‘Legoland of the media industry’ becoming reality… What caused the JTBC crisis - 경향신문
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Hong Jeong-do, vice chairman of JoongAng Group, bows his head during a press conference on the 15th at the JoongAng Ilbo Building in Mapo-gu, Seoul, regarding the commencement of rehabilitation proceedings. Kim Jeong-geun, reporter
JoongAng Group, which owns newspapers, a broadcaster, and a drama production company, has applied for rehabilitation proceedings, sending shockwaves in and beyond the media industry. Experts analyze that this crisis is the result of aggressively investing in content and broadcasting rights without reading the changed media environment.
According to the industry on the 18th, five JoongAng Group companies, including the holding company JoongAng Holdings, JTBC, ContentreeJoongAng, Megabox JoongAng, and JoongAng P&I, filed on the 15th with the Seoul Rehabilitation Court to commence corporate rehabilitation proceedings. It came three days after JTBC declared a default following its failure on the 12th to repay securitized borrowing worth 20.6 billion won.
The first reason they came to file for rehabilitation is seen as a structure that failed to translate content hits into profits. The content industry requires large upfront investment, but it takes a long time to recoup funds and carries a high risk of flops. Yoo Hong-sik, a professor in the School of Media and Communication at Chung-Ang University, said, “The content business does not yield a high return relative to investment, and it is an industry with a slow turnover,” adding, “JTBC made aggressive investments at the outset, and that continued even as profitability deteriorated.”
The problem was that JTBC was in a structure that made it difficult to retain sufficient profit. JTBC rolled out a string of hits such as <Sky Castle> and <Please Take Care of My Refrigerator>. However, by spinning off production and distribution into the affiliate SLL, SLL came to handle most of the intellectual property (IP) business for dramas and variety shows. In 2022, to secure cash, it sold the IP for 279 programs, including <Knowing Bros>, to SLL for 43.3 billion won. JTBC currently holds less than a 3% stake in SLL. Even when a title succeeds, the profit left to JTBC has become limited.
Originally, JoongAng Group planned to recoup its investment and raise fresh capital through an SLL initial public offering, but the listing fell through due to deteriorating market conditions. As the financing plan premised on a listing hit a snag, liquidity pressure mounted across the group.
The second factor is Megabox’s prolonged slump. Viewing the theater business as a future growth engine, JoongAng Group secured control of Megabox in the mid-2010s. However, the theater industry shrank rapidly as the COVID-19 pandemic coincided with the spread of over-the-top (OTT) services. With OTT becoming mainstream, audience numbers failed to recover to pre-pandemic levels, and Megabox JoongAng posted operating losses for six consecutive years. The group continued to inject funds through affiliates such as ContentreeJoongAng, but as this ‘robbing Peter to pay Paul’ cycle repeated, financial burdens snowballed.
Investment in major sports broadcasting rights was the decisive blow. After securing broadcasting rights for the Olympics from 2026 to 2032 in 2019, JoongAng Group moved to expand its sports content business by also winning rights in 2024 for the FIFA World Cup in 2026 and 2030. At the time, it expected to recoup its investment by reselling the rights to terrestrial broadcasters.
That was a misjudgment. While rights fees kept rising, advertising revenue declined, leading KBS·MBC·SBS to secure rights through joint purchasing for years. Critics say JTBC overlooked the fact that even terrestrial broadcasters were already finding it difficult to make a profit from major sports broadcasts.
Yoo Hyun-jae, a professor in the Department of Communication at Sogang University, said, “The old success formula of turning a profit by reselling broadcasting rights no longer works,” adding, “This is the result of failing to properly read the changed content market.”
Experts view the JoongAng Group situation as an event that reveals a crisis across the traditional media industry, beyond the failure of a particular company. As the media environment has changed rapidly around OTT, the TV advertising market, once broadcasters’ core revenue source, has shrunk quickly.
Broadcasting business revenue fell for two consecutive years, from 197.579 trillion won in 2022 to 188.320 trillion won in 2024. Broadcasting advertising revenue also plunged 19%, from 3.0752 trillion won in 2022 to 2.4905 trillion won in 2023, and then declined a further 7.4% to 2.3073 trillion won in 2024.
Professor Yoo Hong-sik said, “As Netflix has become a ‘black hole’ in the domestic content market, advertising, the core revenue source for broadcasters, is also moving to online platforms,” adding, “As the broadcasting advertising market contracts rapidly, the burden of content investment is actually growing.” He went on to say, “The JoongAng Group situation is an event that reveals the structural crisis of the domestic media industry.”
The Seoul Rehabilitation Court will conduct representative examinations for the five companies on the 23rd and then decide whether to commence rehabilitation proceedings. The Broadcasting Media Communications Commission says it will closely examine liquidity issues in JTBC’s re-approval screening.
Industry watchers largely believe this situation is unlikely to spread into a broader crisis of confidence in financial markets as in 2022, when Gangwon Jungdo Development Corporation applied for rehabilitation (the Legoland crisis). Whereas the Legoland crisis was triggered by a default on local government-guaranteed debt that paralyzed the short-term money market, the JoongAng Group situation is closer to a liquidity crisis at a single corporate group. However, there are projections that funding conditions for BBB-grade or lower companies could deteriorate for the time being.
