[Special Interview] "It Will Soon Appear on OTT..." Movie Theaters Will Perish if 'Holdback' Is Broken (Part 2)

Holdback Becoming Ineffective, Prioritizing Agreement or Legalization
Pros and Cons of Telecom and Card Discounts... Transparency in Average Spending Essential
Government Support for Youth Viewing, Essential Task for the Future of the Film Industry

Yin In-chon, Minister of Culture, Sports and Tourism, announced the 'Video Industry Leap Strategy' last month, introducing the K-Content Strategy Fund. It will be established with a scale of 600 billion won next year alone. A significant amount will be invested in Korean film production. He emphasized, "A virtuous cycle structure is needed where investment is recovered through release and funds are reinvested into the market." There is a prerequisite attached to this: the promotion of releases and the agreement and compliance with holdback (the period between a film moving from one distribution channel to the next). This is gaining attention as a solution to restore the Korean film ecosystem, which has been disrupted by the advent of online video services (OTT).

Korean Film Discussion Photo by Yongjun Cho jun21@

However, there are great risks lurking in the recent calls for legislation. This is because screen monopoly by a few films occupying most theaters still persists. The majority of films struggling to secure screens may lose opportunities to rebound on IPTV or OTT platforms. In fact, many distribution and production officials are resisting, saying, "It's like telling us not to cut open the goose's belly when we don't even have rice to eat tomorrow."

It is also unclear whether movie theaters can achieve the expected effects. This year, successful cases are limited to 'Suzume's Locking Up' and 'Slam Dunk.' There are concerns that, rather, the industry may fall behind trends in production and other aspects, dampening the rise of K-content. Therefore, the second topic prepared is 'Ineffective Holdback, Ways to Check OTT...'

△Asia Economy: "Most people are skeptical about the holdback compliance claimed by movie theaters. If legislation is pushed forward in earnest, various controversies may arise."

△Park Ki-yong: "Holdback is a kind of promise and insurance. It collapsed during the pandemic but should be restored. It must be done to induce investment in IPTV and others. Everyone sets holdback as a prerequisite. In fact, it is no exaggeration to say that all troubles originated from Netflix. France still maintains a 15-month holdback and requires Netflix to pay production costs equivalent to ten films annually. On the other hand, Korea has almost no regulations or restrictions. Holdback is not enforced either. Since the Ministry of Culture, Sports and Tourism, the Ministry of Science and ICT, and the Korea Communications Commission manage it separately, the situation has worsened. Distribution and production officials cannot raise their voices because they are cautious."

Choi Jeong-hwa, Representative of the Korean Film Producers Association Photo by Jo Yong-jun jun21@

△Choi Jeong-hwa: "Whenever similar points are raised at public hearings, the answer is that they are hampered by the Korea-US FTA. They say additional regulations or charges cannot be imposed. That should be changed in annual negotiations. How long do they intend not to touch it... The government should take a more proactive stance."

△Kang Min-a: "Minister Yin In-chon is very interested in holdback. He even included related content in the recently announced video industry leap strategy. Of course, reaching a consensus on standards is a priority. If release promotion and holdback funds proceed along with prior steps, I think it could naturally reach the stage of considering legislation. It will also become possible to impose various conditions on OTT."

△Park Ki-yong: "I recently met a producer from Saudi Arabia who said they limited Netflix's intellectual property (IP) ownership period to 10 years. It is said to be an achievement through direct negotiations between the government and Netflix. Local distribution and production officials say even that is too long and are asking for it to be shortened. Ultimately, it depends on how much interest and involvement the government has. Our government is not responding at all to related issues. There are various constraints such as the Korea-US FTA, but the government needs to act more actively."

