Movie Theaters Take Strong Measures Ahead of Peak Season... Bearing Distribution Companies' Loss Risks

At the Premiere, 'Mogadishu' and 'Sinkhole' Rated as Commercially Viable
Full Revenue Allocated to Distributors and Producers Until 50% of Production Costs Are Recovered
Criticism of Inequity Arises, but "Film Companies Leading Win-Win Cooperation Have Been Overlooked"

The film exhibition and paid broadcasting industries have set unprecedented conditions to encourage the release of domestic tentpole films. They guarantee the recovery of 50% of the total production costs for two films expected to perform well at the box office.

The Korea Association of Multiplex Theaters, which includes CGV, Lotte Cinema, and Megabox, announced on the 15th that after lengthy discussions, 'Mogadishu' and 'Sinkhole' were selected as beneficiaries. Both films were evaluated as commercially viable during preview screenings held over two days on the 11th and 14th.

Exhibition industry insider A said, "The competition was not intense," but added, "Both works are more than capable of leading the summer box office." Exhibition industry insider B also stated, "These are films that everyone can enjoy regardless of age or gender."

Typically, movie theater ticket sales revenue is split 50-50 between theaters and distributors/producers. With this selection, 'Mogadishu' and 'Sinkhole' will have all ticket sales revenue go to the distributors/producers until 50% of the total production costs are recovered. In the ancillary rights market (KT, SK Broadband, LG Uplus, Cable TV VOD), they will receive 80% of the revenue, which is about 20% more than the existing distribution rate. The Korea Association of Multiplex Theaters promised, "We will support various promotions and marketing not only for these two films but also for other Korean film releases."

This guarantee is a self-help measure aimed at normalizing not only theaters but also the ancillary rights market. It reflects a determination to break down the barriers to audiences created by COVID-19, even at the risk of losses for distributors. Once 50% of the total production costs are recovered, the revenue split will revert to 50-50. However, the settlement ratio after 100% of the total production costs are recovered is still under negotiation. The production costs for 'Mogadishu' and 'Sinkhole' are 25 billion KRW and 15 billion KRW respectively (including promotion and marketing expenses).

On the 13th, supported by smooth COVID-19 vaccination and the summer peak season, students are purchasing tickets to watch movies at CGV Yongsan I'Park Mall in Seoul, where the number of movie theater audiences is increasing. Photo by Moon Honam munonam@

Many insiders point out that this measure is unfair. They unanimously argue that defining eligibility based on nationality and production costs is unjust. Distributor C said, "The initial selection and even the criteria were vague," adding, "Since the support essentially amounts to favoritism, a thorough screening process was necessary."

Distributor D said, "Films with high production costs, films with low production costs, and films imported by paying a certain amount are all in the same situation," and added, "It is not right to give preferential treatment only to Korean films with high production costs." He appealed, "Film companies that have provided many works to theaters even during difficult times must be feeling disheartened," and said, "They took the lead in cooperating with theaters but ended up being sacrificed." Distributor E also said, "This approach is problematic," and argued, "Everyone should have been given an equal opportunity, like the 6,000 KRW discount coupons for theaters last year."

The Korean Film Council has only mediated this measure and has yet to present clear support plans. The Film Development Fund is depleted, making it difficult to even prepare next year's budget. One official said, "We have requested projects such as the 6,000 KRW discount coupon for theaters in the second supplementary budget," and added, "We hope for the government's wise judgment."