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Korean Film Industry Faces Financial Crisis

2005/06/02 Source

The warning lights are flashing on Chungmu-ro, the center of Korea's film industry as public funding runs out. The liquidation date for most of the W260 billion (US$260 million) movie fund for film production between 2000 and 2002 comes up at the end of this year, and the Small and Medium Business Agency's anticipated first-round contribution of W250 billion to the film fund has come out to no more than W7 billion.

The movie fund was an idea hatched by the film world following the Asian financial crisis of 1997, when the Small and Medium Business Agency, Korean Film Council and other government agencies and private investors came together to set up a fund to boost film production. Under the Kim Dae-jung administration, W260 billion were raised, and the fund became the seed money behind the renaissance of Korean film. CJ Entertainment and Showbox Mediaplex, the two biggest patrons in the film world, invested W85 billion and W36 billion respectively in film production in 2004 alone.

But most of the fund expires either at the end of the year or soon after. And although the development partners aren't saying, the fund records on average minus 13-15 percent profits on investment, so existing investors have lost their enthusiasm.

Despite what seemed like a string of industry success last year, with "Silmido" and "Taegukgi" drawing more than 10 million viewers and Korean films taking awards at international festivals, the reality was much grimmer, with one production company after another recording losses. According to investment and production firm IMPICTURES, only 25 of 71 films released in 2004 turned profits at the box office; the remaining 63 percent didn't even make back the initial investment.

What shocked the film industry even more was the announcement late last year of the Small and Medium Business Agency's 2005 investment plan, when the agency allotted a total of no more than W60 billion for investment in all sectors, including IT and ventures. Production company Kiheck Shidae president Yoo In-taek said despondently, "When you take away funds for ventures and other sectors, the allotment for the film fund comes to only W7 billion".

Some point to problems within the film industry. Cho Sang-hee of Isu Venture Capital said, "It's true that due to losses existing fund investors have lost interest, but there are still moves to create a new movie fund with capital from telecom firms like SKT and KT... But it's the film industry that must urgently create a system that cuts production costs, especially by adopting transparent accounting standards".

LJ Film president Lee Seung-jae said, "In the long term, we need to adopt other profit models such as cultivating overseas markets, but we urgently need our own independent and stable capital if we want to do this".

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