Homegrown product nabs more than 40% of B.O.

SEOUL, South Korea — With Korean movies snagging more than 40% of local B.O. and homegrown hits bringing seven-digit profits to producers, Koreans are realizing that movies can be as good as gold to investors.

And never has the film industry seen so much fresh capital, led by venture capitalists, so-called Netizen funds and other creative cash outlets, such as Hana Bank’s trust fund. That fund will raise $8.5 million by selling beneficiary certificates worth $17,000-$42,500 and invest the money into production of 10-15 movies during the next two years.

Netizen funds are a program in which (mostly twentysomething) Koreans invest in film projects through the Internet for a return based on the movie’s success after release.

Unique to South Korea, the Gen-X funding trend began in 1999, when production house Bom invited Netizens to participate in an $85,000 fund. It took 40 days to hit the mark, and the 200 investors, who put in $425 each, received about 200% return on their profits.

The second Netizen fund project, “Friend,” introduced in March, drew 100 investors in 60 seconds; they are each expected to receive a 300% return. Other projects that have employed Netizen funds include “Libera Me,” “Humanist” and “My Sassy Girl.”

“These Netizen funds grew bigger as their success became widely known, which led to this film investment boom. And it’s a win-win for everybody, considering how well the Korean movies are doing,” said Jennifer Muhn, marketing director at distrib Cinema Service.

Speaking in early December, she said Korean films’ market share could reach 50% by the end of 2001 given the success of films “Hi Dharma” and “The Last Witness” as well as the now just-bowed “2009 Lost Memories.” That would be more than double the Korean market share in 1998.

The number and size of film investment associations are also growing, with an investment pool of about $76.5 million. There’s also reportedly $35 million invested through the Korea Film Commission, $35 million through public film investment companies in the country and $72 million in the Ministry of Culture and Tourism, which plans on forming film investment associations worth about $100 million every year through 2003.

And the future looks just as bright. For example, major film producer-distributor CJ Entertainment has announced it will likely be listed on the Korean stock market by February, which means the public will be able to invest indirectly in all CJ projects.

The success of Korean films has piqued the interest of local economists, who’ve made attempts to pinpoint the reasons for the sudden boom.

“After gaining some advanced moviemaking skills and knowledge, there were drastic changes made in the three main sectors of the film industry: production, investment and distribution/marketing,” said Shim Sang-min, a researcher at the Samsung Economic Research Institute. “Also, regional governments were supportive in film production activities, and film investment funds by Netizens added strength to the industry as well.”

Meanwhile, the budgets of productions are growing larger, with bigger productions coming in at around $4 million. The average production cost per movie is $2.1 million compared with $800,000 in 1995, while marketing costs now average $800,000 compared with $85,000 in 1995.

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