[The Decline of Movie Theaters] Theaters OTL Pushed Out by OTT

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On the 18th, CGV Yongsan I'Park Mall in Seoul was less crowded than usual. On this day, CGV announced that it will raise movie ticket prices by 1,000 won starting from the 2nd of next month to overcome the crisis caused by the prolonged COVID-19 situation. Photo by Moon Honam munonam@

The movie theater industry is facing its greatest crisis in 126 years since its inception. Due to the spread of COVID-19, theaters have become spaces people avoid. The number of moviegoers in theaters from January to February was 4,898,053, about 80% less than the 24,216,065 during the same period last year. Despite no reported cases of COVID-19 transmission inside theaters, the situation continues to worsen. Mid-to-large scale films are avoiding theatrical releases or moving to online video services (OTT). Even the established ‘holdback’ period (the time interval before content rights transfer from one platform to another) has been abandoned, yet there is no sign of recovery.

◆End of a 45-Year Monopoly Era

Movie theaters also faced existential threats in the 1960s when TV became widely available. Many theaters closed and the number of films sharply declined. The film industry overcame this crisis by producing blockbusters, investing heavily in production and promotion to achieve high profits. This led to the emergence of cinema complexes?large-scale theaters with multiple screening rooms in one building. These complexes maximized efficiency by operating large-capacity screening rooms focused on blockbusters.

The trend that began with Steven Spielberg’s ‘Jaws’ (1975) and lasted 45 years was abruptly broken last year due to the COVID-19 pandemic. As mid-to-large scale films struggled to recoup production costs, they gradually abandoned theaters. Their new home became OTT platforms.

OTT platforms, backed by massive capital, handle both investment and distribution. Distributors and producers cannot earn high profits but are guaranteed a certain level of revenue, enabling them to produce their next films. As financial difficulties worsened due to COVID-19, everyone turned to OTT platforms. Meanwhile, theaters have been relegated to a sub-platform status, even having to persuade distributors to release films theatrically. The firmly held holdback period has thus disappeared.

◆Being Treated Like Stepchildren

Distributor CJ ENM will simultaneously release the film ‘Seobok,’ starring Gong Yoo and Park Bo-gum, in theaters and on OTT platform TVING on February 15. CJ ENM secured exclusive rights for TVING in exchange for guaranteed revenue but gave up part of the guaranteed amount considering the struggling theater industry.

During negotiations, theaters had no voice because they desperately needed films to screen immediately. Last weekend (January 19?21), three of the top 10 box office films (‘The Lord of the Rings: The Two Towers,’ ‘The Lord of the Rings: The Return of the King,’ and ‘Chungking Express’) were re-releases. The 2nd place film, ‘Demon Slayer: Mugen Train’ (released January 27), and the 5th place film, ‘Soul’ (released January 20), had been out for about two months.

Theaters have been quick to act to attract releases. Recently, they met with distributors to request screenings of films such as ‘Life is Beautiful’ starring Ryu Seung-ryong and Yum Jung-ah, ‘Confession’ starring So Ji-sub and Kim Yoon-jin, ‘Hero’ starring Jung Sung-hwa and Kim Go-eun, and ‘Special Delivery’ starring Park So-dam and Song Sae-byeok. However, the answer was always “Not yet...”

Movie 'Seobok' still cut

A representative from distributor A said, “This is not a decision we can make on our own. We have to convince producers and many investors.” Distributor B added, “We took a big risk releasing films last year but saw little benefit. Efforts to prove how safe theaters are must come first.”

Due to distributors’ reluctance, theater C even tried screening films and dramas already released on OTT. However, they were criticized for expecting success just by screening without participating in promotion or marketing. Re-releases are also not easy. For example, it took over six months to arrange the current screenings of ‘The Lord of the Rings’ series.

◆The Fate Depends on ‘Seobok’

The release method used for ‘Seobok’ may become the norm for the time being. Distributor B said, “We are closely watching the performance of both theaters and OTT. If it leads to meaningful results, we plan to pursue similar releases.” Distributor C said, “We recently received an intellectual property (IP) contract proposal from an OTT but postponed our response until after ‘Seobok’ releases. The traditional theater-first release model is effectively broken.”

On the 18th, a notice about the increase in movie ticket prices was installed at CGV Yongsan I'Park Mall in Seoul. On the same day, CGV announced that, to overcome the crisis caused by the prolonged COVID-19 situation, movie ticket prices will be raised by 1,000 won starting from the 2nd of next month. Photo by Moon Honam munonam@

Distributors and producers have not abandoned theaters because they expect the highest revenue there. In 2019, 76% of the film industry’s revenue came from theater ticket sales. Ultimately, if theaters prioritize income, they will wait for the right time; otherwise, they will follow the ‘Seobok’ procedure or go straight to OTT. Of course, having lost the advantage of being the first to show new releases, expecting 10-million viewer blockbusters like before has become difficult.

A representative from theater D expressed concern, “If overseas OTTs like Disney Plus and HBO Max fully enter the market, our space will shrink further.” Theater C’s representative said similarly, “We are no longer the dominant party.”