After a 40% increase in two years, prices remain unchanged.
Choi Min-sik’s recent comments have sparked controversy.
Distribution ratios among production companies and theater contracts.
After the coronavirus outbreak, everyone has voiced: “It’s tough.”
The debate over theater ticket prices has resurfaced. Actor Choi Min-sik noted that citizens are no longer frequenting movie theaters due to the significant increase in ticket prices.
According to NUMBEO, a global price comparison platform, the average cost of a movie ticket in South Korea is $11.25, ranking 27th out of 96 countries. In comparison, the price in the United States is $14, while Japan’s is $12.31. However, regarding the ratio of ticket prices to GDP, South Korea surpasses the United States, standing at 0.033% compared to 0.016%.
In response, Lee Byung-tae, a professor at the Korea Advanced Institute of Science and Technology, countered Choi Min-sik’s remarks by saying, “During the pandemic, movie theaters faced bankruptcy risk, but did Choi Min-sik donate his appearance fees to theaters that screened his films?” While profitability has sharply declined due to increased costs and a shrinking audience, including higher rents and minimum wages, Choi Min-sik’s comments suggest theaters might be making monopolistic profits.
Movie ticket prices, which do not include VAT and the soon-to-be-eliminated Film Development Fund, are divided among theaters, production companies, and investors.
For instance, if a moviegoer pays 10,000 won for a ticket, 1,300 won is deducted for taxes, representing 10% VAT and a 3% film development fund. The remaining 8,700 won is shared between the theater and the production company.
Actor Choi Min-sik. Yonhap News
Lee Byung-tae, professor at the Korea Advanced Institute of Science and Technology. Yonhap News
The distribution ratio between theaters and production companies varies, but it is generally around 4 to 6 or 5 to 5. Assuming an even split, the theater would receive 4,350 won, the production company would also obtain 4,350 won, and the remainder would go to the investment company.
Citizens have expressed their concerns regarding the rising cost of movie tickets. The regular ticket price for weekdays at three major theaters—CGV, Lotte Cinema, and Megabox—is 14,000 won. Ticket prices have escalated 40% since 2020 when they were set at 10,000 won, and they have yet to decrease.
In contrast, despite the ticket price hike, theaters and production companies are simultaneously bemoaning their financial situations.
Their conflicts are substantial. The Korean Film Promotion Agency reported that the three main theater companies—CGV, Lotte Cinema, and Megabox, which hold over 98% of the market share—have “blindly made unfair settlements during the ticket sales allocation process.” They also mentioned “various discounts,” claiming that actual sales prices lack transparency.
Cinemas in downtown Seoul are bustling with citizens eager to watch movies.
The theaters emphasized the challenges of recovering from the significant losses incurred during the COVID-19 pandemic.
Last year, the three cinema companies reported a combined operating profit of 22.7 billion won, reflecting a mere 14% increase compared to 2019, prior to COVID-19. Nonetheless, only CGV, which operates numerous overseas cinemas, remained profitable, while Lotte Cinema and Megabox, primarily operating within South Korea, incurred losses in the past year.
The Korea Exhibition Development Association stated, “Due to drastic declines in audience numbers during COVID-19, theaters have incurred losses exceeding 1 trillion won. As financial difficulties have intensified, interest rates for external funding have become prohibitively high.” They noted, “Even if operating profits are generated, it will still be a lengthy process to return to pre-COVID-19 profit levels after accommodating interest expenses.” Addressing the claims from filmmakers’ unions, they argued, “The allegations from filmmakers’ solidarity groups are unfounded,” and assured that the compensation from telecommunications and credit card companies was settled fairly with distributors.
Reporter Ahn Kyung-jun eyewhere@segye.com
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Are Movie Tickets Expensive Because Actors Are Expensive?
After rising 40% in two years, it remains unchanged. Choi Min-sik’s recent remarks have caused controversy surrounding the distribution by production company/theater contract ratio. Post-coronavirus, everyone shouted: “It’s hard.”
The Rising Cost of Movie Tickets
The controversy over movie ticket prices has resurfaced recently, with actor Choi Min-sik commenting about the rising costs, arguing that it’s a significant factor preventing citizens from going to movie theaters. According to NUMBEO, the average price of a movie ticket in South Korea is approximately $11.25, placing it 27th out of 96 countries surveyed. For comparison:
| Country | Average Ticket Price |
|---|---|
| South Korea | $11.25 |
| United States | $14.00 |
| Japan | $12.31 |
Ticket Prices vs. GDP
When measuring the proportion of ticket prices to GDP, South Korea surpasses the United States at 0.033%, compared to the U.S. at 0.016%. This poses the question: Are movie ticket prices justified, or are they an outcome of inflation and distribution issues?
Rebuttals to Rising Prices
In response to Choi Min-sik’s assertion, Lee Byung-tae, a professor at the Korea Advanced Institute of Science and Technology, criticized his comments. He highlighted that while the profitability of theaters has declined due to high operational costs, the claim of theaters making monopolistic profits is unfounded. During the pandemic, many theaters faced bankruptcy risks, bringing attention to the need for structural change in the film industry.
How Movie Ticket Pricing Works
Understanding how movie ticket pricing is structured can shed light on why prices have escalated. Movie ticket costs consist primarily of the base price, taxes, and additional funds:
- Base Ticket Price: The amount paid before any taxes or funds.
- Taxes: A typical tax breakdown includes:
- 10% VAT
- 3% Film Development Fund
- Net Revenue Split: Approximately 87% of the ticket price goes towards the theater and production companies.
Example Breakdown of a Typical Ticket
If a movie ticket is priced at 10,000 won, the breakdown looks like this:
- Base Revenue: 8,700 won
- Distribution:
- Theater: 4,350 won
- Production Company: 4,350 won (eventually shared with investors)
The Disconnect Between Pricing and Profits
Despite the average ticket price increase of 40% in just two years, complaints amongst viewers about high costs continue to amplify. Major theaters in South Korea, including CGV, Lotte Cinema, and Megabox, now charge 14,000 won for a weekday ticket—up from the previous 10,000 won.
Profitability Post-Pandemic
Interestingly, even with these price hikes, both theaters and production companies claim they are still struggling financially. For example, the three main cinema chains reported a total operating profit of just 22.7 billion won last year, reflecting only a 14% increase compared to pre-pandemic profits in 2019. Only CGV has managed to generate profits due to its international reach, leaving Lotte Cinema and Megabox operating at a loss.
Claims and Counterclaims in the Industry
The Korean Film Promotion Agency has raised concerns over the practices of major theaters, suggesting that they have made “unfair settlements” during ticket allocations. It appears the current ticket pricing mechanism lacks transparency, leading to dissatisfaction across the board.
Coping with Pandemic Losses
Prior to the pandemic, the theater industry was thriving, but they have collectively incurred losses exceeding 1 trillion won due to drastic declines in audience numbers. With rising operational costs, including interest rates on borrowed funds, the road to profitability remains a major challenge.
Final Thoughts on the Future of Movie Ticket Pricing
The debate over movie ticket pricing will likely continue as the industry grapples with rising operational costs and audience retention. As important stakeholders weigh the sustainability of current pricing structures, audiences can only hope for a more transparent and manageable system that balances profitability with fair access to cinema experiences.
