Friday, December 29, 2006

Embarrassment of Riches:
Korean Movies 2006 Wrap-Up

What do you call an industry that has grown twelve times over the past decade? If you are a Korean filmmaker, you would call it "in trouble." Seriously. Despite the huge strides made by the Korean movie business over the past decade, just about everyone I talk to these days is convinced they are in big trouble.

How is that possible? Producers and investors will tell you that although the industry as a whole is raking in more money than ever before, in fact the average film is doing worse. They are making less money in home video, making them more sensitive to cinema revenue. But the entire Korean movie industry made less than $50 million at the box office 10 years ago (and less than $30 million back in 1993). In 2006, it made over $600 million. So who is right?

Let's take a more careful look at the numbers. The box office for Korean movies over the past three years has grown steadily -- from $542 million in 2004 to $567 million in 2005 to about $660-690 million this year (final figures are not in yet). However, the number of Korean films released each year has also risen, from 72 to 79 to a stunning 118 this year (that is the most number of films made in a year in Korea for 30 years). Take the mean average and you get $7.53 million in 2004, $7.18 million in 2005 and $5.85 million in 2006.

But it gets worse than that. Like figure skating, you should not let the best and the worst skew results too much. So let's knock off the top two movies from each year. In 2004, that is SILMIDO and TAEGUKGI. In 2005, that is WELCOME TO DONGMAKGOL and MARATHON. In 2006, KING AND THE CLOWN and THE HOST.

The new means are:
2004 - $5.53 million
2005 - $6.11 million
2006 - $4.40 million

Yikes! That looks pretty bad. Especially considering how production and marketing costs have kept rising.

Looks, however, can be deceiving. First of all, mean average is not a great statistic. Pretty much everyone agrees that far too many films were made this year, and next year the number should return back closer to 80 or so. Also, life is about far more than averages. We are capitalists, dammit, and free markets are about winners and losers. And the pattern of winners has changed a lot.

Using just Seoul numbers... (I have more handy numbers available just for Seoul, but the pattern works nationwide... nationwide attendance is usually about 3.5 times the Seoul number).

In 2004, we had:
1 Korean film with over 3 million attendance in Seoul
2 films over 2 million
3 films over 1 million
16 over 500,000
36 over 200,000

In 2005 we had:
0 over 3 million
1 over 2 million
6 over 1 million
13 over 500,000
32 over 200,000

In 2006:
2 Korean films over 3 million
3 over 2 million
6 over 1 million
16 over 500,000
33 over 200,000

What do we see? A slight swelling in hits, both at the mega-hit level and the hit level. Almost no change at the moderate level. Which means that there are more money-makers than ever, and as many successes... but the vast majority of those new productions have ended up in the toilet, with lousy attendance.

So what we have is a PRODUCTION problem. Film companies are making too many crappy films that no one cares about. And, as a first-year economics textbook teaches, they are getting weeded out. Successful filmmakers are getting rewarded and bad filmmakers are losing their shirts... which is how an economy is supposed to work.

Backing me up, I would rhetorically ask how many really good films were released in the last year that did not find an audience? Hong Sang-soo's WOMAN ON THE BEACH did not do great, but Hong is not a mainstream filmmaker. Same with Song Il-gon's MAGICIANS. But plenty of terrible films made far more money than they had any right to (I'm talking to you, TUSABU ILCHAE).

As for ancillary revenues... Yes, the lack of a DVD market in Korea is brutal. However, I would not overstate how big the home video market used to be. Sure, in the mid-1990s, filmmakers could get 50-60% of their costs back from home video... but average production costs were well under $1 million back then. What really happened was that the film industry has grown up but home video has not kept pace.

I would feel a lot worse for filmmakers if every subway station and corner in the nation was not occupied by some dufus selling pirated DVDs. Duh! Especially since the Korean police just received ex officio powers to enforce intellectual property rights last fall, there is no reason for a country as modern and successful as Korea to have such a ridiculous and pitiable piracy problem. Really... it was one thing when Korea was ripping off the rest of the world. Now, piracy is killing its home market. This is a local problem with a very obvious local solution.

Another part of the problem, of course, is a certain innate pessimism you find just about everywhere in Korea (which, if you are interested in, you should check out Hahm Pyong-choon's great essay, "Shamanism and the Korean World-View", in Shamanism: The Spirit World of Korea). In all my years in Korea, I have never heard people tell me that it was a good year for the film industry.

What's next? Well, that is the million-dollar question, isn't it? But I am actually pretty optimistic, for a few reasons. I think the over-production problems is going to solve itself fairly quickly and naturally. I also see a good future for the other biggest problem -- diversity.

A lot of people have complained (correctly) that the Korean film industry has gone to the same wells too many times over the past couple of years. But I think that is changing.

Park Dong-ho, the CEO of the multiplex chain CJ CGV, once told me that he thought Korea had a real diversity problem, but it was a question of demand and supply. At the time, the nation simply had too few screens. In 1996, there were less than 500. When I talked to Park, we were over 1,200. Today, there are around 1,800. Park said that once Korea had over 2,000 screens, diversity would take care of itself. Right now, there are too few screens chasing the biggest hits, so every theater wants the same movies. But as you top 2,000 screens, you begin to get a situation where the same-old-same-old gets less and less profitable. Gradually, being able to distinguish your product becomes more important, having a better selection than the neighboring theaters. I think the success Sponge House has been having is the first signs of the trend.

Similarly, I think some of the studios are beginning to get it. CJ and Nabi Pictures signed a deal last year to start making around five low-budget, HD action movies a year. Brilliant. Think of how many great directors in the West got their start with Roger Corman or other low-budget outfits. Think of Robert Rodriguez or Del Toro's PAN'S LABYRINTH. Low budgets mean freedom. Freedom to play around, try out new things, now talent. Developing a solid network of low-budget movies could be just what Korea needs to jump-start its creativity once again (kind of like the economic crisis of 1997 did).

So. Sorry to be so long-winded. But I think I have made a fairly clear case that the Korean film industry is in fact doing well... Riskier, but also with more rewards for the best. (Yes, I know "best" is a loaded term... but I advisedly use it nonetheless).

UPDATE: Somewhat similar trends seem to be befalling Japanese cinema. Check it out over at Hoga Central (relevant stuff begins around the fourth graph or so).

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