Posted: Sun., Mar. 12, 2006, 5:00am PT

Pic biz seeking a Seoul mate

Flush with cash, Korea woos Western partners to spread its culture abroad

By Patrick Frater

HONG KONG -- Ten years ago, the Korean film biz was a small cottage industry. Now, it's grown to a major force, challenging Hollywood's dominance as two-thirds of local box office goes to Korean fare.

Korea's theatrical market exceeds Germany's, with a total B.O. of $890 million in 2005, making it the fourth biggest foreign territory for pics after the U.K., France and Japan.

And the growth spurt isn't stopping.

After successfully exporting its films to Japan, the wealthy Korean film biz -- cash-rich from investments in TV, mobile phones and more -- is expanding its horizons, searching for profit opportunities and partners in the West.

• Agents from CAA are pursuing stars like Jang Dong-gun, whose stock market-listed production company has a capitalization of some $80 million. "Typhoon," a maritime heist actioner starring Jang (who, though handsome, doesn't speak English), will be released in the U.S. through DreamWorks -- the first Korean pic released by a U.S. major.

• In the last year, Korean firms have all but stopped selling remake rights. With second-to-none production skills, they are instead upping the number of locally made English-language films and are seeking long-term alliances with Hollywood to distribute Korean pictures. Sony, Warner Japan and Gold Circle are just a few of the companies talking about Korean production and distrib deals.

  Pics range from English-language fantasy actioner "D-Wars," now set up at Showbox, to $20 million U.S.-Korean biopic "The Julia Project," which is being co-developed with Focus Features.

  • Korean production companies looking for Hollywood-style effects are going straight to the source. The Chungeorahm shingle contracted with a leading San Francisco f/x house, the Orphanage, for its $15 million "The Host," a buzzed-about horror pic that's being tracked by U.S. studio specialty divisions.

  While Korean firms look for partners who can help them branch out of Asia, Americans are eager to put down roots in Korea. New Line has explored a partnership with deep pocketed-Taewon Ent. (though its first Korean-language collaboration, "The Shadowless Sword," was a flop).

  Korean congloms make attractive partners for U.S. firms, who hope they can re-open the doors to a movie-mad market that has largely become closed to exports of U.S. indie fare.

  Though Westerners may think Korea's film industry consists only of horror and gangster pics, the 75 features each year run the gamut of styles. The great strength of Korean film sector in the last decade has been its ability to reinvent familiar genres, retooling old staples with an edge that echoes the country's gutsy and respectfully in-your face attitudes.

  Female auds have been served with "You Are My Sunshine," a rural AIDS drama; and "My Boyfriend Is Type B," a romantic comedy with its starting point the phenomenon of blood-group dating. Meller "April Snow" delivered the triple play of housewives' heartthrob Bae Yong-joon, untimely illness and adultery.

  Male auds last year rallied to 19th century saber-rattler "Blood Rain" and "Typhoon," starring Jang.

  The biggest hits of 2005 were those dramas that worked across multiple demos; an autistic boy who could not stop running in "Marathon," or a village stuck in a Korean War time warp in "Welcome to Dongmakgol." "Oldboy" helmer Park Chan-wook banked another $25 million by lowering the hemoglobin content and ratcheting up the tension in "Sympathy for Lady Vengeance."

  Forty years ago, the government imposed screen quotas to protect the fledgling industry from Hollywood.

  Now, with local films flourishing and Korea seeking a bilateral trade agreement with the U.S., the government has bowed to Stateside pressure and halved the quotas -- cinemas must show Korean films 73 days out of the year.

  Since the brakes of censorship and the dead hand of state intervention were lifted, Korean film has attracted huge amounts of capital. "Raising money is no longer the biggest problem for producers. Independents now have the means to compete with major congloms like CJ and Showbox. They can then pick and choose their distributors," says Suh Young-joo, prexy of the country's sole indie sales outfit, Cineclick Asia.

