Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
Will Lotte Cinema-Megabox merger revive Korea’s slumping film industry?
People enter a Megabox multiplex cinema chain in Seoul, March 30. Yonhap
By Baek Byung-yeul
Will Korea's next cinema giant be "Lottebox" or "Mega Cinema"?
Lotte Cinema, Korea's No. 2 multiplex cinema chain, and its No. 3 rival Megabox have begun merger talks, a significant shake-up as the industry grapples with a prolonged downturn, hit hard by the COVID-19 pandemic and the rise of streaming platforms.
On Thursday, Lotte Group, operator of Lotte Cinema, and JoongAng Group, which runs Megabox, signed a memorandum of understanding to merge their cinema operations. They said the joint venture will be managed collaboratively by their parent companies, Lotte Shopping and Contentree JoongAng, respectively.
If the two merge, their combined number of screens will surpass industry leader CJ CGV, which has 1,346. According to the Korean Film Council (KOFIC), Lotte Cinema had 915 screens and Megabox had 767 screens as of 2024.
Lotte said the strategic decision to pursue a merger was made for sustainable growth amid a rapidly changing content industry, characterized by declining film production and a lack of blockbuster hits, creating a vicious cycle.
JoongAng Group said the main purpose of the merger is to ensure stable investment in the Korean film market and secure competitive content.
Industry experts anticipate that this merger will allow them to seek profitability improvements and explore new business ventures.
"Upon completion of the merger, they will emerge as the No. 1 theater operator in Korea based on number of screens, and profitability is expected to improve through the closure of overlapping locations and the sharing of personnel," said Lee Hwa-jung, a researcher at NH Investment & Securities.
Lee Hyun-ji, a researcher at Eugene Investment & Securities, echoed the thoughts.
"The merger is expected to create new growth opportunities in theaters and reorganize the industry's value chain," Lee said. "Under a joint management system, the merged entity will operate 131 branches nationwide and synergy is expected in various aspects such as operational efficiency, content diversification and the provision of experiences centered on special theaters."
A Super Plex theater in Lotte Cultureworks’ multiplex cinema chain Lotte Cinema’s Lotte World Tower & Mall branch in Seoul / Courtesy of Lotte Cultureworks
However, concerns have been also raised about the unclear leadership of the joint venture and the uncertain impact of becoming the No. 1 operator in terms of screen count in a domestic cinema market where the era of quantitative growth has ended.
“The Korean film industry is currently losing its competitive edge compared to streaming platforms,” an official from a local film company said on condition of anonymity.
“With high ticket prices and declining film production quality due to a lack of larger capital investment, it remains to be seen what kind of synergy this merger will create in attracting audiences back to theaters.”
The current atmosphere across Korea’s cinema chain industry is bleak. Last year witnessed the closure of 10 Lotte Cinema locations, six Megabox branches and four CJ CGV branches.
Adding to the pressure, local streaming platform Coupang Play announced on Friday that it would make the majority of its content, including its original series, international TV shows and other content, free to general members with ads, starting in June. Previously, Coupang Play was exclusively available to paying members of Coupang Wow.
The rise of streaming platforms and their aggressive marketing strategies present a considerable threat to traditional cinemas. The COVID-19 pandemic and subsequent social distancing measures led to a sharp decline in cinema attendance, while streaming platforms experienced significant growth, fostering a new type of viewing culture. Now, exclusive releases on platforms like Netflix are commonplace.