[Asia Exclusive] "In the Super IP Era, Change is Survival... Expanding Beyond Movies to TV and OTT"

Kim Dosu, CEO of Showbox
Breaking Away from Movie Investment and Distribution Image, Accelerating Drama Production
Forming Creative Planning Group to Expand Public Engagement, Also Venturing into Metaverse and NFT Businesses
Expectations for Song Kangho, Lee Byunghun, Jeon Doyeon in "Emergency Declaration"
"Planning and Producing Over 40 Titles... Releasing at Least 5 Each Annually"

Kim Dosu, CEO of Showbox, is being interviewed at the Showbox headquarters in Gangnam-gu, Seoul on the 30th. Photo by Jinhyung Kang aymsdream@

The blockbuster film "Emergency Declaration," set to be released on the 3rd of next month, has a total production budget of 30 billion KRW. Directed by Han Jae-rim, known for "The Face Reader" (2013) and "The King" (2016), it stars top Chungmuro actors such as Song Kang-ho, Lee Byung-hun, Jeon Do-yeon, Kim Nam-gil, and Im Si-wan. The disaster scenario unfolding on an airplane was already unveiled at the Cannes International Film Festival last July. The investment and distribution company Showbox tried to ride the momentum to push for the release but repeatedly failed. They had no way to withstand the spread of COVID-19.

When the path to recouping funds is blocked, reinvestment becomes difficult. It inevitably has a negative impact on operations and management. Showbox is a company that has relied entirely on films. Except for 2020, when they produced the drama "Itaewon Class," their dependency was over 95% every year. The past two years, when business was blocked due to COVID-19, were truly a nightmare.

With the lifting of social distancing measures in May, the movie theater environment improved. There was even a "10 million viewer film" ("The Outlaws 2"). However, Showbox declared a departure from its traditional method of focusing solely on films. They expanded drama production and ventured into metaverse and non-fungible token (NFT) businesses. Regarding drama production, about forty projects are in planning and development. Titles include "The Witch," "Hypnosis," "Polar Night," "The Mechanic of Purgatory," "Artifact Reading Appraiser," "Hero's Variable," "Uturi," and "Birth of a Nation." They plan to produce at least three works each year this year and next. They secure various intellectual properties (IP) based on strong partnerships with creators.

The NFT business is handled by the U.S. investment firm MCG, which raised 131.6 billion KRW in investment last April. They invest in and produce specialized content centered on next-generation platform business networks. MCG was founded in Silicon Valley by Gu Bon-ung, the third-generation CEO of LS Group. MCG acquired about 30% of Showbox's shares, becoming the second-largest shareholder.

The diversified plans are led by Showbox CEO Kim Do-su (pictured). He is a key figure who led Showbox's heyday by dedicating over ten years on the production front. Leveraging his experience, he forms a planning and creative group of directors, writers, and producers, creating an environment suitable for developing super IPs. He actively seeks distribution diversification and aims to present a new paradigm. This is a content expansion business planned for 8 to 9 years. Although gradual changes were envisioned and steadily realized, the rapid changes in the platform environment have accelerated the process.

In an interview with Asia Economy, CEO Kim explained Showbox's challenges and future vision. He said, "If we don't transform quickly, we could become vulnerable," and added, "We are expanding our scope to films, TV, and online video service (OTT) dramas, preparing various works." He stated, "Although we are still perceived as a film distributor, if we release at least five films and dramas annually, that perception will change," and pledged, "We will not just consistently produce diverse content but also communicate, empathize, and enjoy content together with the public." Below is a Q&A with CEO Kim.

-For the past two years, normal operations were nearly impossible due to the spread of COVID-19.

▲The first film to suffer was "The Man Standing Next." It was released on January 22, 2020. It gained great popularity in the first week, and we thought attracting 7 million viewers would be no problem. However, after news broke that a COVID-19 confirmed patient watched "The Man Standing Next" at CGV Sungshin Women's University Station, audience attendance plummeted. We failed to reach our target record. We did generate revenue (4,750,104 viewers). Fortunately, the original release date was planned for April that year. Initially, we thought we could benefit from marketing effects ahead of the general election (April 15). But we judged there was a high risk of political issues and moved the release up by three months. This minimized damage, but the problem was the films in production. The production team of "Kidnapping," scheduled to shoot in Morocco in April, was denied entry. We realized it was not a problem that would be resolved quickly. At that time, Showbox had invested about 120 billion KRW in films. The system of capital circulation through film releases collapsed, causing widespread damage.

-Not only Showbox but the entire film industry was on the brink of collapse.

