Behemoths in the Movie Industry

Low-Budget Films Suffer From Unfair Market Practices of Three Big Companies

By Kim Tae-jong
Staff Reporter

The local film industry last year produced two mega hits _ the historical piece "The King and the Clown" and the monster film "The Host" _ which sold more than 12 million and 13 million tickets, respectively.

The films' most remarkable feat, however, was their dominance of the market.

While the two films were showing last year, almost half the screens in the country were devoted to them. Small-budget films were nudged out of theaters, and audiences didn't have much choice in which films to watch.

A bill has been proposed in the National Assembly to reduce the dominance of large companies.

The bill's main purpose is to regulate how multiplex theaters allocate screens to films. It aims to protect small films and offer audiences a chance to enjoy more diverse movies by preventing one from dominating screens.

"Our basic idea is to keep cultural diversity for the audience's right to choose", said Kim Sang-chul, secretary to Rep. Chun Young-se of the Democratic Labor Party. Chun proposed the bill.

Kim agreed that popular films tend to play on more screens but said it is film distributors and theater owners' job to decide which films they screen and how many screens will be needed. He said a minimum regulation, however, is required to give small films a chance to compete.

"The audience will be the main factor to consider when it comes to deciding how many screens a newly opening film will get. But in many cases, small films don't even have a chance to compete at theaters in the beginning, as they are the weak in the market. We think we should give them the chance at least", Kim said.

Opposition to Regulation

The proposed bill has gotten a mixed response from the film industry.

On Dec. 27, a public hearing on the bill was held, which government officials, lawmakers and private groups related to the film industry attended. They discussed whether multiplex theater chains need to be regulated.

The groups at the session included the Coalition for Cultural Diversity in Moving Images, the Korean Film Council (KOFIC), the Federation of Korean Movie Workers Union and the Korea Fair Trade Commission (FTC).

In general, the participants agreed with regulating an unfair market, but many of them opposed government intervention that could lead to stagnation in the industry.

The bill received the most vocal opposition from major film distributors and multiplex theater owners.

"It's hard to understand. What we do is not a public service, but a business. How can we screen an unpopular film?" said Lee Sang-moo, general manager of the public relations team at CJ Entertainment. CJ Entertainment is one of the country's biggest film distributors.

Audience demands regulate the film market, which is how it should be, Lee said.

Outrage of Big Companies

But experts believe that the domination of screens by a few films may be just the tip of the iceberg.

Doh Dong-joon, a researcher in the policy research department at KOFIC, said that people might not see how unhealthy the local film industry is.

"The market is not healthy now, and it's getting worse. It's not just because that a few films dominate screens nationwide, but also because major companies have too a great an influence on the market", Doh said.

The local film market is under great influence by distributors CJ Entertainment, Showbox and Lotte Entertainment, which have their own multiplex chains, CGV, Megabox and Lotte Cinema, respectively.

A KOFIC report shows that the three major distributors constituted about 60 percent of the market in 2005 and the three multiplex chains controlled about 800 of the country's 1,600 screens.

These companies also have a vertical structure of affiliated companies. They are involved in every step of the film making process, from investment, actor management, production, screening and selling their products in secondary film markets, including DVD and home video sales.

"The consequence of the vertical system can be seen in the many unfair trade practices of these three companies", Doh said.

Small theaters near multiplex theater chains often go out of business after the distributors affiliated with chains refuse to give small theaters films or force them to buy a film at high premiums or with unsuccessful films as part of a package, Doh said.

Obstacles

The government's antitrust regulator said that there is no proper law to deal with antitrust activities of these major companies.

"Strictly speaking, according to the current antitrust law, the three companies' control over the market is not categorized as monopoly or oligopoly based on their market share", Ji Cheol-ho, director of the anti-monopoly regulation team at FTC, said. The law stipulates that the three companies must account for 75 percent of the market to be considered a monopoly.

The industry criticizes the antitrust practices of these major companies, but the biggest hindrance to resolving the problem is the lack of evidence and active participation from the industry, Ji said.

"The contracts between distributors and theater owners are usually made verbally, following the old tradition, and it's hard to track down each individual antitrust activity because of the lack of evidence and because the weak parties don't report these activities out of fear of repercussions", Ji said.