Allegations of a massive, multi-year pattern of box office fraud rocked the Korean film industry last week. The anti-corruption bureau of the Seoul Metropolitan Police Agency said Thursday that 69 executives from the country’s largest theater chains — CGV, Lotte Cinema and Megabox — and 24 distributors, including Showbox, have been referred to prosecutors. Police said the theaters colluded with distributors to exaggerate ticket sales for at least 323 films in the past five years, providing false information to the Korean Film Council, the government-run body responsible for collecting local film. checkout data.
But some Korean film industry insiders say the practices the police uncovered were an “open secret” in the industry for many years, and often not nearly as outrageous as they seem.
Much of the outrage currently growing in the Korean film industry, meanwhile, is directed against the big multiplex companies, which are owned by Korea’s largest conglomerates and have unparalleled market power. Insiders say the conglomerates are ultimately responsible for dictating the practices that are suddenly under scrutiny.
Seoul police allege up to 2.67 million movie theater admissions have been faked in the past five years, including for movies like the 2021 disaster blockbuster emergency declaration and last year’s hit crime thriller Warm-blooded.
In some cases, the companies involved are suspected of participating in “ghost screenings,” where distributors buy tickets en masse for late-night or early-morning screenings, where the film plays in near-empty theaters, boosting its box office rankings .
“We will recommend an improved system to the (Korean film) council and the Ministry of Culture, as theaters are solely responsible for sending box office data and there are currently no sanctions against distributors and production companies colluding with the theaters,” the statement said. Seoul police in a statement.
Industry insiders say that so-called box-office rigging was common knowledge in the industry and that distributors and production companies reserved seats for promotional purposes. Some say the multiplexes often require such facilities as a condition of screen access. The promotional tickets are then used for special premieres or marketing events – but they are counted as part of regular ticket sales in the film’s box office total, even though actual attendance at these screenings is often lower than the reported attendance. Part of the problem, according to insiders, is that Korea uses an admission-based system as its main box-office metric, rather than sales revenue as in Hollywood. So when withdrawals are compared to revenue, differences arise due to bulk purchase marketing practices.
“It is ridiculous that they claim such practices are illegal (for all parties),” said an industry insider who works on the production side. “Some theaters would only select and show movies if distributors buy seats in bulk in advance.”
“The market practice is not that simple,” adds Oh Dong-jin, a film critic based in Seoul, noting that some companies’ marketing activities involve legitimate ticket purchases, while others engage in more questionable practices. However, the Seoul police seem to have labeled all of these activities as criminal.
“Companies hold press screenings, VIP screenings, and industry screenings prior to the release of a movie,” Oh explains. “There are many cases where the actual attendance is lower than the pre-booked seats. There may be instances where a company purchases a number of tickets and later cancels them in order to maintain a certain reservation level. There should be a system in place to detect these fraudulent cases, but you can’t simply point to the low turnout sold out screenings and call it a crime given the current box office system.
Rumors of box office fraud surfaced last year at the height of a COVID-19 slowdown in public movie theater attendance in South Korea, when emergency declaration broke the mark of 2 million ticket sales in just 18 days – a feat that seemed unlikely at the time. In June, police raided the offices of local theaters and distributors and launched an investigation.
“There may have been some errors between the pre-booked tickets and the actual turnout, but I feel the police findings are a bit exaggerated,” said Kim Seong-su, a cultural critic who also lives in Seoul. “I do believe that the local box office has been managed quite transparently.”
Kim quotes The red herring, a documentary about the disgraced ex-Minister of Justice Cho Guk, who was also included in the police investigation, as an example. Police explained that the actual attendance for some film screenings, which claimed to be sold out, was significantly lower than the reported number of admissions. But the film was produced through a crowdfunding campaign by Cho’s political followers.
“It’s common for these types of films to give away tickets to individual investors in advance,” he says. “Not all of them show up at the screening. They invested in the film to support Cho and the spirit of the film.”
Regardless of the outcome, some say they will welcome the greater transparency the case could bring to Korea’s film distribution and exhibition business. A Korean executive who spoke on condition of anonymity said that ambiguity over the use of marketing budgets is a perennial complaint in the industry.
“Ultimately, directors are compensated based on the profit made from ticket sales, after paying actual production costs and marketing costs – but we don’t always get accurate data on how much and what the film’s marketing budget is. is spent,” the director said.
While the Korean Film Council was not the main target of the police investigation, some in the film industry say the situation is a result of the organization’s “reckless management” and weak oversight of the exhibition industry. In June, shortly after police raided film companies, Korea’s Ministry of Culture, Sports and Tourism, which oversees the film council, released a statement alleging that the organization’s budget was being mismanaged and questioned on the transparency surrounding the selection of financing. receivers.
“The box office manipulation controversy in the film industry has damaged public confidence in the integrated ticket counting system of the Korean Film Council and the film industry,” said Korean Culture Minister Park Bogyun. “To restore confidence, the municipality needs to take several measures, such as shifting the current cash register counting methods from admission-based to revenue-based.”
Park added that the ministry will actively review the current law and movie distributors and theaters will be caught deliberately omitting or manipulating data related to box office scores. This has been announced by the Korean Film Council The Hollywood Reporter that his perspective on the matter is consistent with Park’s statement.
The uproar comes at a time when the Korean theatrical film industry is still struggling to recover from the severe market downturn caused by the pandemic. According to the Korean Film Council, the total number of film admissions in South Korea in the first half of 2023 was 58.39 million, just 57.8 percent of the average attendance over the same period from 2017 to 2019.
