Crisis in Korean Cinemas: The Fall of the CGV Empire and a New Future

Amid the waves of the pandemic and the OTT revolution, the Korean cinema industry is undergoing not a simple collapse but a painful yet inevitable process of reconstruction.

• Comparison of financial status and survival strategies of the three multiplex giants (CGV, Lotte, Megabox)
• Analysis of key external factors shaking the cinema industry in the OTT era
• Recommendations for theaters, production companies, and policymakers for the future of the film industry

The provocative question of the “Fall of the CGV Empire” signals the start of a massive paradigm shift: the crisis of Korean cinemas. The pandemic shock, the fierce wave of the OTT revolution, and decades of accumulated structural weaknesses have converged into a ‘perfect storm’ that has placed the cinema industry at a crossroads of survival. This article begins from the perspective that the current crisis proves the old success formulas no longer apply and forces the search for new survival strategies.

1. Anatomy of the Crisis: Financial Health of the Three Multiplex Giants

1.1. The Peak Before the Pandemic (2019): A Benchmark of a Bygone Era

Before COVID-19 in 2019, the Korean cinema industry enjoyed a golden age. The financial indicators from this period serve as an important benchmark for gauging the current crisis. The market was vibrant, with five films surpassing 10 million viewers in a single year.

Notably, industry leader CJ CGV recorded consolidated sales of 1.9423 trillion KRW and operating profit of 123.2 billion KRW in 2019, achieving remarkable results. Lotte Cinema also maintained a stable profit trend. These data remain a bittersweet benchmark—both the shattered past glory and the target for recovery.

1.2. Pandemic Shock and the Long, Uneven Recovery

Recovery after the pandemic has been slow and unstable. In 2023, total audience numbers reached 125.13 million, only 56% of the pre-pandemic annual average of 220.98 million.

The financial damage was enormous. Megabox recorded losses for five consecutive years, and Lotte Cinema barely made an operating profit of 300 million KRW in 2023. Even CGV, once the absolute leader, had to resort to voluntary retirements and extreme cost-cutting measures. This underscores how deep the pandemic wounds are and how difficult the recovery path remains.

1.3. Divergent Fates: CGV’s Global Hedge vs. Domestic Quagmire

In the crisis, CGV’s extensive overseas network became a lifeline, while Lotte Cinema and Megabox, focused on the domestic market, were fully exposed to the crisis.

In Q2 2024, CGV’s domestic operating profit plummeted, but its overall consolidated operating profit surged thanks to explosive growth in Southeast Asian markets like Vietnam and Indonesia. The ‘global hedge’ strategy of offsetting domestic market weakness with overseas revenue succeeded. In contrast, Lotte Cinema and Megabox lacked such a global shield.

*Note: 2019 Megabox figures are estimates.

This table shows how the crisis acted as a catalyst, amplifying existing strategic differences.

2. Tectonic Shifts: External Pressures Reshaping the Industry Landscape

2.1. The Giant OTT and the Collapse of the Theatrical Window

The rise of OTT platforms has fundamentally changed content consumption habits. Central to this is the collapse of the ’theatrical window’, the exclusive period during which films are shown only in theaters before distribution on other platforms.

Audiences now expect to “wait and watch at home,” which diminishes the value of theater visits. The industry is sharply divided between those advocating for legally enforced theatrical windows like in France and those fearing that rigid legislation could stifle the industry.

2.2. The Weight of a Ticket: Price as a Barrier to Viewing

Rapidly rising ticket prices have become a major cause of audience decline. Weekend prices approaching 15,000 KRW have sparked complaints like “a family of four watching a movie and eating popcorn costs nearly 100,000 KRW,” turning movie-going into a ‘special event.’ I myself have felt the burden of nearly 100,000 KRW when taking my family of four to the movies.

To make matters worse, opaque revenue-sharing controversies around the high ticket prices have become a toxic issue, undermining trust between producers and theaters.

2.3. Hollowing Out of Korean Films: The Risk of a Lost Middle

Higher ticket prices and OTT competition have caused an extreme polarization in the Korean film market, a ‘hollowing out’ phenomenon. Audiences flock only to a few guaranteed blockbusters, while mid-budget films—the industry’s backbone—are losing their place.

This threatens creative diversity and entrenches a dangerous structure that makes the entire Korean film industry dependent on a handful of tentpole films.

[Insight] The Doom Loop These external pressures form a vicious cycle where each problem is both cause and effect: High ticket prices → Blockbuster concentration → Screen monopolization → Fewer films to watch → Audience shift to OTT → Shortened theatrical window → Decline in theater value → Audience decline and pressure to raise prices

3. The Empire’s Counterattack: Strategic Maneuvers for Survival

3.1. CGV’s 1 Trillion KRW Bet: Lifeline or Strategic Gamble?

In crisis, CGV executed a massive capital increase of 1 trillion KRW. Beyond a simple cash infusion, this is a bold gamble to transform into a technology-based ‘future-oriented space operator’ by acquiring IT subsidiary CJ OliveNetworks.

