Korean Link : https://www.etnews.com/20240814000258
Recent amendments to the Copyright Act, which have begun to be discussed in the National Assembly, include provisions to grant ‘additional compensation rights’ to creators of audiovisual works. Will this system truly benefit the development of our film industry? Concerns are growing that it may adversely affect the industry as a whole and, ultimately, harm the creators themselves.
1. A system that overlooks the unique nature of the film industry
Film and drama production is a high-risk, high-return business. According to the Korean Film Industry Settlement, the average production cost of a Korean film amounts to 9.8 billion won. However, only 20-30% of these films break even. Investors take such risks because of the potential returns when successful. What would happen if additional compensation rights were introduced? Investors would be reluctant to invest due to concerns about uncertain future additional costs. For instance, consider a blockbuster film that invested 10 billion won and generated 100 billion won in revenue. In the current system, this profit goes to the production companies and investors who took the risk, but with additional compensation rights, a portion of this profit must be mandatorily distributed to creators. This inevitably increases investment risk and may consequently diminish investment in film production. Moreover, this system does not apply solely to successful works. By taking away profits that could be used to offset losses from unsuccessful works, it could upset the overall balance of the industry. In the film industry, the ‘1 to 9 rule’ is often applied, meaning that one hit out of ten films compensates for the failure of the other nine. Additional compensation rights target only the profits of successful works without considering these industry characteristics.
2. Violation of the principle of freedom of contract
Additional compensation rights disregard the compensation terms freely negotiated between creators and production companies, forcing additional compensation based on legally set criteria. This could undermine the flexibility of various contract forms currently existing in the film industry (e.g., low upfront payment with profit-sharing, high upfront payment with no profit-sharing, etc.). It could be particularly disadvantageous for novice creators, as production companies may find it riskier to give opportunities to unproven newcomers.
3. Concerns about weakening global competitiveness
The Korean film industry is more vibrant than ever due to the global popularity of K-content. According to a report by the Korea Creative Content Agency, exports of Korean content industry in the first half of 2023 recorded $5.39 billion, a 1.3% increase year-on-year. Notably, broadcast industry exports increased by 29.6% to $561.29 million. However, the introduction of additional compensation rights could put the brakes on this growth. Foreign platforms or production companies might become reluctant to invest in Korean content. For instance, global streaming services like Netflix or Disney+ might reduce or abandon investment in Korean content due to concerns about uncertain cost increases from additional compensation rights. Furthermore, if this system applies only to domestic companies, it would put them at a disadvantage in competition with global firms. For example, if domestic OTT services like Wavve or Tving are subject to additional compensation rights while Netflix is not, this would constitute clear reverse discrimination. Conversely, attempting to apply it to foreign companies could create problems that conflict with international law, potentially violating the WTO’s national treatment principle.
4. Legal uncertainty and litigation risks
The specific criteria and scope of additional compensation rights are ambiguous. How will ‘contribution’ or ‘success’ be defined and measured? It is particularly difficult to accurately calculate the revenue of individual works in new distribution models such as subscription-based streaming services (SVoD). This could lead to endless legal disputes.
5. A system that may disadvantage creators
Ironically, this system intended to protect creators could work against them. Production companies or investors are likely to offer lower initial compensation in the early contract stage, considering the risk of additional compensation. Also, production companies might tend to invest only in works guaranteed commercial success or those by famous directors, potentially reducing opportunities for experimental works or new creators. In the long term, this could harm content diversity and reduce opportunities for new talent to emerge.
6. The danger of blindly following foreign examples
While the EU Copyright Directive mentions ‘appropriate and proportionate remuneration’, it also stipulates that the ‘principle of freedom of contract’ should be respected. In France, the additional compensation system operates through collective agreements rather than legislation, and in Germany, compensation determined by collective bargaining or joint remuneration rules is recognised. On the other hand, in Sweden, a government committee study concluded that additional compensation rights could distort the market and have unintended side effects. Given the diversity of situations and approaches in different countries, blindly following foreign examples could be risky.
7. The need for alternative approaches
The development of the audiovisual content industry and the protection of creators’ rights are goals everyone agrees on. However, it is questionable whether additional compensation rights can be the answer. Instead, it could be a dangerous system that harms the industry’s dynamism and ultimately disadvantages creators. We should instead seek ways to regulate unfair contracts and enhance creators’ bargaining power within the framework of current laws. It would be more desirable to develop incentive systems for successful works autonomously within the industry. The fact that Korea’s content industry exports have surpassed $10 billion demonstrates the importance of this industry. For the future of this valuable industry, more careful and in-depth discussion is needed regarding the introduction of additional compensation rights. It is time to seek better alternatives that can protect creators’ rights without undermining market autonomy. That is the path that can truly brighten the future of our film industry and creators.
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