Bong Joon-ho's record-breaking creature film "The Host" may look, in retrospect, like a no-brainer investment decision. But at the time producer Choi Yong-bae of Chungeorahm Film was assembling finance for the film, it was seen to involve serious risks.
"If it had been based on a different subject, then it would have been really easy to find finance, given the director's name and the cast," Choi notes. Nonetheless, the film that was first described by the director as "Nessie in the Han River" would require digital effects the likes of which had never been attempted in Korea.
"Normally in Korea investors wait for casting to be confirmed before committing to a project. In this case, they were waiting for the contracting of an effects company, and to see actual CGI footage," Choi says.
As a midsize distribution and production company, Chungeorahm was able to function as the main investor for the film, providing cash to keep the project running from its early stages of development in spring 2003 to the start of pre-production in spring 2005.
Structured as a separate project within Chungeorahm, without creating a special purpose company, the film did not make use of bank loans, and so no completion bonds were required.
Ultimately it was Japanese investor Happinet Corp. that was first to commit to the film, signing a deal at 2005's Filmart that provided a $3.2 million minimum guarantee for Japanese rights plus $1.5 million in investment finance.
"Happinet's commitment made a big difference, and it also helped to give local investors confidence in the film," Choi says.
A total of 20 partial investors would join Chungeorahm on the project, signing on throughout 2005 as the film was being shot, right up until June 2006, a month before its local release.
The investors fall into four categories:
- venture capital companies such as K&C Ventures and IBK Capital, which invest through film funds;
- film-related companies such as distributor Showbox and production house Tube Pictures (which was not involved in the production);
- companies seeking to secure ancillary rights, such as sales agent Cineclick Asia, broadcaster SBS and cable station OCN;
- and individual investments made by at least one of the film's actors.
The scale of investment ranged from a high of $2.46 million to a low of $107,000, with the most common amount being $535,000.
After selling just over 13 million tickets, "The Host" will produce a rate of return for its investors of 218%. Astoundingly, in another market, the film may have stood to produce an even higher profit; however, revenues were constrained by the weakness of Korea's ancillary markets, in particular DVD.
MONSTER NUMBERS
Initial profit estimates for "The Host":
Total theatrical revenues: $97 million
Theatrical revenues, minus exhibitors' share and 10% tax: $38.5 million
International sales: $5.9 million
TV rights: $3.3 million (pending)
Video/DVD: $650,000
Product tie-ins/VOD: $540,000
Total revenues: $48.9 million
Total budget, including P&A costs: $15.4 million
Profit: $33.5 million, for a rate of return of 218%
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