CGV Knocked Down by COVID-19, "Considering Complete Suspension of Operations" (Comprehensive)

Among 116 Directly Managed Stores, 35 Closed... Screen Cutoff Applied Even to Normally Operating Theaters
CEO Choi Byunghwan "A Painful Decision Made After Much Deliberation... High Fixed Costs Make Operation Difficult"

On the 22nd, when the government strongly urged for 'social distancing' to overcome COVID-19, a movie theater in Yeongdeungpo-gu, Seoul was quiet. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Lee Jong-gil] CGV, the largest multiplex in Korea, will close thirty-five of its directly operated theaters starting from the 28th. Despite continuing operations amid a sharp decline in audiences due to the spread of the novel coronavirus disease (COVID-19), ongoing financial difficulties have led to a reduction in operations.

On the 26th, CGV announced that it would suspend operations at 30% of its 116 directly operated theaters. The theaters to be closed include Seoul’s Daehangno, Myeongdong, Suyu, Cheongdam Cine City, Piccadilly 1958, Hagye, and locations in Gyeonggi and Incheon such as Gimpo Pungmu, Uijeongbu Taeheung, Paju Munsan, Pyeongtaek Sosa, Yeonsu Station, Incheon Airport; Daejeon and Chungcheong areas including Daejeon Gao, Cheonan, Cheongju Yullyang, Hongseong; Busan, Ulsan, and Gyeongnam areas including Centum City, Asiad, Masan, Changwon, Ulsan Sincheon; Daegu and Gyeongbuk areas including Daegu, Daegu Suseong, Daegu Academy, Pohang; Gwangju and Jeolla areas including Gwangju Geumnam-ro, Gwangju Yongbong, Gwangju Hanam, Seojinju, Jeonju Gosa, Jeonju Hyoja, Mokpo, Suncheon; and Gangwon and Jeju including Wonju and Jeju.

CGV will also apply screen cutoffs at theaters that remain open, operating only some screening rooms. Screening sessions will be reduced to three per day (9 hours) at all theaters except CGV Yongsan I'Park Mall, Wangsimni, and Yeongdeungpo. In January alone, daily screening sessions were more than seven.

Due to the scaled-down operations, all employees will switch to a three-day workweek system. CGV will pay employees suspension allowances for the downtime. The CEO, executives, and department heads will voluntarily return 30%, 20%, and 10% of their monthly salaries respectively until the end of the year as a measure of shared sacrifice. Additionally, voluntary retirement will be offered to employees with more than 10 years of service, and unpaid leave will be implemented for employees who wish to take it.

[Image source=Yonhap News]

CGV entered an emergency management system from the end of January after a COVID-19 confirmed case visited the Sungshin Women’s University branch, reducing screening sessions. However, as the average daily audience dropped to 20,000?50,000, financial difficulties intensified, prompting stronger self-help measures.

CEO Choi Byung-hwan stated, “Given the high fixed costs such as rent and labor in the theater business, and the lack of major new releases until May, it is more appropriate to suspend operations at all theaters rather than partial closures.” He added, “Considering the revenue structure where theater sales are distributed across the entire film industry, a sharp decline in theater revenue could lead to the collapse of investment, production, and distribution in all sectors. Therefore, we decided to temporarily close only thirty-five directly operated theaters first.”

He continued, “This painful decision was made after much deliberation from the perspective of theaters as a platform for the film industry. Although employees have proposed self-help plans with one heart to overcome the crisis, if the COVID-19 situation does not improve and prolongs, we may have no choice but to consider stronger measures such as a complete shutdown.”

CGV plans to request rent payment deferrals from all theater landlords. A CGV official explained, “The total monthly rent for directly operated theaters amounts to 17 to 18 billion KRW. We plan to defer payments for the next six months and then pay in installments over 12 months once theaters normalize.” Six theaters scheduled to open this year have postponed their openings to the first half of next year. Investment plans for two theaters scheduled for renovation have also been completely suspended.

Lotte Cultureworks, which operates Lotte Cinema, also entered an emergency management system from last month, with executives voluntarily returning 20% of their salaries and allowing unpaid leave for those who wish. However, they are cautious about closing theaters. A Lotte Cultureworks official said, “We plan to continue operations for the time being to maintain employment stability and protect the film industry field,” but added, “Depending on future circumstances, some branches may suspend operations.”