Downturn Shuts Down Movie Theaters

By Jane Han
Staff Reporter

Perhaps it was the reckless expansion or simply the economic slump, but movie theaters have been put up for auction after being forced to shut down this year.

According to GG Auction, a local brokerage specializing in auctioning properties, a total of 19 cinemas nationwide have been put on a fire sale throughout this year ― 16 of them scattered in the provinces and three in Seoul.

The combined appraised value of the for-sale multiplexes amounts to more than 300 billion won ($258.9 million), according to the auctioneer.

But owners are not going to get paid anywhere near the appraisal value, said Kang Eun, an official of GG Auction.

"Theaters aren't in high demand on the auction market because it costs a fortune to tear down audio visual facilities and equipment", she said. "Plus, many of the businesses went bankrupt because of unfavorable locations so buying merits are minimal".

The highest bidding prices for out-of-business cinemas typically reach up to just 20 percent of the asking price, according to GG Auction.

For example, MMC Megaplex Cinemas in Busan, the nation's second-largest city, was recently auctioned off for 1.4 billion won, despite having an appraisal value of 8.2 billion won. Cinus Chilgok in Daegu, which was appraised at 8.7 billion won, was sold for 1.5 billion won after four failed auctions.

Industry experts said the reason theaters in the regions outside of Seoul are going under is partially because of their rapid and reckless expansion.

"We've been seeing new openings exceed demand", said a representative of Megabox, one of the nation's top three theater operators.

He said cinemas usually open for business inside large shopping malls, but they've witnessed a steep drop in moviegoers because the economic downturn has cut off foot traffic altogether.

According to the Korean Film Council, the nation's cinema operators have posted collective sales worth 476.8 billion won, the highest on record, in the first half of this year despite the economic crunch.

A series of strong releases helped drum up consistent sales, it said.

"It's ironic to see that businesses suffered when the overall industry did better than expected", said a council official, who attributed the rise in closures to the regional economy's comparative weakness compared to that of Seoul.