Megabox to merge with Lotte Cinema as box office industry looks for turnaround

The operator of Megabox, Korea's third-largest theater chain, will merge with the owner of Lotte Cinema, the country's second-largest chain, as the domestic box office industry continues to struggle against online streaming platforms.

Customers at a Megabox branch in Seoul on March 30 [YONHAP]

The operator of Megabox, Korea's third-largest theater chain, will merge with the owner of Lotte Cinema, the country's second-largest chain, as the domestic box office industry continues to struggle against the growing dominance of online streaming platforms.

JoongAng Group announced Thursday that it signed a memorandum of understanding (MOU) with Lotte Group to merge Lotte Cultureworks and Megabox Joongang, an affiliate of the Korea JoongAng Daily.

Lotte Shopping currently owns 86.37 percent of Lotte Cultureworks, while JoongAng Group holds 95.98 percent of Megabox Joongang. Under the deal, the firms will create a joint venture to operate the two movie businesses. A Lotte spokesperson declined to disclose the joint venture’s shareholding structure.

The firms’ merger will need to undergo a review from the Fair Trade Commission. They plan to proceed with the review and secure new funding for the venture “as soon as possible,” Lotte said in a press release.

A moviegoer looks at posters at Lotte Cinema's branch in Lotte World Tower at Songpa District, southern Seoul. [NEWS1]

The merger comes amid hard times for the movie industry in Korea, which has not recovered from the Covid-19 pandemic slump.

Theaters, in particular, have struggled as they compete with online streaming services. Korean box offices made $875 million in ticket sales in 2024, down 6 percent from the previous year, according to the Korean Film Council. This amounts to only 53.3 percent of box office sales recorded in 2019.

Korea’s film and video industry grew by 4.1 percent on year in 2024. While Korea’s box office sector, including ad revenue, contracted by 5.5 percent on year in 2024, the online streaming services sector grew by 11 percent.

Lotte said the merger with Joongang would help secure sustainable growth revenues and create competitive customer-oriented services by using the two firms’ combined resources. Megabox Joongang and Lotte Cultureworks also produce and distribute films in addition to operating theater chains.

The joint venture will integrate the firms’ resources in marketing and cut out redundant investments or operating costs to improve profitability, and will secure additional funding to improve its finances, Lotte said. The secured funds will be used to build premium theaters and content for online streaming services.

The joint venture will also invest in new content that builds on the two firms’ existing intellectual property.

“This MOU is aimed at combining the strengths of both companies to enhance business competitiveness and financial soundness, while delivering a differentiated customer experience,” a Lotte spokesperson said.

“Through the merger, we will strive to broaden content diversity, improve audience services and have a positive impact on the overall film industry ecosystem.”

BY KIM JU-YEON [kim.juyeon2@joongang.co.kr]