  Today, Korean film has its own major studios -- CJ, Orion/Showbox and the increasingly influential Lotte Cinemas -- and credibility with capital markets. Korean film now recruits from the top ranks of university graduates, and ranks alongside electronics, biotech and finance in terms of prestige.

  The country now regularly receives delegations of filmmakers and bureaucrats from other parts of Asia, hoping to learn how Korean movies grabbed an unheard-of 60% share of their home market.

  Sales strategy

  With boffo results at home and in Japan, Korea now desperately needs the kind of partners that will help it access China, Europe and the U.S.

  Korean legislators were happy to trade the country's screen quotas for a generic, MPA-sanctioned bilateral trade agreement with the U.S. But what they really need is more clout within the Hollywood system.

  The inflow of cash and inflation of production budgets have outstripped growth at the local turnstiles, so the need to balance the books through exports is urgent. For the last couple of years, astronomically priced license deals to Japan have prevented a crash, but there is a very real need to find markets further afield.

  The Korean film boom took off five or six years ago thanks to boffo dramas including "Shiri," "JSA" and "Friend," which each sold millions of tickets. Companies like CJ, a commodity foods group with connections to Samsung, and confectioner Orion were encouraged to accelerate their expansion into multiplexes. They soon diversified into distribution and production finance, supporting films across a broad range of genres and becoming local congloms that, as theater owners as well as producers and distribs, wield even more influence than the likes of Universal and Warners in the U.S.

  The cash-rich companies have kicked off a complex mix of corporate maneuvering. Last year ended with publicly listed movie companies including Poibos, K & Entertainment, Nubotek, Popcorn Film and MKB. This year, others will likely join their ranks.

  Already, arthouse shingle LJ Film has announced it is reversing into a listed subsidiary of Innotz, multiplex operator Lotte is floating on the London and Seoul bourses, and a string of other IPOs is expected.

  There is also a strong market for secondary equity: Last year saw Korea Telecom pay Won 28 billion ($2.9 million) for a 51% stake in Sidus FNH, while rival telco SKT grabbed 22% of iHQ. That company quickly used the status of its KOSDAQ listing to make an $18 million grab for a couple of cable TV nets. The year 2006 has also seen CJ buy back some of its separately listed divisions and U.S. exhib chain Loews sell its 45% stake in Showbox for a cool $70 million.

  Another factor in the Korean boom is the involvement of the cell phone companies, which could make Korea the world leader in convergent entertainment. CJ already owns NetMarble, a global giant in Internet games. Now SK and Korea Telecom have both launched mobile TV (DMB) platforms and are so hungry for content that in addition to corporate investment in production shingles and talent agencies, they are also putting money directly in filmmaking.

  Although it's flush with cash, the biz will need to confront several brewing problems in order to best benefit from international partnerships. Online piracy, lack of producer control and exhibition terms are three areas in need of consideration.

  Some pessimistic voices warn that there is a disconnect between filmmakers and those making money. Growing industrialization of the sector could narrow the range of film genres being produced and endanger the country's top talent pool.

  Richest parts of the industry are the exhibs and an elite layer of TV-launched talent, which is increasingly able to strike rich deals and simultaneously threatening to move into production through films commissioned by their managers and talent agents.

  Jonathan Kim, head of the Korean Film Producers Assn. (KFPA), says the average Korean film loses $500,000, while multiplex operators enjoy revenue growth of 20% per year.

  "We have begun talking to the exhibitors about a change to the rental terms," Kim says. "Next we will be addressing downloaders and pirates where money is simply being lost from the industry." He and others also have their fingers crossed that DMB could provide a revenue stream that makes up for Korea's lack of a homevideo industry.

  Korea's media biz is clearly in a growth spurt, but it could be quite a while before it starts to act more mature. "The trouble with the Korean industry is that it looks like a teenager, but in fact it is still just a 12-year-old kid," Kim says.