Korea’s digital market gives industry hope

South Korea’s rapidly growing digital online market is giving its film industry hope for new revenue sources after the slump of video and DVD rentals in the early ‘00s. The market has more than tripled from $87.5m in 2009 to $263.7m in 2013, according to the Korean Film Council (KOFIC).

At the KOFIC Industry Forum in Busan, Joon S. Im, director of Channel 1 Division at major conglomerate CJ E&M, said: “We’ve stopped calling it the ancillary market and are calling it the digital distribution market. This comes from the thinking that theatrical distribution and digital distribution should be discussed on the same level.

“The ratio between theatrical [revenue] and digital is 8:2, so theatrical is always still important. But if before, the ancillary market was thought of as something that was just added on after all your money was made at the theatre, nowadays the discussions over selection and marketing on IPTV have gotten vigorous.”

He went on to say digital online has become a serious consideration at the investment stage and that sales data needs to be shared in further detail to help films, especially of the small-to-mid-budget type.

Lee Hyun-Myoung, CEO of production company Greenfish, said: “We want to know when we make a film and the investors make a certain amount of money and we get a share, how much will that be?” Greenfish produced Secret, the remake rights of which were sold to Hollywood, and local box office hit The Suspect, which has screened in over 20 countries.

Lee added: “The statement of accounts usually comes to us as just about two Excel sheets. You get the theatrical revenues based on the integrated ticketing system, overseas export figures, and sales to public TV, which is based on how much a film did at the box office. So there’s transparency. But there is a thirst for IPTV and digital platforms data. We know the platforms get detailed data, but we get two to three or four cells’ worth of information in the Excel file.”

He went on to emphasise the necessity of an online integrated system so that production companies and investors could have transparency and trust, but also so that they could analyse and use data for directing their marketing strategies.

KOFIC chairman Kim Eui-seok declared at the beginning of the forum that the governmental organisation would “spur on” the creation of an integrated market data system for VOD sales results. However, the speed of which this will be realised is still under examination.

Audiences still prefer watching films in cinemas

In the meantime, KOFIC has put out a survey of VOD user trends and preferences. In this 2013 survey of 1,000 VOD users aged 14 -59, 74.2% said they primarily chose to watch films at the cinema in the past year, while 7.7% said they used free file-sharing and download sites to watch films on TVs or computers.

Similarly, 7.4% said they watched films through subscription-based broadcasters and other channels on their TV, while 6.8% said they watched them on subscription-based broadcasters and paid VOD on their TVs.

But as a secondary choice for watching films, 25% said they watched films through subscription-based broadcasters and channels on their TV, while 24.4% said they used subscription-based broadcasters and paid VOD on their TVs. 19.9% said they used free file-sharing and download sites.

KOFIC interpreted this as significant in the sense that subscription-based channels, paid VOD and the internet were perceived as supplementary to cinema-going.

Action the preferred genre on VOD

Asked to pick their number one most preferred paid-VOD film content by genre, users picked action (23.7%), drama (17.3%) and then crime/detective/thriller (11%). The second preference was action (16.8%), sci-fi/fantasy/martial arts (15.%), comedy (14%) and then crime/detective/thriller (10.6%).

Going by multiple answers, action (17.5%) still ranked at the top, followed by comedy (12.8%), drama (12.4%), sci-fi/fantasy/martial arts (11.7%) and romantic comedy (11.3%).

So the most popular genres for paid-for VOD are action, drama, comedy, crime/detective/thriller and sci-fi/fantasy/martial arts.

Hollywood second choice to Korean movies

Asked which films they preferred first by nationality, 56.4% of users said Korean films while 27.3% said US films. 12.6% of respondents said they didn’t consider nationality. European films took 2% while Japanese took 1.1% and Hong Kong/China films took 0.5%.

When it came to secondary preferences, 55.5% went for US films, 26.1% Korean, 7.7% European, 6.3% Hong Kong/Chinese and 4.3% Japanese films.

When asked for multiple answers, users ranked Korean films highest with 32%, US films came next with 30.8%. European films took 12.4% and Hong Kong/Chinese 10.2% and Japanese 8.4%.

‘The rich get richer’

Back at the KOFIC Forum, panelists pointed out the top 10% of most popular content accounted for 87% of sales in 2013, only down 1% from 2012. Films that got more than 3 million admissions at the cinemas accounted for 29% of VOD sales in 2013, compared to 23.9% the year before.

Films that got 1 million to 3 million admissions accounted for 23.6% of VOD sales, down from 26% in 2012. All in all, the films that did more than 1 million admissions at the box office saw a small increase in VOD from 49% to 52%, and the experts opined this rise would continue steadily.

“It’s a case of the rich get richer and the poor get poorer,” said Bryan KIM, CEO of Indieplug, a producer/investor/distributor that specialises in independent films. “In a way, box office results are reflected directly in the digital online market,” he said.

Holdbacks and day-and-date releases

Park Dong Soo, senior vice president of Media Biz General Office at KT Media Hub, explained holdback periods are not set in stone but depend on the box office progress of a film.

“On average, a domestic film will start [VOD release] quickly at four weeks or slowly at six weeks [after theatrical release]. The guidelines say that you can call it a simultaneous release if the film is still on 50 screens or more, so that you don’t exaggerate or lie about the status,” he said.

Day-and-date releases are up to the content distributors, but are still being experimented with. There has yet to be any backlash from Korean cinema chains over day-and-date releases, unlike the situation in the US following the announcement that the Crouching Tiger, Hidden Dragon sequel would premiere simultaneously on IMAX and Netflix.

“But in Korea, theatrical accounts for such a big proportion for commercial films, it’s being looked at whether day-and-date services would really hinder box office admissions,” he said.