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Posted: Sat., May 14, 2005, 3:43pm PT
 
Bubble trouble?
 
Local film biz keeps expanding, but some fear a burst
 
By ANTHONY LEONG

 
TORONTO -- South Korean distribs enjoyed a record year on the international market in 2004, taking in $58.3 million, with the average price of an exported film growing 59% to over $300,000.

The expansion of Korea's export business from nil to nearly $60 million in less than a decade has coincided with a boom at the local box office, which last year saw domestic titles control 57% of the market, up from 54% in 2003.

Still, despite huge perfs at the beginning of the year by Showbox's "Tae Guk Gi" ($56 million in local B.O.) and Cinema Service's "Silmido" (released in late '03, it earned the bulk of its $52 million in '04), the second half of 2004 was largely sluggish for locally produced pics.

In fact, only two domestically made films released in '04 exceeded $15 million and 3 million admissions at the Korean box office -- and none released after May 1 did. In comparison, in 2003, seven of the top 10 homegrown productions exceeded the 3 million mark.

The sudden downturn at the local box office has caused some to wonder if the boom in both international and domestic performance is slowing down. "A big issue is the poor-quality films coming out of this bubble, which can cause irreparable damage to both domestic and international markets," says IM Pictures production official Genie Lee.

Certainly, the Korean film industry has its share of challenges in 2005 and beyond -- the screen quota and shortage, rising costs and risk to its export business.

In fact, since last year, the hot topic has been the possible reduction of the screen quota designed to protect the local production business. It mandates that Korea's theaters reserve 40% of screen space for domestic films. The film industry, of course, staunchly supports the quota , but the government hopes to smooth bilateral investment treaty negotiations with the U.S. by lowering it.

On the exhibition side, Korea is underscreened. A handful of large vertically integrated media conglomerates, including Cinema Service and Showbox, control the bulk of the country's 1,400 screens, squeezing out smaller arthouse pics and modestly budgeted features.

"The increased dominance of entertainment companies is reducing the number of screens for specialized productions," says Korean Film Council secretary general Kim Hai-joon. As a result, critically acclaimed productions, such as Kim Ki-duk's "3-Iron," receive short, unprofitable runs.

Decreased opportunities for exhibition in many cases coincide with rising costs.

According to industry figures, only 20% of Korean pics were profitable in 2004, with overseas revenue a key contribution.

In many cases, Korean producers are swinging for the kinds of wide-release home runs enjoyed by such action-driven local films as "Tae Guk Gi" or "Silmido," and are spending a lot of money in the process. "It's important to enhance the profit structure of the Korean film market rather than focusing on blockbusters that bring over 10 million visitors," Kim says. The average production cost doubled to $3 million between 2000 and 2004, while the average marketing cost grew from $500,000 to $1.3 million, raising overall costs 126%.

The increases have been attributed to a number of factors, including the rising price for popular actors in lead roles, and the need for bigger promotional campaigns in a crowded market.

Costs also might rise in the future to better compensate scarce and highly skilled production staffers, whose working conditions have not improved much during the boom. "If something visible isn't done, the industry may face a brain drain," Lee notes.

Meanwhile, unlike Hollywood, Korea has an almost nonexistent homevideo market. "Piracy is a major issue," Lee adds. "And it has been slowing the development of new markets, such as DVD, VOD, etc."

On the international side, there's concern among Korean distribs about having so much of their sales tied into one market: Japan.

In 2004, 69% of Korea's film export revenue came from Japan, a territory that had grown 191% in Korean purchases since 2003 due to a number of high-profile titles. These pics included Nippon Herald's purchase of Kim Ji-woon's "A Bittersweet Life" for a record $3.2 million and Happinet's $4.7 deal for Bong Joon-ho's "The Host."

The fact that some Japanese distribs have suggested that rising minimum guarantees are pricing Korean films out of the market has augmented worries.

With potentially flattening revenues and ever-rising costs, can the Korean film industry maintain its growth? "The convergence of IT and broadcasting, including digital content services and video-on-demand, which should combat illegal downloading, will be the main growth engine" Kim says.

The market also should grow as the development of exhibition infrastructure alleviates the screen shortage. "Screens will continue to grow and likely peak at 1,600 in 2007," Lee says.

In addition, it seems as if Korean films are bouncing back at the box office in 2005. As of mid-April, the market share of Korean films was 52.7%, thanks to the strong performances of Jeong Yun-cheol's "Running Boy" and Kang Woo-suk's "Another Public Enemy."

Meanwhile, a number of highly anticipated productions will likely woo audiences back, such as Park Chan-wook's "Sympathy for Lady Vengeance," Kwak Kyung-taek's "Typhoon," and Hur Jin-ho's "April Snow."

"The film industry is a fluid market. ... The issues it faces are just temporary things," Lee says.

Anthony Leong is the Toronto-based author of "Korean Cinema: The New Hong Kong."
 
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