Wondongyeon, CEO of Realize Pictures Photo by Yojongjun jun21@

△Won Dong-yeon: "Let's return to the holdback discussion. Before the pandemic, there was a principle of 6 to 8 weeks. However, due to the industry's worsening situation, it has become frequent for films to be sent to IPTV or OTT within days. If holdback is broken, the film market will perish. There is a need to set uniform standards again. It cannot be enforced by law immediately. The industry must agree autonomously. In the process, I hope movie theaters embrace the positions of distributors and producers. If audience reactions are poor in the first week of release, theaters take the film off screens. If sufficient compensation is mentioned on OTT and others, they will inevitably be tempted. The longer it drags on, the more the value decreases. It is by no means an easy problem to solve."

△Kim Jin-sun: "The problem is that distributors and producers push forward with wrong contracts even though they know it. Large corporations are included. No matter how much OTT offers extra money, it cannot affect theater or VOD revenue. Distributors and producers know how unfair that is. Suggesting to agree on holdback while being cautious is nonsense. The government must first set standards through strong legislation and develop related support projects to normalize the ecosystem."

△Choi Jeong-hwa: "Still, isn't reaching consensus on standards a priority? In fact, hit films have little to do with holdback. The problem lies with films that are not successful. Whether OTT or IPTV, they have no choice but to find survival paths quickly. In that sense, I hope theaters distinguish screening rooms and adjust admission fees for independent and art films. It is not about devaluing worth. It means guaranteeing dedicated theaters where art house films can be fully screened and applying regular discounts to attract audiences. If theaters continue to push only hit films as now, the industry collapse is only a matter of time. I hope sufficient safeguards are prepared before promoting holdback."

Yoon Je-kyun, CEO of CJ ENM Studios Photo by Jo Yong-jun jun21@

△Asia Economy: "Increasing transparency of average ticket price should also be a prerequisite."

△Kim Jin-sun: "The Korea Film Council's integrated computer network aggregates ticketing immediately. Distribution companies can disclose details anytime upon request, including mobile carrier discounts and promotions. Misunderstandings seem to have arisen due to youth or socially disadvantaged admission fees. During the pandemic, admission fees were raised three times, but that was the only thing left untouched. When looking at actual revenue, adult admission fees are more weighted toward 11,000 won than 15,000 won due to mobile carrier discounts."

△Choi Jeong-hwa: "Still, there are suspicious parts, especially mobile carrier discounts. I heard multiplexes compete aggressively for them. If theaters succeed in contracts, they can expect additional revenue besides attracting audiences. Distributors and producers have nothing to do with it. They are unlikely to welcome it unconditionally. Detailed information is not even identified through the integrated computer network. I heard the recorded amount is above the basic unit price. It is necessary to disclose in detail how mobile carrier or card discounts are applied to calculate average ticket price."

△Won Dong-yeon: "Mobile carrier or card discounts certainly affect audience inflow. Distributors and producers probably feel the need internally. However, multiplex memberships providing free tickets and others need reconsideration. Most people use free or discount tickets to watch hit films. Distributors and producers bear half the burden each time. Theaters claim that is fair. But strictly speaking, the stakeholders are the theaters, aren't they? It is problematic to have a one-way approach like 'We will pay half, so you pay the other half.' According to theater logic, distributors and producers should also get a share of revenue from popcorn, advertising, etc."

Jinseon Kim, President of the Korea Film Theater Industry Association Photo by Yongjun Cho jun21@

△Kim Jin-sun: "In the early 2000s, many audiences flocked to theaters thanks to mobile carrier discounts. Especially youths enjoyed many benefits. Competition to attract them has intensified. Multiplexes bear some losses. However, if they propose to raise average ticket price collectively, it could be misunderstood as collusion. I hope the Ministry of Culture, Sports and Tourism and the Korea Film Council help. I will try to ensure sufficient prior agreement on promotions or memberships conducted by theaters. Some distributors even refused to participate in the annual college entrance exam student promotion. I feel the need to reconsider."

△Park Ki-yong: "You said average ticket price is not a big problem, but most people think distributors and producers take about 6,000 won. Actually, it is about 4,500 won. The fact that it has not risen much despite three increases is a serious problem. It needs to be publicized."

