Distribution Revolution About to Overtake South Korea’s Film Industry

Buffeted by world and local trends, the business is in the midst of a gigantic upheaval

South korea’s film distribution market is in the midst of such rapid change that it’s likely to soon face a new chapter in its existence.

There are multiple factors behind this shakeup, not the least being the agreement between Disney and 21st Century Fox for the Walt Disney Co.’s $52.4 billion acquisition of 20th Century Fox. One result will probably be for the two studios’ Korean offices to be merged by this summer.

That will clearly impact the releasing patterns of their lineups. Also, according to the Korean Film Council’s annual report, the two companies together accounted for 15.9% of the total box office revenue in 2017, which exceeds CJ Entertainment’s 15%.

At the same time, traditional market leaders including CJ Entertainment and Next Entertainment World have been losing their grip. The KOFIC data shows that CJ Entertainment has been the top local distributor in the country since 2003. It remained on top last year, but the total number of admissions attracted by CJ releases has been decreasing since 2014. In 2017, CJ films eked out 33.27 million admissions — the lowest since 2008, the year when the KOFIC started counting admissions by distributor.

CJ’s two summer tentpole films, “The Battleship Island” and “The Fortress,” had weak scores last year and affected the company’s total admissions.

Distributor Next Entertainment World has tended to focus on blockbusters since the success of “Train to Busan” in 2016. Last year, however, the company’s most successful release, “The King,” only managed some 5.3 million admissions, followed by “Steel Rain,” which sold 4 million tickets.

Lotte Entertainment was the only Korean company that was on the upswing in 2017. The company’s biggest film last year was “Along With the Gods,” which crossed the 10 million admissions mark.

These performance patterns make it clear that mainstream Korean cinema is being reorganized.

While the number of films made on big budgets exceeding 10 billion won (about $9.34 million) doubled in 2017 from the previous year, those blockbusters’ rate of profit decreased. On the other hand, films with budgets between 3 and 5 billion won went into the black in 2017 and eased the impact of the decrease in the earnings rate of more expensive films. Sources say such improvement can lead to emergence of new non-conglomerate investors-distributors that can handle small- to mid-size pictures. Some are already gearing up to enter the market.

Celltrion Entertainment, an affiliate of biotechnology firm Celltrion, invested in Liam Neeson-starring “Operation Chromite” in 2016. As the film was fairly successful with a gross of $51.5 million, the company has buckled down in film business and recently invested in biographical drama “Uhm Bok-dong” (working title) starring singer-dancer-actor Jung Ji-hoon (a.k.a Rain). The company is already producing the film and will also self-distribute the title. Based on the life of Uhm Bok-dong, who became Korea’s pride as he defeated Japanese cyclists and won the championship in a race during the Japanese colonial era, the film is set for a theatrical release in the second half of 2018.

Huayi Bros. and vfx house Dexter Studios are also said to be joining the local distribution market. Per multiple sources, Dexter, which co-produced and invested in “Along With the Gods” and also signed partnership deal with China’s Alpha Pictures for the film’s distribution in China, will add local distribution to its business portfolio.

“It’s expected that the newcomers will positively affect the film industry in the long run,” says film market analyst Kim Hyung-ho. “Projects that conglomerates tend not to pick up can still reach audiences through those new, mid-size investors-distributors. Kidari Entertainment is a good example.”

Since it was established in 2014, Kidari has backed and distributed mid-size genre films such as “The Deal,” “The Tooth and the Nail” and “A Special Lady.” Its latest release, “The Vanished,” a Korean remake of 2012 Spanish film “The Body,” crossed the break-even point to achieve moderate success.

The rise of streaming services is another variable that may affect the dynamics of South Korea’s distribution market. Global streaming giant Netflix, which backed top Korean director Bong Joon-ho’s “Okja,” has recently expanded its Korean office, stating that it will invest as much as $8 billion in Korean originals.

YouTube is also rising fast. Recent research showed that Koreans spend twice as much time using YouTube as they do on Naver, South Korea’s leading online platform.

As internet streaming is gaining more importance in the distribution market, traditional theater distributor Lotte Cinema and Lotte Entertainment have announced that they will start their own OTT service, becoming the first investor-distributor-exhibitor to enter the online market.

Another leading internet company, Kakao, announced last year that it would also take a step into the film business.

(Pictured above: “Along With the Gods”)

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