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In 2021, Kang Hye-jung, the CEO of South Korean production shingle R&K and the wife of star director Ryu Seung-wan, produced Escape From Mogadishu, a political thriller based on North and South Korean diplomats trapped in a civil war in the Somalian capital in 1991. Directed by Ryu, the film became the most-watched Korean film of the year and the only Korean film that sold more than 3 million tickets during the coronavirus pandemic.
Along with disaster film Sinkhole, also released in 2021, Mogadishu was one of only two films during the pandemic era to achieve blockbuster status in the country, and it was only able to do so thanks to a pandemic-driven subsidy from the Korean Screening Association that guarantees 50 percent recovery of total production costs.
“Before the pandemic, people used to say, ‘Let’s go watch a movie in a theater.’ Now they say, ‘Let’s go watch that movie in a theater’,” says Kang, noting that theatergoers’ behaviors have changed in the past two years, and they often go with a specific film in mind.
To the outside world, however, the Korean entertainment sector would appear to be thriving. In 2020, director Bong Joon Ho’s Parasite triumphed at the Oscars, and a year later, Korean American director Lee Isaac Chung’s Minari nabbed six nominations and one win. Pop group BTS has a massive international following, and Squid Game was Netflix’s biggest global hit last year. And yet, insiders say the Korean film industry is facing a host of deeply rooted challenges that were only exacerbated during the pandemic, from the rise of streamers to widespread consolidation that has led to giant conglomerates dominating and squeezing out smaller, more adventurous releases.
According to the Korean Film Council, a government-run film body, the pandemic contributed to the domestic film market plunging 40.8 percent, from 2.5 trillion South Korean won ($1.9 billion) in 2019 to 1.2 trillion South Korean won ($946 million) in 2021. Theater revenue rose slightly in the past year, but it was mostly due to the release of Hollywood blockbusters like Spider-Man: No Way Home, which reached 7.5 million admissions. Only 17 Korean films with a production cost of more than 3 billion won ($2.3 million) were released last year. Lotte Cultureworks, the entertainment arm of the country’s retail giant Lotte Group, released 10 films in 2021. Lotte was the only domestic film distributor in the top five in terms of box office, joining Disney, Sony, UPI and Warner Bros.
The rise of streaming services hasn’t helped the fortunes of South Korea’s domestic film sector. Following the launch of Disney+ and Apple TV+ in 2021, HBO Max is looking to launch in Korea later this year. Netflix reportedly has more than 5 million subscribers in Korea, the largest among the over-the-top services operating in the country so far. But there is also competition from smaller, local streamers: Wavve, operated by SKT, the country’s top mobile carrier, unveiled that it would invest 1 trillion won ($784 million) in original content by 2025; and Tving, from CJ ENM and Seezn, backed by Korea Telcom, another mobile operator, has announced that it will invest 400 billion won ($313 million) in original content in the next few years.
Now, many local production companies are setting up or expanding their investment in streaming content instead of theatrical. Parasite producer Barunson E&A recently announced that it is working on a drama series with a local screenwriter. Studio & New, a drama production house and an affiliate of film distributor Next Entertainment World, signed a five-year partnership with Disney+ in April 2021.
“For creators, I think it’s become a lucrative market,” says R&K’s Kang. “For [film] producers, it’s very difficult to get hold of experienced staff who are [now] getting paid by the episode by the streaming services. The market offers more advantages for creators, because they’re now given the power to choose the platform.”
Kang, who set up R&K 17 years ago, has signed a deal with major distributors to produce three films in the next few years, including Ryu’s latest film, Smuggling. But not all producers are as fortunate as R&K. Many Korean studios either postponed their film releases or stopped shooting new films entirely during the pandemic. Others are on the verge of closing down.
Outside of the competition of streamers, Korean filmmakers and producers have long raised concerns that the dominance of three major players — CJ ENM, Lotte and Showbox — is damaging the movie industry’s ecosystem. Three multiplex chains currently account for 97 percent of theater revenue in Korea, and all of those theaters have their own distribution units. Mid-budget films from up-and-coming filmmakers have limited options for theatrical release as major distributors tend to invest primarily in local blockbusters or films by experienced directors.
Korean films also continue to face stiff competition from Hollywood, even though Korea’s screen quota system requires multiplexes to show domestic films for at least 73 days a year. But even then, last year imported films made up 70.3 percent of theater revenue, while Korean films accounted for only 29.7 percent.
For many, the most fertile period for the non-blockbuster domestic film industry can be traced back to 1998, when then-President Kim Dae-jung abolished film censorship and set up the Cultural Industry Promotion Fund — a financial support system used mainly to promote and produce smaller, mid-budget films. The Kim administration also expanded cultural spending and encouraged local banks and the country’s conglomerates to invest in the Korean film industry. But by 2008, with the reign of the conservative government, public funding for the film industry was significantly cut and organizations that were considered “left-leaning” were blacklisted and banned from receiving public funding.