Despite fierce opposition from minority shareholders, this is a concrete execution of the ‘NEXT CGV’ vision to create differentiated value that OTT cannot offer through advanced special theaters like 4DX and ScreenX and new alternative content platforms.

3.2. Birth of a Duopoly? Merger of Lotte Cinema and Megabox

The industry’s second and third largest players, Lotte Cinema and Megabox, chose defensive consolidation for survival. Their merger aims to cut redundant costs and improve financial structure.

If successful, the Korean cinema market will shift from a ‘Big 3’ to a ‘duopoly’ structure. This could create a strong competitor to CGV but also raises concerns about reduced choices for consumers and producers due to the emergence of a giant exhibitor.

3.3. Beyond Movies: Rebirth as a ‘Cultureplex’

The most creative response is the attempt to reinvent cinemas as ‘cultureplexes’, multifunctional cultural spaces.

Live broadcasts of Im Young-woong concerts, climbing gyms, musical-only theaters, and pop-up stores represent a fundamental shift from ‘film distribution’ to ’lifestyle space provision.’

4. Internal Cracks: Debates Over the Industry’s Soul

4.1. Screen Monopoly Debate: Dissecting a Blockbuster

“The Outlaws 4” reignited the screen monopoly debate by occupying 82% of nationwide screens during its opening weekend. Critics argue this deprives audiences of choice, while defenders claim it was a rational response to overwhelming demand.

4.2. The ‘Opaque Settlement’ Issue: Collapse of Trust in the Value Chain

Filmmakers have reported the three multiplex companies to the Fair Trade Commission, accusing them of unfairly passing promotion costs like telecom discounts onto producers and investors, reducing creators’ shares. Such opaque settlement practices undermine the trust that forms the foundation of the industry ecosystem.

4.3. Policy Dilemma: Searching for a Panacea

Amid criticism that the industry has lost self-regulation, calls for government intervention are growing.

• Screen Cap Regulation: Proposals to legally limit the screen share of specific films.
• Theatrical Window Legislation: Proposals to legally define exclusive theatrical screening periods.
• OTT Film Development Fund: Proposals to levy funds from global OTTs like Netflix.

These policies face dilemmas amid complex interests. Internal divisions and distrust weaken the industry’s ability to respond collectively to external threats.

Comparison: Two Blockbusters — “The Outlaws 4” vs. “Excavation”

To better understand the screen monopoly debate, comparing two 10-million viewer films reveals the difference between demand-driven and supply-driven success.

“Excavation” succeeded through word-of-mouth with high occupancy despite lower screen share. “The Outlaws 4” led with overwhelming screen supply but had lower efficiency metrics. This suggests screen monopolization may maximize short-term profits but risks inefficiency and ecosystem damage long-term.

Step-by-Step Guide to Overcoming the Crisis

1. Theater Operators (Multiplexes)

• Adopt Hybrid Models: Elevate ‘cultureplex’ as a core strategy and set revenue targets for non-film segments.
• Implement Flexible Pricing: Experiment with subscription models, demand-based pricing, and more.
• Invest in Premium Experiences: Focus on special theaters like IMAX, 4DX, and the essential value of ‘shared enjoyment.’

2. Film Ecosystem (Production, Distribution, Investment)

• Seek a ‘Grand Bargain’: Establish an independent mediation body to create transparent and fair revenue-sharing standards.
• Rediscover Mid-Budget Films: Explore new models to reduce risks, such as co-productions with OTT platforms and premium VOD markets.

3. Policymakers

• Act as Facilitators: Focus on mediating fair trade agreements among stakeholders rather than imposing strict regulations.
• Incentive-Based Approaches: Impose Korean content investment obligations on global OTTs but offer tax incentives to encourage partnerships.

Conclusion

The crisis in Korean cinemas is not a ‘collapse’ but a forced ‘dismantling and reconstruction’ triggered by external shocks.

• Key Takeaways:

  1. Paradigm Shift: The old cinema-centric business model has reached its limits; diversification is essential.
  2. Strategic Divergence: CGV pursues a tech-based ‘space operator’ model, Lotte-Megabox aim for efficiency through scale, and the industry overall moves toward ‘cultureplexes.’
  3. Trust Recovery is Crucial: Resolving internal conflicts like screen monopolies and opaque settlements is a prerequisite for addressing external crises.

The tears of cinemas reflect reality, but they can nourish the seeds of a new industry. Those who successfully ride this massive wave of change will find a more diverse and sustainable future beyond the screen.

What do you think the future of cinemas should be? Share your thoughts in the comments.