[Indonesia Hallyu⑨] CGV Turns Profit "From K-Pop Mecca to Hallyu Hub"

Interview with Park Jeongshin, Head of CGV Indonesia
Boosting Sales Across All Sectors with Steadfast Management
"Korean Movies and K-Pop Stars Guarantee Box Office Success"
"Cinema Has Great Potential... 100 Million People Have No Experience"
"Unique Space Design as a Hub for Promoting Hallyu"

The country with the most remarkable growth in the Southeast Asian film market is Indonesia. From 2016 to 2019, the number of moviegoers increased by more than 20% annually. With such remarkable achievements, the size of movie theaters has grown significantly. Until 2012, there were only 145 locations (609 screens), but by 2020, this increased to 517 locations (2,145 screens). With a population of 275.5 million and a low median age (29.7 years), it is still considered to have great potential. CGV entered Indonesia in January 2013 by starting the entrusted management of the local theater chain Blitz Megaplex. In January 2017, it fully rebranded to CGV and expanded its territory. The decisive turning point for full-scale business was the excellent performance after participating in management. Until 2012, Blitz Megaplex’s annual audience was around 4 million. In 2013, when CGV began entrusted management, it was 5.56 million; 6.76 million in 2014; 7 million in 2015; and 10 million in 2016. Through advanced marketing, differentiation of special theaters, and CSV activities, it recorded an average annual growth rate of 30%.

The steep upward trend faced an unexpected barrier in 2020: the COVID-19 pandemic. The Indonesian government implemented strong social distancing policies (PPKM), making normal business operations difficult. Local production companies also postponed the release dates of films they were preparing to premiere. Only fifty-six local films were released that year. Most failed to find screening venues or exited early due to a lack of audiences. The following year, many shifted to online video streaming services (OTT). Of the total 106 films, only 36% were screened in theaters. The Indonesian government, which values the economic ripple effects and high added value of the film industry, encouraged reconstruction through various policies. It allocated a film support budget of 500 billion rupiah (approximately 41 billion KRW) that year and attracted audiences again through various promotions and subsidies. According to market research firm Euromonitor, the local film industry size in 2021 grew by 7% from the previous year to 274 million USD (about 338.4 billion KRW). It ranked seventh (2.6%) in the Asian market. It is projected to maintain the upward trend and reach 350 million USD (about 432.3 billion KRW) by 2026.

CGV’s efforts also played a part in normalization. They strengthened digital marketing tailored to local characteristics and continuously improved mobile and reservation systems. They expanded the range of premium theaters such as 4DX, ScreenX, SphereX, Starium, Gold Class, and Sweetbox to increase audience satisfaction. The most effective business was the distribution of Japanese animation like 'One Piece' and the expansion of K-pop content supply. Especially the latter saw explosive popularity with live broadcasts of Astro fan meetings and musicals like 'Altaboys' and 'The Song of the Sun.' It was highly praised for creating new demand with borderless content locally. As more people visited theaters, the business recovered. CGV Indonesia’s sales in Q3 last year were 27.3 billion KRW, and operating profit was 2.3 billion KRW. The former increased more than fifty times compared to the same period the previous year, and the latter turned profitable. At the center of this revival was Park Jeong-shin, head of CGV Indonesia, who joined in July 2021. Through steadfast management, he raised sales across all sectors that had sharply declined. Now, aligned with the recovery of daily life, they aim for another growth by diversifying multiplex functions and injecting new culture. This is the long-term continuation of Hallyu led by the 'cultureplex' (complex cultural space).

Below is a Q&A session.

- You came to Indonesia during the height of social distancing, right?

"Unlike Korea, a shutdown was in place for about four months. Shopping malls were closed, and public transportation was not operating, indicating how severe the COVID-19 situation was. Gatherings were prohibited, so everyone switched to remote work. Even after the shutdown was lifted, regulations and relaxations repeated. Content supply became unstable, and seating was limited to 75%, among other continuous adversities. Both local and Hollywood films postponed their releases. To fill the gap, we actively brought in Korean films, especially K-pop movies, and introduced films from neighboring countries like Thailand to barely survive."

- Korean films don’t seem very popular there.

