South Korean film distributor Next Entertainment World (NEW) is planning to enter the cinema exhibition business with a number of cinemas opening across the country. Branded as Cine Q, the first cinema will open on 24th August in the South Eastern city Gyeongju, and another seven locations coming in the near future.
NEW started its business as investor-distributor in the entertainment industry in 2008 and has expanded its footprint in this area with arms in music distribution, audiovisual content production and sports-related areas. The exhibition business is new to NEW, but not for its competitors as it is the only one among the country’s top four distributors not involved in cinemas.
The top local distributors in South Korea are:
Although NEW stated in its announcement the purpose of the move is to stabilize its business and enlarge the scope of its diverse media content, its timing and motivation is unclear.
First of all, the cinema market in South Korea is comparatively mature with an average screen growth of 5.5% in the past five years. The box office is also stable with 1.6% growth in 2016 and 3.1% in 2015. It is difficult for NEW to enter the market at such a stage with limited room to expand. Secondly, the top three exhibitors (CJ CGV, Lotte and Megabox), also the main driving force behind the screen growth, account for 99% of the total market. How is NEW to position itself among its competitors and what is their growth plan, if any? It is not fully clear whether NEW is satisfied with a small role in the market or aims to put in place a more ambitious strategy to merge and acquire rival exhibitors and catch up on its competitors.
Furthermore, the recent row over the simultaneous release of Netflix film Okja in South Korea (which was boycotted by the top three cinema chains) also brings NEW’s move into some question. As the local distributor of Okja, apparently NEW supports the simultaneous release strategy. Given this, NEW enters the cinema business at such a time to make one wonder if they are betting on the Netflix model winning out over the current theatrical model of windowing, and want to lay foundations for the future.