Movie chains eat dirt from pricey tickets and box office bombs

Korea’s multiplex chains are faltering as moviegoers turn their back on cinemas amid high ticket prices and the absence of tolerable low-budget films. The rise of streaming platforms during the pandemic is also playing a role.

Moviegoers visit a cinema in downtown Seoul on July 2. [YONHAP]

Korea’s multiplex chains are faltering as moviegoers turn their back on cinemas amid high ticket prices and the absence of tolerable low-budget films. The rise of streaming platforms during the pandemic is also playing a role.

CJ CGV, a movie theater chain with the largest market share, is looking to break through the crunch via a large-scale paid-in capital increase. The company announced on June 20 that it will raise capital worth 1 trillion won ($785 million) by selling its own stock and that of other CJ Corporation subsidiaries.

CGV’s board decided to issue 74.7 million new shares, worth 570 billion won, at a price of 7,630 won per share. The value of these new shares surpasses CGV’s market capitalization of 458 billion won as of Monday, and the number of newly-issued shares is 1.5 times the number of shares currently in the market.

This type of announcement forecasts a dilution in equity worth, plunging the CJ CGV stock price to below 9,000 won from around 14,000 won. It recovered to 9,000 won on July 10 but is still more than 30 percent cheaper than what it was worth last month — and even cheaper than the price of a movie ticket with an early bird discount at 10,000 won.

CJ CGV last traded under 10,000 won in 2008, according to Korea Exchange data.

Its two main competitors, Lotte Cinema and Megabox, face a similar financial plight.

The debt ratio of Lotte Cultureworks, Lotte Cinema’s operator, reached 3,475 percent at the end of last year. Megabox JoongAng, which runs Megabox, had a debt rate of 1,138 percent.

CJ CGV’s debt ratio was at 816 percent during the same period.

Lotte Cinema and Megabox, both unlisted, have fewer options than CGV to raise money.

“An emergency transfusion [of capital] is inevitable should the two fail to make up for their losses incurred during the Covid-19 pandemic,” a movie industry source told the JoongAng Ilbo.

The root cause of the multiplex chains’ crisis is the shrinking number of moviegoers despite the lifting of Covid-era regulations.

Unlike the service and tourism industries which found a breather after the government lifted social distancing regulations in April last year, theaters are still waiting to see their audience numbers recover to pre-pandemic levels.

Around 21 million movie tickets were sold in the first six months of this year, according to the Korean Film Council (Kofic) statistics. The figure rose above 20 million for the first half of 2020 but is only 38 percent of its performance in 2019, when nearly 57 million tickets were sold between January and June.

Movies released this year failing to succeed at the box office also intensified the movie industry’s slump.

Kofic data showed that of all the movies released this year, only 12 films sold more than 1 million tickets as of Monday.

Five films — “The Roundup: No Way Out,” “Suzume,” “The First Slam Dunk,” “The Guardians of the Galaxy: Volume 3” and “Elemental” — beat the 3-million mark, considered the break-even point for commercial movies. There were eight or nine films that sold more than 3 million tickets before the pandemic.

Industry sources say the absence of “average” films, or ones created by small- and medium-sized production companies on a relatively small budget reaping moderate success, accounted for the drop in audience numbers.

“Movies made by small- and medium-sized producers with 3 to 5 million ticket sales need to come in between blockbusters to keep audience numbers steady and help keep the theater industry going,” an industry source said.

“The problem is that they’re turning up as flops.”

For moviegoers, the rise in ticket prices is also a strain, with movie ticket prices in Korea spiking around 5,000 won on average in the last three years.

Of the 4,031 people aged between 20 and 59 surveyed by survey platform Tillion Pro in May last year, 38 percent said they have not gone to a movie theater for more than six months. Three out of four people said they may consider returning if prices go down.

A poster for ″BTS: Yet to Come in Cinemas″ [CJ CGV]

Multiplex chains are implementing various methods to escape the predicament, such as building more special movie theaters with larger screens and better sound; utilizing the space as concert and exhibition halls; and showing films targeting fanbases.

CJ CGV screened “BTS: Yet to Come in Cinemas” in February. The documentary film about the boy band’s concert in Busan had a reservation rate of over 50 percent right before its release, the highest among all movies in CGV cinemas for that period.

A movie about popular trot singer Lim Young-woong, “IM HERO The Final” that was released in March, garnered 5.6 billion won in sales.

“The demand for movies may [...] rise on the back of domestic and overseas tentpole films,” Korea Investors Service, an affiliate of Moody’s Investors Service, said in its report on the multiplex chain trio released in May.

Homemade films “Smugglers,” “Concrete Utopia” and “The Moon,” as well as Hollywood’s “Mission: Impossible – Dead Reckoning Part One," “Oppenheimer” and “Dune: Part Two” will be premiered in the latter half of the year.

BY PARK KUN [sohn.dongjoo@joongang.co.kr]