△Won Dong-yeon: "If admission fee increases were made when the industry was booming, there would not be such backlash. The timing was very bad. Theaters must feel unfair too. Electricity, labor costs, and all prices have risen. The overall content power is weak, so there is no chance to rebound. Strategic thinking is needed."

△Yoon Je-kyun: "Will adjusting admission fees for independent and art films mentioned earlier really lead to sufficient effects?"

△Kim Jin-sun: "Overseas, films in their 3rd or 4th week of release are screened at half price. They designate theaters that offer discounted admission fees and consistently showcase independent and art films. Some importers request this method first. They complain, 'Who would pay 15,000 won to watch our films on weekends?' But if general adult admission fees are lowered to 12,000 or 13,000 won, will audiences increase? Due to the perception of 'Culture Day,' the public will think of 7,000 won as an appropriate price. It is not acceptable to the industry."

Park Ki-yong, Chairman of the Korea Film Council Photo by Jo Yong-jun jun21@

△Won Dong-yeon: "It cannot be said what is right, but it is regrettable that 'Culture Day' falls on Wednesday. Promotions on release day have stirred public resistance."

△Kim Jin-sun: "There was an expectation that if theaters were crowded on release day, word of mouth would bring more audiences. Of course, there was concern that audiences planning to watch on weekends might crowd on Wednesday. Now, apart from 'Culture Day,' distributors and producers strongly resist other promotions. Even if theaters offer to bear more costs, they do not participate."

△Yoon Je-kyun: "If admission fees are temporarily lowered and audience trends are observed, wouldn't it help set appropriate admission fees? Theaters could find points of profit maximization considering additional revenue."

△Choi Jeong-hwa: "It depends on which films are released. Theaters have a structure that makes testing difficult due to lack of consistent content. The dilemma that arises when raising admission fees again must also be considered."

Kang Mina, Director of Video Content Industry Division, Ministry of Culture, Sports and Tourism Photo by Jo Yongjun jun21@

△Asia Economy: "More than 95% of Korean theaters are dominated by the three multiplex companies (CGV, Megabox, Lotte Cinema). If even one collapses, the entire film market could be shaken."

△Park Ki-yong: "Theater is the foundation of the film industry. No matter how big OTT grows, everyone agrees on that perception. However, the Korea Film Council cannot directly intervene in admission fee issues. It is difficult to recommend lowering fees because it cannot be certain that audiences will increase. Discussing various discount methods is a more realistic alternative."

△Kang Min-a: "The government is seriously considering support for theaters. It is trying to increase related budgets. It plans to more actively promote the 1.9 billion won lottery fund secured for youth admission."

△Kim Jin-sun: "Youth admission is essential for theater survival. Their visits were cut off for the past 2-3 years due to the pandemic. Especially lower-grade elementary students reportedly do not even know what a theater looks like. The future is bleak to that extent. Is it really only a theater problem? Isn't it a matter to worry about including distributors, producers, and future creators? In fact, advanced countries are eager to secure future audiences. Theaters, related industries, and governments work together to develop various programs such as 'Movie Pass' (allowing free movie viewing for a certain period). I hope our government provides more opportunities for youth to experience movies."

Korean Film Discussion Photo by Yongjun Cho jun21@

△Kang Min-a: "This year, we estimated the Movie Pass budget at about 10 billion won and applied, but unfortunately it was rejected."

△Choi Jeong-hwa: "Attempts to include film literacy in public education have repeatedly failed. Even the Korea Film Council's support for regional cultural enjoyment is being abolished, leaving nothing to say."

△Won Dong-yeon: "The government must have a sense of crisis. Recently, OTTs are developing films like 'Gil Bok-soon' and 'Believer 2,' and based on these, producing dramas. If this trend continues, young generations will perceive OTT films not as complements but as substitutes."

△Choi Jeong-hwa: "The problem starts with the government viewing films as big corporate businesses. It denies the existence of small and medium-sized enterprises. The vulgar perception of 'What film when we are dying without money' has permeated the government and society. Please face reality. There are no longer production companies that only make films. Many sell intellectual property (IP) while guaranteed only about 10% profit. This is by no means a normal situation."