Sun cooling on Korea
Star-driven underperformers slow Japan buying
In recent years, South Korea's booming film industry has made full use of its ties to Japan, a $1.7 billion market where Korean actors and entertainers have enjoyed a sudden and unprecedented burst of popularity. It has not been uncommon to hear of Korean films picked up by Japanese buyers for minimum guarantees of $3 million or $4 million, even as high as a rumored $7 million for star vehicle "April Snow" which, riding on publicity generated by superstar Bae Yong-joon, went on to earn a cool $23.7 million during its 2005 release through UIP Japan.
Nonetheless, the mood has shifted this year, amid increasing signs that Korean cinema's party in Japan may be over. The Cannes Film Market was unusually quiet for Korean sellers, with only a couple titles picked up for Japan at modest prices compared with the recent past. A report issued this summer by the Korean Film Council confirmed what many had suspected: Total exports in the first half of 2006 plunged from $41.8 million to $17.4 million, a 58% drop. Although numbers were down in all territories except for China and Thailand, it was the drop in exports to Japan that drew the most notice, falling from a massive first-half total of $31 million in 2005 to $8.7 million in 2006.
Buyers' newfound caution comes in the wake of box office disappointment for many high-profile spring releases in Japan, including noirish thriller "Running Wild," melodrama "Now and Forever" and big-budget action pic "Typhoon," all of which were sold in the $3.5 million-$4 million range. Such films were packaged as projects that would appeal to Japanese viewers due to their star power. However word of mouth in Japan has generally been weak for these and other "tailored" products.
In some ways, the weakening of Korean film exports to Japan can be viewed as a process of rationalization, rather than the sudden bursting of a bubble. "Many Japanese companies have been acquiring data on the successes and failures of Korean films in Japan, and now they want to apply that to their purchases," says Soojin Jung, General Manager of Intl. Business at Korean sales company MK Pictures.
"It's also becoming harder for Japanese distributors to book Korean films into theaters, so it's natural that their purchases would decrease."
Privately, many Korean sales agents also admit that charging high minimum guarantees, while profitable in the short term, has made it excessively hard for buyers to turn a profit, and so many are looking elsewhere. Those that do remain interested in Korean titles are moving towards new business models, often involving co-investment or co-production. For its part, Happinet Pictures pre-bought Japanese rights to monster hit "The Host" for $3.2 million, but also invested $1.2 million in the film's budget, which will net it significant returns on the heels of the pic's record-breaking Korean release.
Another reason for Japanese buyers' struggles to break even with Korean titles may lie closer to home. Japanese cinema has been undergoing a commercial revival in 2006, with strong investment from TV networks helping to boost the scale and technical achievement of local pics. Some observers predict that, powered by hits like "Umizaru 2 -- Test of Trust" and "The Sinking of Japan," local market share will break the 50% barrier for the first time since 1985. Inroads made by films from other parts of Asia are also putting pressure on Korean releases.
Not all Japanese buyers are down on Korean pics. "There are still a great number of fans of Korean cinema in Japan, and I think certain titles will continue to do well," says Ryuta Hattori, manager of IR and PR at Gaga Communications, "We'll be releasing "Sad Movie" this fall, and we expect it will be a very strong title for us."
Gaga itself holds the record for Korean releases in Japan, with "A Moment to Remember," which earned $24 million late last year.
Nonetheless, as expectations for Korean films' performance in Japan settle to more reasonable levels, Korean film companies are grappling with continually rising budgets that are threatening the bottom line. Although Korea's theatrical sector remains buoyant, flimsy ancillary markets and a lack of growth in other overseas territories may force a round of belt-tightening in Seoul.
"The situation that all of us were fearing has now come true," says Jung. "I don't think it will be possible to recreate the sales boom of the past few years, but I hope as an industry, we take this as an opportunity to co-operate with buyers and to make better, more diverse films."
