Korea at the cutting edge

After several lacklustre years, the South Korean production sector is bouncing back. The territory has enjoyed a strong presence at this year’s major festivals including Cannes with films such as Lee Chang-dong’s Poetry, Im Sang-soo’s The Housemaid, Hong Sang-soo’s Hahaha, Kim Ji-woon’sI Saw The Devil and newcomer Jang Cheol-soo’s Bedevilled. The films closed a slew of healthy sales to multiple territories including Japan, the UK, Taiwan, France, the former USSR, Spain and the US.

At the more commercial end of the spectrum, Korean War movie 71: Into The Fire sold to major territories including the UK, Japan and Germany while CJ Entertainment sold English-language remake rights to Park Chan-wook’s Sympathy For Mr Vengeance to Warner Bros earlier this year.

Even with the Korean box office posting record grosses in this year’s third quarter, the industry is getting serious about controlling production budgets as it adjusts to a more sober economic landscape following several giddy years of ballooning sales to Japan and blind investment money pouring in from the stock market. According to a report presented at a recent Korean Film Council (KOFIC) forum, average production budgets peaked in 2007 at $3.8m (won3.5bn) and in 2009 were around $2.7m (won3.1bn).

Against this backdrop, subject matter appears to be diversifying.

Shift of focus

“Profitability has gone down and the number of films getting investment has gone down drastically, and so a lot of interest has been focused on small and medium-sized film productions,” says Kang Hye-jeong, president, Filmmaker R&K, which produces films such as her partner Ryoo Seung-wan’s The City Of Violence and Kwon Hyuk-jae’s recent Troubleshooter.

“Fortunately, compared to 2008 and 2009, I feel like the situation for producing in 2010 has become much better. In particular, compared to before, investors are taking a great interest in so-called big-budget films of won6bn ($5.4m) and over, focusing on films with commercially strong concepts,” she says.

Most Korean film-makers go to investor/distributors such as CJ Entertainment, Showbox Mediaplex and Lotte Entertainment for funding. These companies are also involved in film funds which are invested in primarily — but not exclusively — by related industry entities such as exhibitors, telecoms and home-entertainment companies. Some believe this inter-related approach is one reason for conservative financing.

“The financing system creates less of an incentive for funds to invest in new independent film-makers and their films, which is why film-makers always seem to be complaining there’s no money to be had,” says Andy Kim, a veteran of film investment who is content team director at M-Venture Investment.

“There’s actually plenty of money. It’s the investment structure that’s keeping it from getting to newer people.”

He also points out the government’s way of choosing funds to sponsor also prevents an accumulation of know-how in investors. The government, through entities such as KOFIC or the Fund of Funds, will put in money — usually seed money — for a film or media-related fund, with the set-up usually made so the government will take losses first and profits last. Fund managers receive a fee to operate the fund one way or another, so it benefits them to create new funds.

Trial and error

“The history of film funds in Korea is only about 10 years old. You learn from trial and error, and trial and error means you will see losses over a certain number of years. But instead of looking at learning curves, the government chooses to finance funds only on the basis of their having seen fewer losses — possibly not even investing in films much — so it propagates the cycle of trial, error and error when it comes to film funds,” he says.

Lee Joo-ick, CEO of Boram Entertainment and producer of international co-productions such as Battle Of Wits, noted at a recent KOFIC forum that Korean films and producers still have a hungry edge which keeps them competitive.

“In Japan, everything is financed by production consortiums, where everyone shares [in decision-making] and the risk is hedged. But because of the tendency to minimise risk, it’s harder for big, major works to come out. But Korea is different,” he says.

Compared to Japan’s production consortium projects, more responsibility is placed on the film-maker’s shoulders regarding artistic and production decisions and there is less of the Japanese industry’s marketing co-ordination, which reduces risk.

“Acute win-or-lose situations are not necessarily desirable. But I think it’s because of a sort of extreme need to survive that major works come out of Korea,” says Lee.