of terrestrial broadcasters. Samsung Group, the biggest advertiser in the country, is rumored to have set advertisement fees for the new channels at 25 percent of what they pay terrestrial broadcasters.

Analysts say even that is too much. "In principal, the pricing should be 6 to 7 percent of what advertisers pay terrestrial broadcasters when considering the ratings of the new channels are only one fifteenth of terrestrial broadcasters'," Choi said.

He expected there will be adjustments in advertisement pricing. "It will follow ratings in the end."

Hwang Sung-jin, an analyst at HMC Investment and Securities, said that advertisers know that they can't overpay new channels forever. "The problem was that in the initial stage following their launch, the pricing of commercials wasn't linked with viewer ratings. But if their ratings continue like this, the new channels will have to cut advertising prices, while other cable operators, which have higher ratings, may charge more."

CJ E&M, which operates 16 cable channels, raised their advertising fees by 100 percent this year, pointing out that the new channels are charging much higher advertisement fees despite much poorer ratings.

The solution for the new channels is to create hit programs and pull up the ratings. Currently, viewers are shunning the channels due to poor content. According to a report by Korea Creative Content Agency, about half of the programs on the new channels are reruns.

At the current pace, they are certain to fall into a vicious cycle of low ratings leading to poor advertisement sales, which will then lead to little funding for production of quality programs. The poor quality programs will result in continued low ratings.

Analysts point out that SBS, a terrestrial broadcaster launched in 1991, emerged as a major player thanks to hit drama "Sandglass" aired in 1995.

However, the new channels face much tougher conditions. SBS didn't have competitors in cable channels when it was launched. Now, there are around 200 channels competing in a country where people are spending less time watching TV than before. "SBS had a much better start than the new channels. Even its low ratings in the beginning were much, much higher than those of the new ones," Choi said.