South Korean Film Biz Sets Plans for Recovery and a Future That Will Be Significantly More Digital

Compared with the U.S. or European countries, South Korea’s infection and death toll from COVID-19 was small. But the disease has had an outsize impact transforming the entertainment industry.

Film producers and distributors are currently seeing some light at the end of the tunnel, and are busily repopulating the late summer distribution calendar. But the virus has hastened the systemic shift to a more digital future.

In pre-COVID times, film-mad fans meant Korea had one of the world’s highest per-capita cinema attendance rates and the mid-sized country the world’s fourth-largest box office. And after “Parasite” and Korean-language, U.S.-made “Minari” scored at Oscars and resonated with audiences worldwide, there has been renewed interest in Korean movies, at levels not seen since the naughties.

At first, Korea seemed to be handling the pandemic well, through isolation and testing, and in summer 2020, cinemas were able to welcome back major commercial movies. “#Alive,” “Steel Rain II: Summit,” “Deliver Us From Evil” and the “Train to Busan” sequel “Peninsula” achieved grosses between $12 million and $34 million. “Tenet” earned $16.3 million.

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But the return to the old normal was short-lived. With new waves of infection and subsequent restrictions on daily life, Korean cinemas were shunned by the public after the Chuseok holidays in late September, and audiences don’t look to return in big numbers any time soon.

Research firm S&P Global Market showed that Korea was the only major market in East Asia not to see a box office recovery between January and April 2021, compared with the same four months of 2020, when the first waves of the virus were peaking.

Nationwide, aggregate weekend box office was stuck in a $2.5 million- $4 million range from October 2020 till May 2021. June saw something of a resurgence, with three weekends out of four achieving more than $6 million.

Cinema operators have been badly hurt by the downturn. The three major chains lost $877 million in 2020 (CJ-CGV, $672 million; Lotte Cultureworks $145 million; J Contentree, owner of Megabox, $60 million), according to published reports, and have permanently shuttered many venues. Two of them, CJ-CGV and Lotte may be nursing further pain as they both have significant overseas operations — including Vietnam and COVID-ravaged Indonesia, where theaters have remained closed for months.

As the pain for exhibitors has deepened, the chains have increased ticket prices on two occasions and also turned to alternate content, such as live-streamed stage presentations, concerts and even aids to meditation.

Pain in the production sector has not been so prolonged. Films shooting predominantly overseas, such as Megabox’s “Bogota,” which endured a hiatus of 10 months, were the hardest hit.

Others persevered, despite the complications of adopting COVID protocols. These including TV series “Dramaworld” and Busan-set car chase movie “Hard Hit,” which made use of empty streets and the country’s optimal healthcare system.  After the peak of the second wave of the virus, many other productions resumed.

But cinema audiences stayed away and theatrical distributors became more cautious. Many film releases were postponed or rescheduled. Others were abandoned as rights holders chose to sell to streamers instead.

Major films including Berlin 2020 title “Time to Hunt,” as well as “Space Sweepers” and “Night in Paradise” gave up theatrical release plans and went to Netflix instead. In April this year, sci-fi comedy actioner “Seobok” debuted simultaneously in theaters and on the CJ ENM-owned streamer Tving.

Thanks to the popularity of K-pop and Korean TV dramas, the shift to digital is likely to become a long-term trend. It is where the money and the talent are already moving.

Korean consumers, used to blisteringly fast internet speeds, have historically been early adopters — digital terrestrial TV and IPTV are good examples. Recently they have been spoiled for choice — and reasons to stay at home — by intense competition between streaming companies.

Netflix, which once gave “Parasite” director Bong Joon Ho a $50 million budget and the artistic licence to make “Okja,” has engineered a strategic pivot when it became a significant purveyor of Korean content, rather than simply a platform for imported shows. It has now taken long-term leases on two studios near Seoul and has committed itself to spending close to $500 million on Korean content this calendar year.

In its early phase, Netflix licensed local shows from Korean producers and broadcasters. But by investing in original shows to which it controls rights, it has been able to drive up subscribers and achieve profitability in Korea. It disclosed 3.8 million paying subscribers at the end of 2020, and consultancy Media Partners Asia forecast that it will finish the current year with 5.7 million.

Netflix also reports that its Korean shows are among the most watched among overseas.

The high production values and exportability of original Korean content has not been lost on other streamers in Korea or abroad. Hong Kong-based platform Viu built its multi-territory appeal with a roster of Korean shows that it initially acquired. Now it is moving into Korean originals. So too is China’s iQiyi as it tries to cultivate audiences in Southeast Asia. (It is not clear if iQiyi’s Korean originals can be shown in mainland China, which maintains frosty diplomatic relations with its smaller neighbor.)

Not to be outdone, the powerful CJ ENM group recently responded by announcing that it will plow KRW5 trillion ($4.48 billion) into Korean content over the next five years. Much of this will go into building Tving as a rival to Netflix, but other shows will be hatched by CJ’s affiliate production powerhouse Studio Dragon.

CJ these days pitches Korea as a global content production hub. It is making shows for HBO Max in Latin America and added recent pacts with Skydance Media in the U.S. and with Japan’s Tokyo Broadcasting System. It also making four Mandarin-language series through deals in Hong Kong and Singapore.

Disney Plus, HBO Max and Apple TV Plus are all expected to launch in Korea by year end, joining the fray with established local streamers Waave (backed by broadcasters and SK Telecom), Coupang Play (backed by e-commerce leader Coupang) and VC-backed Watcha.

All are expected to need a local content component. Disney Plus set the ball rolling, recently announcing a five-year content pact with Studio & New, an affiliate of indie studio Next Entertainment World.

Such is the strength of demand for K-drama and K-pop that the Korean companies are gaining the whip hand and becoming the dealmakers.

Drama producer and commercial broadcaster JTBC recently acquired Wiip, the U.S. indie studio behind HBO hit “Mare of Easttown” and Apple’s “Dickinson.” Korean internet giant Naver recently acquired online story developer Wattpad in a $600 million deal and will now merge that company with its online comics firm Webtoon.

And HYBE (previously known as Big Hit Entertainment), the management firm behind pop sensation BTS, recently swallowed Scooter Braun’s Ithaca Holdings in $1 billion deal that gives it access to Justin Bieber, Ariana Grande and the Big Machine Label Group.

The industrialization of Korean entertainment may be anathema to the characters portrayed in “Parasite,” or “Burning,” but in the quarter century of Korean film’s modern era, big business has never been far away.

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