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Korean Distributors Fight for Box Office Market Share

Sonia Kil and Patrick Frater

Korean distributors are having to fight ever harder for their share of Korea’s theatrical market share. Threats on the horizon include a slide in the performance of local movies, consolidation, the arrival of new players and the challenge from streaming services.

South Korea’s theatrical box office is now bigger than that of France or Germany despite a smaller population. But it has largely stopped growing and may be at a turning point. Admissions have plateaued since 2013, and gross revenues have increased largely due to ticket price increases. 

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The country’s powerhouse exhibition companies CJ-CGV and Lotte have responded by expanding abroad. But for distributors, it means a fight on many fronts.  

The clearest evidence that the old order was under threat came last year when Lotte Cultureworks (formerly Lotte Entertainment), dethroned CJ Entertainment as the country’s top distributor for the first time in 15 years. Success came from its two “Along With the Gods” franchise films and Lotte’s role as distributor of Paramount titles such as “Mission: Impossible — Fallout.” 

There was bad news all round when the big-budget tentpole films released by major distributors during the Chuseok holiday and Christmas all largely flopped. That reinforced growing worries that Korean-made films are slowly losing their box office appeal. 

Korean films took 51% of the local box office last year, their lowest figure since 2014, according to data from the Korean Film Council (KOFIC), and a long way from the steady 55%-60% range that Korean film have come to expect. Distributors are having to work far harder too. Some 1,210 Korean films were released last year, compared with the 465 needed in 2012 to achieve a 59% market share. 

The beneficiary has been Hollywood. And worse could be on its way, as Disney gets ready to take over 21st Century Fox. A merger of their Korean operations was anticipated last year, but it now looks like that is being held back until the parent companies complete their deal. 

When they do merge, the studios that last year delivered “Avengers: Infinity War” ($88 million) and “Bohemian Rhapsody” ($70.5 million) could become the single largest distribution company in the country. Disney and Fox together commanded a 23% share last year, compared to Lotte’s 17%. 

In the modern era of Korean cinema, no Hollywood company has ever held that position — or the power to shape the national releasing calendar. Korea’s splendid isolation, and its near unique ability to keep Hollywood at bay, could be forever changed. 

But so far in 2019, the direst predictions have not turned out to be correct. CJ is back on top thanks to the stratospheric performance of January release “Extreme Job.” The comedy has earned $122 million from 16.2 million admissions.

But tech and finance from other quarters may be a further irritant for the traditional distribution players. 

New contenders include Merry Christmas, a distributor set up by former Showbox CEO You Jeong-hun with backing from Chinese film studio Huayi Brothers. The company’s first release, fantasy comedy “The Dude in Me,” earned $14.5 million from 1.92 million admissions, enough for a profit. Its romantic drama “Roman” is set for an April release, and it is looking at a sci-fi blockbuster with a $20 million production budget. Its strategy is to target mega projects that span film, games and web cartoons.

Another venture, combining industry veterans and non-industry capital is Acemaker Movieworks. Set up by Showbox alumnus Jung Hyn-joo with investment from the former owner of cosmetic company Carver Korea (which Unilever acquired in 2017), Acemaker is gearing up to distribute five Korean films in 2019, including mystery thriller “Daughter” and crime drama “Dirty Money.” 

Still another example is tableware manufacturer Haengnam, which has acquired the production companies behind “Kundo: Age of the Rampant” and hired director Yoon Jong-bin and hit producer Han Jae-duk (“New World”) to start a distribution business.

After enjoying success as a minority investor in 2016’s Liam Neeson-starring “Operation Chromite,” Celltrion Entertainment, an affiliate of biotechnology firm Celltrion, is looking for a role as an investor and distributor. Its first, the biographical drama “Race to Freedom: Um Bok-dong,” about a colonial-era cycle champion who defeated Japanese rivals, earned $1.12 million from 116,300 admissions.

Korean film executives are also fretting about streaming — understandably in a country that has ubiquitous and super-fast mobile internet coverage.

Leading social media platform Naver has launched Studio N, an affiliate that turns Naver’s hit web cartoons and novels into movies, TV series and animation. Led by ex-CJ Entertainment executive Kwon Mi-kyung, Studio N expects to launch 10 titles this year, with “Vigilante” its first. 

Netflix began operating in Korea in January 2016, and is now gathering steam. While the streaming giant does not disclose subscriber numbers by territory, its heavy spending on Korean original content appears to show that the country is a major priority. Its impact can also be measured in other related sectors.

Across the telecoms, media and tech sectors, Korean companies are trying to scale up in order to better face off against Netflix and YouTube. 

February saw the announcement of Korea’s third-ranking mobile network LGU+ acquiring the country’s largest cable TV company CJHello. 

If this deal gets past competition regulators, as is anticipated, other consolidation moves are expected. Lotte has gone ahead and launched its own OTT platform — both a defensive play, and one that makes it a more attractive target. 

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