"There hasn’t been a major hit. Locals prefer Korean culture and content, but their interest is focused on OTT and K-pop. That’s the difference from other countries. For example, Vietnam had longer COVID-19 restrictions than Indonesia. As local films postponed releases one by one, Korean films filled the gap. Titles like '2022 654' and 'Emergency Declaration (2022)' did quite well. In Indonesia, such a level of success is still hard to expect. Most prefer Hollywood films, and the local film base is solid. The only comparable content is K-pop films, which are much more popular than in Vietnam. When 'NCT Dream The Movie: In a Dream' was released recently, the theater lobby was packed with fans. Even though tickets were more expensive than regular movies, fans flocked."

- What is the most successful K-pop film?

"It’s 'The Box (2021)' starring EXO’s Chanyeol. It’s a drama about a young man named Jihoon (Chanyeol) who meets a producer Minsu (Jo Dal-hwan) with a completely different personality and performs street shows. It is the only Korean film screened in Indonesia to attract over 100,000 viewers. The number is similar to the Korean record (122,469 viewers), and considering the scale of screenings for diversity films and the severe COVID-19 restrictions, it’s an incredible achievement. It’s like a diversity film in Korea attracting over 1 million viewers. Recently, 'Decibel (2022)' did fairly well. It drew early attention because Astro’s Cha Eun-woo participated as a supporting actor."

- What is the fundamental reason for the poor performance of Korean films?

"Korean content is abundant on global OTT platforms like Netflix and Disney+. More than five works consistently rank in the top 10 popularity charts. The price is about 5,000 KRW, similar to movie ticket prices. This is just over 1% of Jakarta’s minimum monthly wage (about 400,000 KRW). Because the financial burden is low and a variety of content can be enjoyed, it is highly preferred. Movies still have a high price and have not established themselves as popular culture like in Korea. If a film attracts over 5 million viewers, it would rank in the top 10 box office records. 'Miracle in Cell No. 7,' released in September last year, is a representative example. It is a remake of the Korean film 'Miracle in Cell No. 7' and attracted nearly 6 million viewers, ranking fifth in all-time box office hits. Another reason is the lack of universality. Locals find it difficult to understand the era, social context, or themes in Korean hit films. Due to low understanding of Korean society, satisfaction inevitably decreases. The popularity of Hallyu centered on K-pop cannot be overlooked. Locals are more interested in singers than actors. 'The Box' succeeded mainly because Chanyeol starred. I met several fans who said they watched it multiple times in the lobby of the Grand Indonesia branch."

- The strong position of local films seems to make it difficult to settle in.

"That’s right. While they mainly enjoy Hollywood films, they also watch domestic films just as much. Local production has been active early on, creating a stable revenue environment. Preferred genres are horror and drama. Especially the former is strong; last year’s release of 'KKN di Desa Penari' (KKN in the Dancing Village) became the highest-grossing local film ever, with over 9.2 million viewers. 'Pengabdi Setan 2: Communion' (Satan’s Worshiper 2), released in August last year, also attracted over 6.3 million viewers and was a big hit."

- Since the all-time box office rankings changed significantly last year, the total audience must have increased a lot.

"Yes. Although it temporarily slowed due to the spread of COVID-19, it still shows unlimited growth potential. Income levels have generally improved, and the middle class is expanding. Spending on cultural life can increase significantly. In 2019, the average annual movie attendance per capita in Korea was 4.37 times. In Indonesia, it is still less than once. Being the world’s largest archipelago, many areas lack movie theaters. Considering the steady growth of provincial cities, the market size needs to be expanded. The median age of only 29.7 years cannot be overlooked. Korea’s median age is 45.6 years, but the increase in viewers over 60 maintains the annual average audience. Strictly speaking, it is difficult to regain the growth curve. Indonesia is the opposite. Most people have either never experienced a movie theater or only once or twice. Probably over 100 million out of the 275.5 million population fall into the former category. If the latest screening systems and best services are provided, we expect to win their hearts."

- You are currently the second-largest operator in Indonesia, running 71 branches with 408 screens.

"The first place is Cinema 21, which has almost monopolized the movie theater business for a long time. It is difficult to surpass them immediately by securing more branches. Theater lease contracts are usually signed for 10 to 15 years. They cannot be terminated early, so it is better to perfect better systems and leave a good impression."

- You have already had a big impact on the Indonesian movie theater environment.

