The Sogang Herald

Monopoly in Cinemas

A Violation of Choice and a Threat to the Film Industry 강민지l승인2017.08.08l수정2017.08.09 08:59l0호

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ⓒPark Eun-sook, Sisa Journal

 

Transformer: The Last Knight received severe criticism after its release on June 21 and 72.3% of the seats were empty on average. Yet the movie occupied about 70% of the total screens since the premiere day. This vividly shows the monopoly in Korean cinemas, a practice of cinemas allotting more screens to the movies distributed by their sister distributing agencies or major production companies. To resolve the problem of Hollywood films occupying most of the screens, the Korean government first implemented the screen quota system in 1966, obliging cinemas to screen domestic films for at least 106 days per year. But nowadays, films from large domestic productions are taking up a large portion of the screens and this has been quite an issue in the Korean film industry.

 

Major Productions Holding All Screens

Three cinema franchises account for 97.1% of the total domestic film ticket sales in Korea—CGV, Lotte Cinema, and Megabox. These companies have their own film distributing agencies operating at the same time. When one enterprise is in complete possession of the affiliates, each cinema assigns more screens to films distributed by their sister agencies. It is prominent that more movies are featured in their sister multiplexes compared to the total movie theaters. Moreover, in the prime time like on weekend evenings, films produced by large productions are mostly on screen, while low-budget movies are shown only in the early morning or late at night.

 

<Table 1> Comparison of seat occupancy rate

Film distributing company

In their subsidiary multiplexes (%)

In total (%)

CJ E&M

15.7

15.3

Lotte Entertainment

10.7

8.2

ⓒKorean Film Council

 

 Furthermore, the film industry market is overly concentrated on a few major companies. The four largest film distributing companies—CJ E&M, Lotte Entertainment, Showbox, and New—account for 77% of the whole sales. For the past four years, the film industries in Korea scored above 3500 points in Herfindahl-Hirschman Index (HHI), an index that indicates the concentration rate of the industry by measuring each firm’s market share. If the result is above 1800 points, the market can be said to be highly concentrated. This means that the film industry in Korea is relying on the hands of a few companies.

 This has eventually led to polarization in movie success. Only films produced by major studios were a hit in recent box offices. Big-budget films that cost more than eight billion Won in production had reached the earning-rate of 53.9%, while films that cost five to eight billion Won reached only 1.1%, and films that cost less than five billion won were in the red. Low-budget movies did not even get close to their low break-even point (BEP; the point at which the total cost and the total revenue are equal). Korean box office is only filled with the films that are more likely to earn the most income—usually, films produced by major production—and movies produced by minor studios do not get any chance. The films that are now hit occupy more and more screens, hence the success even more polarized.

 The monopoly in film industry was not just a domestic problem. In the United States, major film studios such as Warner Bros., Paramount, and 20th Century Fox acquired their own movie cinemas and attempted vertical affiliates. However, they were sued for unfair transactions, reaching a consensus on segregating the screening and distribution of films in 1948.

 

An Obstacle to Both Viewers and the Industry

If only a few selected movies are on screen in the weekend afternoons, consumer’s options become limited as well. Kim Jae-young (17, Communications) said, “I wanted to watch The Edge of Seventeen, but had to return home in vain due to the early closure of the movie,” in an interview with The Sogang Herald. The Edge of Seventeen, an independent American movie, was assigned to less than 100 screens, while Spider-Man: Homecoming was given about 2,000 screens on the same day. The monopoly of big-budget films is threatening basic consumer rights of being able to select what they want among sufficient options.

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△CGV’s timetable showing the disparity between big-budget films and independent films

ⓒScreen-captured from CGV Webpage

 

 Low-budget movies virtually have no chance against big-budget movies. The latest hit low-budget Korean film, Park Yeol (Anarchist from Colony), was fairly successful—it placed number one at the box office ranking for a whole week. The movie also proved its cinematic quality, receiving much praise from the critique and the actors starred in the film being revalued as well. Yet the film was assigned to only 917 screens on its premiere and 1,176 screens in its prime, while Transformer: The Last Knight had 1,739. Despite the large gap of the number of occupied screens, Transformer: The Last Knight only sold 570,000 more tickets. Likewise, regardless of the film’s quality and competence, cinemas nowadays are deciding the number of screens allotted to each movie by the scale of production and investment. Also, movies that can easily receive investment are usually the ones produced by a renowned director, which can result in the industry relying on a few prominent figures. No rookie director would receive attention, nor achieve success in the box office. This, in turn, would work as an obstacle in the future film industry by frustrating the careers of new directors.

 

Movements for Resolution

To settle this rising problem, the Ministry of Culture, Sports, and Tourism announced measures regarding the monopoly in the film industry on June 30. Their proposal can be summed up into three main clauses; ban on managing screening and distributing films simultaneously; limitation of the screen occupancy rate; and a minority quota system. Among those, the limitation of screen occupancy rate is already being implemented in France under the name of minority quota system. It limits the screening of each film up to 30% of the total screens, so that independent films and art films could be screened at a certain rate. The problem of screen monopoly has been addressed for a long time, but it is the first time where efforts to deal with the issue through legal regulations were performed.

 Major film entertainment companies, however, are refuting such efforts. They first argue that foreign companies, such as China’s Wanda, are dominating the culture and entertainment industry worldwide as they expand their size. Therefore, dissolving affiliates during this time can bring about domestic businesses falling into the hands of foreign enterprises. They also claim that it is unconstitutional to enforce a legislation that can threaten a company’s property rights. Lastly, major film entertainment companies points out market principles; blockbusters and films by famous directors are likely to succeed in the box office, so it is natural that the number of screens reflect the demand for popular films.

 Nonetheless, protecting art and independent films is essential to guarantee the viewers more options. Local governments’ effort to protect art films is vital to resolve this issue. For example, Busan City Hall has been aiding 70-80% of the total budget of Busan Cinema Center to support the independent film industry, considering Busan Cinema Center as a public facility. Thanks to their dedication, over 60,000 Busan residents are annually benefiting from the policy. It is impossible for big-budget films and art films to compete under the same conditions in a perfectly fair way since cinemas cannot ignore the profits that popular films might bring. That is why there should be a government’s intervention to protect the art films as in the example of Busan. To restore consumer rights as well as protect valuable art films, certain actions should be implemented to put an end to the monopoly in cinemas.

 

Kang Min-ji (Culture Reporter)

bee813@sogang.ac.kr


강민지  bee813@sogang.ac.kr
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