[Seri column]Korean movies meet market reality

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[Seri column]Korean movies meet market reality

The Korean movie industry has generated dramatic momentum in recent years. Last year, a record 108 Korean-made movies accounted for 64 percent of the domestic market. That impressive output, however, belied dismal bottom-line results. Only 20 of the 2006 domestic releases earned a profit. In total, the Korean film industry racked up a loss of nearly 100 billion won ($110 million).
There has been no turnaround in 2007. In the first half of the year, the market share of domestic movies fell to 41.7 percent, a six-year low. Four of the top five box office performers were foreign-made. In addition, the total number of moviegoers declined 9.1 percent.
The second half of the year has seen renewed vigor with summer hits such as “D-War” and “May 18” attracting more than 7 million viewers in August. But even with that, the domestic market share was only 51.1 percent during the first nine months of the year ― and no buzz-worthy releases are scheduled until the end of the year. The film industry is clearly at a crossroads.
A variety of causes can be blamed for the lackluster results. Certainly, an imbalance in the market’s supply and demand is the chief culprit. Before last year, the Korean movie industry released 60 to 70 new films each year. The record surge in 2006 was due to aggressive investments by production companies and distributors, as well as new market entries taking advantage of the booming movie industry. Many production companies listed on the Kosdaq as telecom firms also advanced into the industry. Supply simply exceeded demand, which did not rise significantly.
Many blame a lack of creativity. In short, the quality has not kept pace with the quantity, resulting in complaints about overused and disjointed storylines. Hong Kong’s film industry suffered a similar decline in the 1990s after 30 years of success, due to a lack of effort in scriptwriting, predictable story lines and a heavy reliance on a handful of A-list actors.
Similarly, the celebrated “Korean wave” that fueled a surge of Korean cinema popularity in Asia, especially Japan, was built mainly on the star power of a handful of movie and music stars, rather than sustainable quality. Familiar storylines also have dampened overseas enthusiasm. With the Korean Wave receding, exports of Korean movies plunged 68 percent in 2006, and 67 percent in the first half of 2007.
Another hindrance to box office sales, as well as the future growth of the local movie industry, is the widespread piracy of movies on the Internet. Online piracy is estimated to have cost the industry 369.7 billion won in 2006, equal to 40 percent of total ticket sales. Concerns are now rising that the movie industry will follow the music industry into near irrelevance (music sales dropped to 60 billion won in 2006 from 450 billion won in 2000, due largely to illegal downloads).
In fact, the present woes of the Korean movie industry may indicate nothing more than an industry entering maturity. The average Korean saw 3.13 movies in 2006, equal to the number seen in other industrialized countries; this number is unlikely to rise much higher. Worldwide, Korea has the third-highest domestic market share for its films. This indicates the market is indeed saturated.
Accordingly, the Korean film industry’s recent results may be a phenomenon visible in any industry beginning to show signs of maturity. The past 10 years of 13.2 percent growth are a thing of the past, and film producers will have to get used to growth rates around 3.6 percent.
That said, the future need not be bleak for the local film industry, especially if domestic producers adapt to the realities of the new environment and learn to tap new markets. Greater selectivity for productions, cost reductions and improved efforts to increase demand through innovation and creativity can provide dividends. Exploration of new business models, including online movie “rentals,” and new access points like DMB (digital mobile broadcasting) for portable devices and IPTV (Internet- working protocol television) can also spur further growth.
Finally, a more proactive approach to foreign markets is vital. Korean directors, actors, actresses and producers need to advance into Hollywood to learn and implement creative new techniques to draw viewers. Joint productions with Asian countries where the Korean wave has been a success can also be valuable.
As Korea’s movie industry reaches maturity, it will have to seek out ways to continue to prosper and grow.

The writer is a senior fellow at the Samsung Economic Research Institute. Please address inquiries on this article to jeongmin.ko@samsung.com.

by Ko Jeong-min
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