South Korea

South Korea is a small nation whose creative industry has become an important part of the worldwide entertainment market.  With a population of just 51 million, Korea in the last decade has seen interest in its culture explode into a phenomenon dubbed the “Korean Wave.” What began with the regional success of Korean TV dramas has quickly expanded with global recognition of the nation’s films, television series and “K-pop” music. As a worldwide interest in Korean entertainment grows, IFTA Research took a look at the South Korean market to see how foreign independent films fare in the market.

The 2015 Korean box office was record breaking, with revenues reaching US$1.4 billion, a 3.1% increase from 2014. On average, Korean citizens saw 4.2 films throughout the year, the highest per capita films viewed in the world. However, large returns at the box office are not shared across the board. Local productions held a majority market share of admissions at 52%. Only 47 titles accounted for 81% of admissions in 2015 (of 1,176 titles released theatrically). Mid-budget dramas and genre pictures have virtually vacated the market. Major U.S. studio films account for more than 80% of the imported film box office. Only two independent films broke into the top 30 imported film.

Competition for cinema space is fierce for two reasons: consolidation in the exhibition space and the number of titles released each year. Approximately 97% of the nation’s screens are owned by three companies – CJ CGV, Lotte and Megabox. A record breaking 1,176 titles were released in 2015 of which 232 were local and 944 imported. On average five to ten new films are per week. The single-screen release is a rising trend, exhibiting many times for only a day in order to allow the film to be sold at a higher price to Korean VOD as a “theatrical title.” A theatrical release also boosts a title’s reputation with the audience because a film that couldn’t acquire a theatrical release is assumed to be “bad.”

Imported independent and arthouse titles must prove their success in arthouse cinemas before opening in larger cinema chains. Often, a title is pulled after only a few days of exhibition due to low admissions, allowing little time to garner revenue. Television quotas support local product and lack of interest in foreign content creates a discouraging TV market for independents. Most imported independent or arthouse titles will have a very small theatrical release and will generate the majority of revenue via multiple VOD windows.

In 2013, major U.S. studios began experimenting with early VOD release windows in Korea. The early windows offer digital rentals and EST purchases of a title during the three month theatrical holdback. The experiment was a success and nearly all theatrical titles use early VOD releases today. However, the popularity of VOD access in the theatrical window caused DVD sales to plummet to near extinction.

South Korea is a pioneer of TV via mobile or internet (IPTV). There are quotas for local programming on Free TV but these are not needed as there is little to no foreign content on Free TV. The little foreign content that is broadcast is major studio tent pole films.

Pay TV is very popular with a 98.7% household penetration at the end of 2015. Cable is the service of choice, followed by IPTV and satellite. Quotas exist for Pay TV but there is not a large amount of imported content on Pay TV. Foreign content often feels old to the Pay TV audience because the titles have already been exploited in multiple VOD windows. A Basic Pay TV package is very extensive offering a range of channels and programming. Premium television options are mostly PPV movie channels, international channels, sports programming and adult entertainment.

The new media market is dominated by TVOD services which account for 90% of VOD revenue. The majority of TVOD services are owned by IPTV companies. These companies are also responsible for the creation of the early VOD windows which has proved to be very lucrative. In addition to TVOD, there are some popular SVOD packages offered by mobile companies. However, these mobile carriers are often owned by the same major IPTV companies. Netflix recently expanded into the territory but hasn’t found much success. Its announcement of an original Korean production directed by the famed Bong Joon-Ho shows Netflix’s commitment to gaining subscribers in the territory.

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