As already noted in Chapters 3 and 5, with the introduction of a civilian government and of a new commercial channel, the close relationship between the Korean government and the terrestrial broadcasting stations was significantly reduced. Moreover, the opening of the cable channel service in March 1995 both began a period of multi-channel broadcasting and gave the Korean conglomerates an opportunity to enter the broadcasting industry. In the mid 1990s, the growth of the broadcasting industry was evident. KBS and MBC, which had previously been the beneficiaries of a highly protected market, recognised that the era
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of public broadcasting was over. Consequently, both began to implement changes and to become more businesslike companies instead of public bodies.
The Korean economic crisis of autumn 1997 accelerated this tendency. During the crisis, the revenue of the three terrestrial broadcasting stations, which relied heavily on advertising, declined sharply as the advertising budget of most domestic companies was drastically cut. According to KBC’s broadcasting industry survey report, the total revenue of the three terrestrial broadcasting stations (KBS, MBC and SBS) declined from US$1.53 billion in 1997 to US$1.14 billion in 1998, a 26.1 per cent reduction (KBC, 2002b: 18). In 1997, it was the advertising income of these three stations that showed the most drastic decrease, falling from US$448.1 million, US$303.7 million, and US$279.7 million to US$268.6 million, US$226.6 million, and US$180.7 million respectively (ibid.: 19-21).
The decrease in the percentage of income derived by the three broadcasting stations from advertising was as much as 35 per cent – an even sharper decline than that in total revenue. This demonstrates the serious effect of the economic crisis on the management of the broadcasting stations. As mentioned above, advertising revenue accounts for the broadcasting stations’ main income. The stations admitted that they urgently needed to diversify their business in order to ensure their survival in times of economic turmoil.
This crisis did not last long. The revenue of terrestrial broadcasting stations in 1999 almost reached the 1997 level, and it increased further in 2000. The KBC report reveals that the significant increase in broadcasting revenue in 2000 resulted from the rapid recovery of the domestic advertising market. This report demonstrates that the total advertising income of all terrestrial broadcasting stations148 in 2000 was as high as US$1.93 billion, almost a two- fold increase on the US$1.01 billion in 1998, and a 28.6 per cent increase on the US$1.50 billion in 1997 (KBC, 2002b: 21). This indicates that the broadcasting industry was severely affected by the economic crisis in 1998, but was able to recover from the financial turmoil in a short period.
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This includes EBS, the education channel operated by the Ministry of Education, all local and radio broadcasting stations, as well as KBS, MBC and SBS.
Figure 6.3 Fluctuation in advertising income of the three television stations between 1997 and 2000 (US$1,000)
Source: 2001 Broadcasting Industry Survey Report (KBC, 2002b: 18-21)
The IMF crisis, however, resulted in changes in employment conditions at the broadcasting stations. In 1998, all three stations underwent extensive restructuring. Many broadcasting employees were laid off, or their jobs were transformed into temporary positions. For instance, MBC reorganised its company structure from six divisions and twenty-six departments in 1997 to four divisions and fifteen departments in 1998 in order to decrease the number of executives and managers (MBC, 1999: 68). KBS and SBS also underwent similar restructuring. Consequently, the number of employees at the three broadcasting stations decreased from 9,480 in 1997 to 8,061 in 1998 (KBI, 2000: 81). Of the three stations, SBS implemented the most lay-offs, a 27.8 per cent reduction. Even though the domestic economy quickly recovered, the number of broadcasting employees did not increase considerably. In 1999, their number further declined to 7,922, and at 7,785 in 2000 it continued to show a downward trend (ibid.: 82). This signifies that a large number of permanent jobs at the broadcasting stations became temporary positions during the height of the IMF crisis. The influence of the broadcasting stations’ downsizing on the drama industry will be discussed further in the latter part of this chapter.
Apparently, downsizing was not enough to solve the stations’ economic problems. Because of the drastic fall in the value of the won and rise in interest rates under the IMF regime, the amount the stations’ had to pay for imported programmes and loans was extremely high, leading them to the brink of bankruptcy. In the case of the newly developed cable television industry, the situation was worse than that of the terrestrial channels. By June
0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1997 1998 1999 2000 SBS MBC KBS
1998, five out of twenty-nine programme providers had gone bankrupt, and only three had no deficit (Kim and Hong, 2001: 86).
Consequently, the broadcasting stations attempted to decrease production costs in order to minimise their expenses. The drama production cost of KBS decreased from US$52.2 million in 1997 to US$38.9 million in 1998, and fell even further to US$36.1 million in 1999 (KBS, 99: 254).149 MBC also downsized its total television programme production costs from US$77.8 million in 1997 to US$64.2 million in 1998. But in the case of MBC production costs increased to US$73.5 in 1999, unlike the drama production costs of KBS (KBI, 2000: 71-72).
Overall, the IMF crisis seriously affected all the broadcasting stations, including both terrestrial and cable channel stations. Although the terrestrial station losses were not as serious as those of the cable channels, their economic difficulties were not negligible. In order to overcome the financial crisis, the three broadcasting stations attempted to diversify their business structure. As one of these diversifications, the prospects for exporting programmes seem to have been explored.