▲Whenever the number of COVID-19 cases decreased and we prepared for releases, the cases would rise again. For "Sinkhole," the release was postponed internally four times. Many articles reported that movie theaters were in danger, and investment and distribution companies were no different. The public's video content consumption patterns had changed. Since the OTT market was rapidly growing, we had to find a breakthrough. We had been exploring new business models, such as producing "Itaewon Class," but we realized we needed to accelerate. We quickly applied our expertise, which had been focused on the film business.

-With the emergence of various OTT platforms, new revenue streams have opened, but there are rumors that the conditions are not satisfactory.

▲It's not something to worry about (laughs). Showbox has a strong library due to its long history. The current OTT environment is an opportunity to consistently appeal our works to the public. The rumors likely stem from not having exclusive contracts with specific OTTs. While the amount is important, I think it should be approached with a long-term perspective. Exposure on various platforms is strategically more advantageous.

-Showbox was the cash cow of its parent company Orion but became a sore spot over the past two years. Employee morale must have dropped significantly.

▲The days of releasing films and celebrating or lamenting the results disappeared. Most people were at a loss about how to expend their energy. At least the production division could focus on dramas, so they suffered less mentally. After much deliberation, we changed the company's identity to a comprehensive content studio. We altered the organizational structure. The investment division became the production division, and related employees' titles were changed to producers. We granted autonomy, allowing them to bring various scenarios and scripts to develop into projects. We specialized collaboration with external production companies and our own production system to secure diverse IPs.

-The image of a film investment and distribution company is still strong.

▲The key is how much our content connects with the public. Simply producing content consistently won't solve the issue. The content must be something everyone can empathize with and enjoy. It doesn't have to be entirely new. We sometimes develop verified IPs we own into dramas before they are publicly released. Sometimes we work on IPs with drama adaptation in mind from the start. Now is the era of super IPs. To succeed, we must carefully consider how to structure sequels or dramas.

-Is there a specific standard for expanding the universe?

▲The universes of globally successful works like "Squid Game" or "Hellbound" are not fictional. They deal with events that have happened or could happen. That is the power to communicate with the public. Many creators present universes made from imagination. We attach creators who can add insight and realism to increase the story's density. Through experience, partnerships among creators are very important. So, we formed a planning and creative group. We focus on super IPs and work meticulously from planning to production. Naturally, the group that receives the most attention is the writers. As platform boundaries blur, everyone is open-minded, considering various formats such as webtoons, dramas, and films.

-With the globalization of domestic content, the consumer base has expanded. "Emergency Declaration" has prepared for release in 169 countries. The negotiation process was quite lengthy. Is there a significant difference in sales volume compared to before?

▲Distributors simulate sales before overseas sales. They decide how much to sell to which countries and set a minimum price. For "Emergency Declaration," we confidently raised the price. Since it was unveiled at Cannes, we thought there was no need to hold back (laughs). During negotiations, I told them not to lower the price and to hold firm. As a result, we achieved the profit we wanted. The increased interest in K-content helped, but the actors' contributions were significant. Especially Song Kang-ho, Lee Byung-hun, and Jeon Do-yeon are recognized for their outstanding acting skills worldwide, known by everyone in the overseas market.

Kim Dosu, CEO of Showbox, is being interviewed at the Showbox headquarters in Gangnam-gu, Seoul on the 30th. Photo by Jinhyung Kang aymsdream@

-There is a backlog of films that couldn't be released over the past two years. But they can't be indiscriminately released in theaters. The difficulty of reinvestment doesn't seem to be resolved quickly.

▲Films delayed until next year will be released in succession. The problem is the year after next. Films invested in this year will come out, but not many. Many creators have shifted their direction to OTT. They will return to films, but sufficient preparation is needed. The entire Korean film industry could stagnate. To overcome this, excellent producers must develop many works. However, even they are turning to OTT, and there aren't many suitable scripts. Regardless of COVID-19, another crisis could come. To aggressively exploit this gap, we recently converted works prepared for OTT back to films. We are also continuously searching for good scripts.

-The domestic film market seems to have peaked in 2019 and is on a downward trend.

▲I think the same. There will be big hits like "The Outlaws 2," but so-called "medium hits" may disappear. Audience consumption patterns have changed a lot. The public's view of films has become more critical. No matter how excellent the quality, if it's not fun, it will be ignored. This is even more true for mediocre films. So, films must be well made. Even if not blockbusters, fresh planning and production must provide enjoyment. Several filmmakers I recently met predicted that this summer's releases?"Alien+," "Hansan," "Emergency Declaration," and "Hunt"?would attract over 40 million viewers combined. But I don't think the theaters have recovered that much. We need to watch closely.