Korea Box Office Scandal: Distributors Say Manipulation Was “Open Secret” for Years

Korea Box Office Scandal: Distributors Say Manipulation Was “Open Secret” for Years

Allegations of a massive, multi-year pattern of box office fraud rocked the Korean film industry last week. The Seoul Metropolitan Police Agency’s anti-corruption office said 69 executives from the country’s largest theater chains – CGV, Lotte Cinema and Megabox – and 24 distributors, including Showbox, were referred to prosecutors on Thursday. The police said the theaters colluded with distributors to exaggerate ticket sales for at least 323 films over the past five years, delivering false information to the Korean Film Council, the government-run body responsible for collecting local box office data.

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But some Korean film business insiders say the practices the police uncovered were an “open secret” in the industry for years, and oftentimes not nearly as nefarious as they might appear.

Much of the resentment that’s currently building in the Korean film industry, meanwhile, is being directed at the major multiplex companies, which are owned by Korea’s largest conglomerates and have unrivaled market power. Insiders say the conglomerates are ultimately responsible for dictating the practices that are suddenly under scrutiny.

Seoul police allege that up to 2.67 million theater admissions were forged over the past half-decade, including to such films as the 2021 disaster blockbuster Emergency Declaration and last year’s hit crime thriller Hot Blooded.

In some cases, the companies involved are under suspicion of engaging in “ghost screenings,” where distributors buy tickets in bulk for late-night or early-morning screenings, where the movie is played to nearly empty theaters, boosting box office rankings.

“We will recommend an improved system to the (Korean Film) Council and Culture Ministry, as theaters are solely responsible for transmitting box office data and currently there are no sanctions against distributors and production companies that collude with the theaters,” Seoul police said in a statement.

Industry insiders say the so-called box-office rigging was widely known in the industry and involved distributors and production companies reserving blocks of seats for promotional purposes. Some say the multiplexes often demand such arrangements as a precondition of getting screen access. The promotional tickets are then used for special premiers or marketing events — yet they are counted as part of regular ticket sales in the film’s box office total, even though the actual turnout to these screenings is often less than the reported admissions number. Part of the problem, according to insiders, is that Korea uses an admissions-based system as its key box-office metric, rather than sales revenue as in Hollywood. Thus, when admissions are compared against revenue, disparities emerge because of bulk-buying marketing practices.

“It’s ridiculous that they are claiming such practices as illegal (for all parties),” said one industry insider who works on the production side. “Some theaters would only select and screen films when distributors bulk-buy seats in advance.”

“The market practice is not so simple,” adds Oh Dong-jin, a film critic based in Seoul, noting that some companies’ marketing activities entail legitimate purchases of tickets, while others have engaged in more questionable practices. Seoul police, however, appear to have labeled all of these activities as criminal.

“Companies hold press screenings, VIP screenings and industry screenings ahead of a film’s release,” Oh explains. “There are many cases where the actual turnout is lower than the pre-booked seats. There may be some cases where a company buys a bunch of tickets and cancels them later just to maintain a certain level of reservation rate. There needs to be a system to detect these fraudulent cases, but you can’t simply point to the sold-out screenings with low turnout and call it a crime, given the current box office system.”

Rumors about box-office rigging emerged last year at the height of a COVID-19 slowdown in public moviegoing in South Korea, when Emergency Declaration broke the 2 million ticket sales mark in just 18 days — a feat that looked improbable at the time. In June, police raided the offices of local theaters and distributors and launched an investigation.

“There could have been some errors between the pre-booked tickets and the actual turnout, but I feel like the police findings might have been exaggerated a bit,” says Kim Seong-su, a cultural critic also based in Seoul. “I do believe that local box office has been managed quite transparently.”

Kim cites The Red Herring, a documentary surrounding the disgraced ex-Justice Minister Cho Guk, which was also included in the police investigation, as an example. The police explained that the actual turnout for some of the film’s screenings, which claimed to have been sold out, was significantly less than the reported admissions number. But the film was produced through a crowdfunding campaign by Cho’s political followers.

“For films like that, it’s customary to give away tickets in advance to individual investors,” he says. “Not all of them will show up to the screening. They invested in the film in support of Cho and the film’s spirit.”

Regardless of the outcome, some say they will welcome the greater transparency that the case might bring to Korea’s film distribution and exhibition business. A Korean director who spoke on the condition of anonymity said lack of clarity around the use of marketing budgets is a perennial industry complaint.

“At the end of the day, directors get compensated based on the profits made through ticket sales, after paying out the actual production cost and marketing fees — but we don’t always get accurate data on how much and on what the film’s marketing budget is spent,” the director said.

Although the Korean Film Council was not the main target of the police investigation, some in the industry are saying the situation is the result of the organization’s “reckless management” and weak oversight of the exhibition sector. In June, shortly after the police raided the film companies, Korea’s Ministry of Culture, Sports and Tourism, which oversees the film council, put out a statement claiming that the organization’s budget was poorly managed and raised issues over the transparency around its selection of funding recipients.

“The controversy over box-office manipulation in the film industry has damaged the public’s trust in the Korean Film Council’s integrated ticket-counting system, as well as the film industry,” said Korea’s Culture Minister Park Bo-gyun. “In order to restore trust, the council needs to take various measures, such as shifting the current box office counting methods from admission-based to revenue-based.”

Park added that the ministry will actively revise the current law and fine film distributors and theaters caught deliberately omitting or manipulating data related to box-office scores. The Korean Film Council told The Hollywood Reporter that its perspective on the issue aligns with Park’s statement.

The uproar comes at a time when Korea’s theatrical film sector is still struggling to recover from the punishing market downturn of the pandemic. According to the Korean Film Council, South Korea’s film admissions total in the first half of 2023 was 58.39 million, just 57.8 percent of the average attendance during the same period from 2017 to 2019.