"Before CGV entered, investment in theater facilities was minimal. The viewing environment was very poor. Since there was virtually no competition, ticket prices fluctuated wildly. For the same movie, Branch A charged 10,000 KRW, while Branch B charged 30,000 KRW. CGV narrowed this gap while managing Blitz Megaplex and introduced customer-centered services. It is no exaggeration to say that we completely overhauled the local movie theater environment from A to Z."

- Does CGV also charge different ticket prices depending on the region?

"Yes. The Indonesian movie theater industry operates strictly on market logic. Branches located in buildings with high rent charge higher ticket prices than average. Conversely, those in cheaper locations charge less accordingly."

- Managing such a large archipelago must not be easy.

"We have a branch even in Manado, the easternmost part of Indonesia. It takes about 3 hours and 30 minutes by plane from Jakarta. To Medan, the westernmost city, it takes about 2 hours and 30 minutes by the same method. Singapore or Malaysia is actually closer, so detailed management is challenging. Despite the difficulties, we prefer to visit directly to assess the situation and devise countermeasures. We also carefully examine the environment to establish new branches in unfamiliar cities. Unlike Korea, we do not have branches in every city. Concrete plans can only be made if there is sufficient development potential. Naturally, cities with large populations and ongoing industrialization are top priorities."

- Do you consider age groups when establishing marketing strategies?

"Indonesia is a young country. Unlike Korea, which has many middle-aged and older people, 80% of moviegoers are in their teens to 30s. We prioritize acquiring content that they like. Generally, they are open-minded and actively accept various films. Twenty-two Korean films were released last year. Although they did not achieve great success, they were a driving force to safely pass through the pandemic."

- Thanks to the locals’ open attitude, CGV seems to have settled quickly.

"For example, imagine a foreign company acquiring a Korean theater chain. It would take a very long time to settle. If they scheduled many local films, there would be an uproar. Indonesia accepts even that with an open mind. Some audiences are happy because there are more things to see. This is possible because of the advanced systems that were previously unavailable. Most locals visiting CGV for the first time are amazed by the customer-centered service. They all welcome the convenient mobile and online reservation systems, the first ticket vending machines introduced, and rechargeable wallets. Cinema 21, the competitor, has belatedly put much effort into service and facility investment. With CGV’s entry, the movie viewing environment throughout Indonesia has improved. This is our ultimate goal. Increasing sales immediately is important, but the overall audience must grow so that investment in local films becomes active, creating a virtuous cycle. Various types of films will be produced, and related industries will flourish. By then, there will be no need to worry about sales growth."

- Is there little room for Korean companies to enter the expanding film production market?

"Probably only remake deals are possible. The Indonesian film production industry is relatively solid. Some production companies make more than ten films a year. Just buying intellectual property (IP) is enough to produce new films. Of course, the system is not as advanced as Korea’s. It is like Korea’s production environment about 20 years ago. Investors are sizable, so the potential for development is very high."

- Many advertisements in theater lobbies are for Korean products.

"In Indonesia, there are monopolistic operators in each sector. Consumer resistance to monopoly brands is not strong. Government regulations are also relatively lax. Even if a specific product is lined up in the most visible corner of a supermarket, it is not considered a problem. Therefore, they do not spend much money on marketing or promotion. We thought it would be better to promote Korean or other countries’ brands rather than persuade them. Instead of simply raising product awareness, we create experience zones to encourage trials. Recently effective products include Coway water purifiers and Toto washbasins and toilets. The former has a separate relaxation space. Thanks to the promotional model BTS, many fans still visit. The latter redesigned the entire restroom. It enhanced the function of the resting area to give visitors a comfortable feeling. The overall concept of the theater is also changed according to regional characteristics. The recently established Malang branch is a representative example. The lobby reflects green color trends and a return-to-nature lifestyle. It is decorated like a forest so that visitors can smell nature and relax before the movie starts."

- It seems to have become a base for promoting Hallyu not only through film screenings but also through unique space configurations.

"This is what CGV Indonesia aims for. We plan to continuously promote Korean culture and products through unique designs and layouts. Even now, there is an LG Electronics showroom in a corner of the CGV Grand Indonesia lobby. We pay great attention to design and layout so that young audiences can use various products and have a good impression. At the concession stand, Korean foods like tteokbokki are adapted to local tastes. In the office, we work hard as intermediaries to have good Korean films remade locally. There are various ways to expand overseas, but B2C, which locals can immediately experience, is the essential driving force for spreading Hallyu. We bear a heavy responsibility and will take the lead in its expansion."