“We used to have many boutique studios like Showeast, MK Pictures and UniKorea that distributed small and mid-budget commercial films that were well received both at the box office and festival circuits,” says Choi Yong-bae, the head of Chunguhram, producer of Bong’s 2006 sci-fi hit The Host. “They created tremendous energy…. Those companies are gone now [that] the government’s subsidy stopped. As a result, the producers are left with a few big companies to turn to, and they tend to rely on the past track record and invest in ‘safe films’ with actors and directors who have already done well. Their decision-making process is much more complicated than smaller studios that make films that they want to see onscreen.”
Choi adds that the industry stopped producing star directors like Bong, Park Chan-wook (2003’s Oldboy) and Kim Jee-woon (2008’s The Good the Bad the Weird) in the early 2000s because of the industry’s current distribution system and the lack of government support for new filmmaking talent.
“Theaters have always done well, but the industry is suffering,” says Choi, who is also vp Korean Film Producers Association. “The industry is flooded with young talents, but they’re not given an opportunity. We’ve seen a fair amount of well-made art house films in the past seven or eight years, but the industry needs to expand the realm of mid-budget commercial films.”
The unfortunate reality is that the presence of big players is expected to grow. In 2021, CJ ENM acquired majority stakes in a number of local production companies, including Park’s Moho Film. Other large conglomerates, such as the Korean retail giant Shinsegae and tech company Kakao, are aggressively trying to enter the industry by buying local film shingles. In August 2021, Kakao bought 3Y Corporation, a production studio focusing on popular variety shows, and in September, Shinsegae bought Studio329, which produced the Netflix original series Extracurricular.
“There is no such thing as a minor league in the Korean film industry at the moment,” says Kim Dong-ha, the head of local production outfit Twin Plus Partners, which recently produced The Next Sohee with Bae Doona, star of Hirokazu Kore-eda’s Cannes competition entry Broker. “It’s becoming more and more commercialized. Streaming services tend to focus on films with celebrity actors that can boost their subscribers, and directors seem more concerned about their personal guarantee and less about the industry’s future.”
The toll of the Korean film industry’s struggles has had an effect on global film sales as well. According to the Korean Film Council, the export revenue of Korean films dropped 41.8 percent in 2021 compared to a year earlier, from $83.6 million to $48.6 million.
“We’re hoping for the market to recover,” says an industry source who works in international sales. “We are still learning and coping as we [recover from] COVID. As circumstances of our partnership [with streaming services] change, we’re still debating what stance we should take as a distributor and a sales agent. It’s going to take some time. Interest in Korean content has risen in the West since Squid Game and Minari, but it hasn’t quite resulted in sales yet.”
Korea’s Watcha Takes on the Streaming Giants
When Taehoon Park, the CEO of Seoul-based streamer Watcha, launched his company in 2016, investors were full of doubts as to whether the firm could really compete against global giants. After all, that same year Netflix also started its service in South Korea.
“The content subscription market was just opening up,” says the 37-year-old Park. “But it took a lot of persuasion and dialogue until we actually secured investment and growth over the years.”
After studying computer science at Korea Advanced Institute of Science and Technology, in 2011 Park founded WatchaPedia, a movie database similar to IMDb that also recommended TV shows and films for users. The application later developed into a full-fledged streaming service, which now has over 100,000 titles, focusing mainly on films and drama series with a cult following, such as Hong Kong action flicks from the 1980s and ’90s and the gay romance genre BL (Boys’ Love) that is popular in a number of Asian countries. The company also features mainstream Western hits like the BBC’s Killing Eve and HBO’s Chernobyl.
“We were mainly interested in content that was not traditionally very popular in Korea,” Park says. “Killing Eve was an example. The main leads were both women, and in Korea there was no case of box office success with two women leads. But we decided that it had the potential to be a hit because we had the data to back it up. We imported the series, and it turned out to be a great success.”
Park recently spoke about Korean content at MIPTV’s Cannes International Series Festival. Damn Good Company, Watcha’s original drama series about young office workers, was invited to the festival’s non-competition section.
“[The] local audience showed interest in our screening, perhaps because of the influence of K-pop and K-dramas,” he says. “I wondered what the reaction would be overseas, because the drama is about a small business set in Korea, but the laughing points were all very similar, and I was assured, once again, that a subject that’s genuinely Korean is sufficient for overseas viewers to identify with.”
Park says the company’s data-driven programming is the main reason for its success. In September 2020, Watcha launched its service in Japan, and it is preparing to expand into other markets. But the company’s strategy is slightly different from other streaming services. Instead of pouring resources primarily into original programming, Watcha hopes to drive its expansion by focusing primarily on existing IP from Korea and Asia.
Says Park: “Introducing existing content overseas is just as important as featuring competitive new works. There are about 100,000 [titles] on Watcha, and 80 percent of them are actually consumed by our members every month. This was possible with adequate supply of quality content and recommended functions matching users with the right content. We’ve put a lot of technical effort into improving this function over the years. There is a lot of quality Korean content, not only new but also old, and we know best how to combine these works for overseas markets.”
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