Mainland attraction

Korean exhibs jump into China's burgeoning multiplex sector

Hollywood studios like Warner Bros. and Hong Kong firms like Edko may be the most visible outsiders targeting the Chinese film market, but Korean companies are busy establishing footholds on the mainland.

MK Pictures, CGV and Megabox are all building multiplexes in China, while other well-backed Korean conglomerates such as Prime and Lotte, and even some private theater operators, are exploring opportunities of their own.

“We don’t really view ourselves as rivals to Hollywood in China, but we do want to get in there early, before the Hollywood studios are heavily involved,” says Jim H.J. Park, a former CGV employee who took over as head of international business at MK Pictures last year. “Timing is crucial to being successful in China, together with having a sound strategy and finding the right partner.”

MK Pictures has a powerful partner in the Poly Group, a massive conglomerate with ties to the People’s Liberation Army.

The joint-venture company MK Poly, which is targeting the exhibition sector, is owned by MK Pictures (45%) and Poly subsidiaries Eastern Dragon (46%) and Beijing Polybona (9%), a leading distributor with 25% market share.

The partnership arose from a chance meeting between MK prexy Lee Eun and officials from Poly at a film festival that led to further discussions and an eventual partnership.

MK Poly plans to open three cinemas on the mainland by June of next year, with five venues and 45 screens penciled in for 2008. The venture’s mid-term strategy envisions 30 sites, 230 screens and a 10% market share by 2013, after which the company will go public.

Meanwhile, Korea’s leading multiplex chain, CGV, has also found an influential partner in Shanghai Film Group, with which it formed a joint venture in February.

The company is scheduled to open its first venue — a six-screen, 905-seat multiplex — in Daning, Shanghai this fall.

Megabox, Korea’s third-ranked exhibitor by revenues, has also partnered with China’s second-ranked Beijing Siningren, which operates 87 screens in 67 venues. After three years of planning, the partners are expected to open two theaters soon, starting with an eight-screen, 1,700-seat multiplex in Beijing in December.

Further cooperation is under discussion.

The investments being made come with a fair amount of risk, especially considering China’s 49% cap on ownership. And despite the fact that venues can be built at one-half to two-thirds the price of a venue in Korea, profits are also lower.

“In Korea, a multiplex can earn back its investment in three to four years, while in China it takes at least five to six years,” says Lee Seong-hoon, who oversees Megabox’s business activities in China.

Nonetheless, Korean companies are placing their bets on future growth, and trying to make best use of the advantages they do possess.

Many in China look to Korea’s booming film industry as a model for their own future development, and so are keen to form partnerships to gain expertise.

And although Korea’s industry and business practices are much closer to Hollywood than they are to China, overlapping cultural traits help the two sides to communicate and to build trust. Korean film companies will be hoping that in 10 or 15 years, such ties will remain as strong as ever.

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