Is DVD dea d in South Korea?
Auds flock to cinemas but stay away from discs
Korea's theatrical sector is booming: In 2005, the market passed Germany to become the world's fifth-biggest at close to $900 million, and in the first half of 2006, it saw a further 29% growth in admissions.
But paralleling the dilemma in some European countries, the DVD sector has shown virtually no growth in the past four years. This year, Universal and Paramount decided to abandon the market, and all signs point toward further decline.
"There are many reasons for the weakness of DVD in Korea," says Peter Woo, managing director of Sony Pictures Home Entertainment, which has taken over distribution of U's titles. "We've been working hard to turn things around, but it's been difficult."
The most frequently cited reason for DVD's stunted growth in Korea is piracy. With some of the fastest broadband connections in the world, capable of downloading a DVD-quality feature film in 30 minutes, a widespread downloading culture has emerged among young Koreans. At the same time, the government has turned a blind eye to scores of vendors selling pirated DVDs in subway stations and on street corners throughout Seoul.
Yet there are other factors as well. "New media have proliferated so quickly in Korea that DVD is being pushed out," says Woo. "Young people's heavy use of mobile devices and the Internet have both had an effect on DVD sell-through and rentals. We're particularly concerned about the launch of IPTV, which may take place next year, as it will expose customers to a huge number of additional movie channels."
Cultural factors may play a role as well: Young Koreans tend to socialize outside of the home and have less time and spending money than counterparts in Western countries. "DVD rooms," where couples can rent a private room to watch a disc together, are common in major cities, but even these are said to be in decline.
The statistics are sobering. In 2005, revenues for sell-through DVD added up to only 63% of the VHS rental market -- despite years of steady decline in the latter. While top-performing films can sell up to 10 million tickets in theaters, even major DVD releases such as "King Kong" struggle to sell 30,000 units. Not including game consoles, only 20% of Korean households currently own a DVD player, and consumer spending on DVDs has been virtually flat, inching up from $77.9 million in 2003 to $78.9 million in 2005. Meanwhile, as prices are slashed in a bid to create more customers, distributor revenue has fallen from $46.7 million in 2003 to $35.5 million in 2005.
Major distributors of DVDs such as Warners, Sony, BVI, Fox and the locally based Taewon have tried various strategies to draw in more customers, including targeting discount stores such as WalMart and the leading Korean retailer, E Mart. Nonetheless, revenue remains low, and store managers are reluctant to grant DVDs much floor space.
"Most discouraging, perhaps, is the fact that our catalog sales have not performed up to expectations," says Woo. "All the major companies have introduced steep discounts, but sales have still not picked up."
Warners, for its part, has pacted with local broadcaster MBC to sell legal permanent downloads of films and TV series beginning later this year -- an effort to win back some of the losses from Internet piracy. Other branch offices in Korea will relegate downloads to their TV divisions, based in Hong Kong.
Amid the gloom, distributors are pushing ahead with the launch of Blu-ray and HD DVD, hoping to entice the growing number of customers with high-end flatscreen televisions. Blu-ray would appear to have the initial leg up, as local powerhouses Samsung and LG will release Blu-ray players by summer's end. Toshiba remains the lone hardware manufacturer in Korea aligned with HD DVD.
"Starting in late August, Sony plans to release four to five Blu-ray titles per month, following the schedule in the U.S.," says Woo. "I really think that once people see the incredible quality of these discs, they will have to own them themselves."
