"Paying Full Price Makes You a Fool"? Telecom and Card Discounts Flood In... The Film Ecosystem Is Dying [The Theater's Last Stand]

Even with Higher Ticket Prices, Per-Customer Revenue Falls
Excessive Discount Wars Among the Three Major Multiplex Chains
A Reluctant Race to the Bottom... Could a Merger Be the Breakthrough?

The film industry argues that, above all, the issue of telecom carrier discounts must be resolved in order to revive the stagnant industry. The Korean Film Industry Crisis Response Alliance requested an investigation by the Fair Trade Commission in July of last year, claiming that the three multiplex companies (CGV, Lotte Cinema, and Megabox) had violated the Fair Trade Act. They defined the discount policy as an "act that seriously undermines the film ecosystem," and demanded that the inflated ticket prices be removed and the settlement process be made transparent.

The three multiplex companies are caught in a dilemma over telecom carrier discounts. Yonhap News

The issue of telecom carrier discounts is directly linked to the average ticket revenue per customer. This figure represents the actual amount paid by moviegoers after all discounts and mileage benefits are deducted. Film investors and producers recover their profits based on this amount. Normally, when ticket prices rise, the average ticket revenue per customer also increases. However, the opposite phenomenon is occurring in the domestic market. In April 2022, the three multiplex companies raised ticket prices to 14,000 won on weekdays and 15,000 won on weekends. That same year, the average ticket revenue per customer was 10,049 won, about 500 won higher than the previous year's 9,518 won. However, it continued to decline, dropping to 9,850 won in 2023 and 9,667 won last year.

The main reason for this distorted structure is cited as the competition for discounts among telecom carriers and credit card companies. The three multiplex companies, in their efforts to attract customers, have engaged in excessive discount bidding wars, accepting losses and entering into unfavorable contracts. The problem is that the specific settlement structures are not disclosed to the public. The three multiplex companies refuse to disclose detailed settlement records, citing confidentiality agreements with telecom carriers. As a result, trust in the revenue structure has declined, and external investment may also be discouraged due to increased uncertainty regarding the possibility of profit recovery.

The Film Industry Alliance pointed out, "This is an irrational situation in which profits that should be distributed among various stakeholders in the film ecosystem?including investors, distributors, producers, and creators?are being reduced." They added, "The practice of raising prices and then operating a superficial discount system undermines audience trust and ultimately leads to the contraction of the entire Korean film industry."

In reality, multiplex companies are also reluctantly maintaining contracts with telecom carriers. They wish to abolish the discount policies, but are concerned that price-sensitive audiences may leave. According to a survey conducted last year by the Korean Film Council on "Perceptions of Fair Practices in the Film Exhibition Sector Among Film Industry Professionals and Audiences," 37.8% of respondents said that telecom carrier and card discounts have a very significant influence when choosing a cinema, while 38.0% said they are "somewhat influenced." In contrast, only 9.8% responded that such discounts have "little or no influence."

An official from one multiplex company, identified as A, expressed concern, saying, "With overall audience numbers already declining, if even our most loyal customers leave, the entire film industry could face a major crisis." Another official, B, explained, "We would like to terminate our contracts with telecom carriers and lower ticket prices immediately, but if a competitor monopolizes the discount policy in the meantime, we could suffer even greater losses." They added, "If all three multiplex companies were to discontinue telecom carrier discounts simultaneously, there is also the risk of being suspected of collusion."

Some believe that the merger between Lotte Cultureworks and Megabox Joongang could provide a breakthrough for these issues. If the merger allows them to overtake CGV and become the market leader, there is hope that they could restructure the existing system and establish a new order. An official from a production company, C, stated, "To return to the era when each citizen watched four movies per year, we need to revive the 200 million admissions era. We must create a new competitive dynamic with CGV and shift toward a more audience-friendly paradigm."

Watching movies in theaters is transforming from mere viewing to an immersive experience. Yonhap News

A distributor representative, D, also asserted, "The merger of the two companies is an inevitable choice for survival. Unless we solve the price issue, which is the biggest barrier to recovering audience numbers, no synergy can be expected." They emphasized, "We must break away from the opaque telecom carrier discount settlement structure, lower ticket prices, and provide audiences with new types of benefits."