CJ CGV, the largest multiplex operator in South Korea, is tightening its belt due to poor performance. After laying off 80 employees last month through voluntary retirement, the company plans to close four theaters this month. As the era of online video streaming services (OTT) has fully emerged following the COVID-19 pandemic, the number of moviegoers has not recovered, prompting the company to initiate restructuring efforts. The stock price, which once soared to 140,000 won, has fallen below 5,000 won.
◇ Four theaters, including Songpa CGV, to close this month
According to related industries on the 20th, CGV plans to close four theaters, including the Songpa location in Seoul and the Yeonsu location in Incheon on the 23rd, and the Changwon location and Gwangju Terminal location on the 31st. As a result, the number of CGV theaters in South Korea will decrease to 192 next month.
This decision, following last month's voluntary retirement, draws attention. In February, CGV implemented voluntary retirement for employees with over seven years of service at the assistant manager level, resulting in about 80 employees leaving the company. This marks the first time in four years since February 2021 when the COVID-19 pandemic was at its peak.
Industry analysts suggest this is a desperate measure due to the decline in theater attendance. According to the Korean Film Council, the total number of moviegoers in South Korean theaters last year was 123.13 million, a 1.6% decrease from the previous year. Compared to the average attendance before the pandemic (2017-2019), which was 220.98 million, it stands at just 56%.
This has negatively impacted the performance of CJ CGV. Last year, the company's consolidated revenue was 1.9579 trillion won, up 27% from the previous year. During this period, operating profit increased by 54% to 75.9 billion won. However, this growth was mainly due to the effects of the acquisition of the subsidiary CJ Olive Networks, which was included in June last year. On a separate basis, the company recorded an operating loss of 7.6 billion won.
A CJ CGV official noted, “Last year, the domestic film market itself was in a situation of negative growth, so we couldn’t just expect things to get better; thus, we made this decision for restructuring and efficiency.”
Concerns over poor performance are leading to a decline in stock prices. The stock price of CGV, which once soared to 140,000 won in January 2016, has continued on a downward trend and fell below 5,000 won this month. As of the 19th, CJ CGV's stock closed at 4,875 won, up 5 won from the previous day.
◇ Megabox and Lotte Cinema also facing poor performance
This is not just a problem for CGV. The competitor Megabox reported an operating loss of 13.4 billion won last year, marking its fifth consecutive year of losses. Lotte Cinema, operated by Lotte Cultureworks, recorded an operating profit of 300 million won last year, but this was attributed to increased sales in Vietnam, while its domestic operations remain sluggish.
Many in the industry point to the growth of OTT and the lack of blockbuster films as causes for the decline in the domestic film business. According to statistics from the Korean Film Council, the market size of the Korean film and video industry was 3.3322 trillion won last year, with theaters accounting for 35.9% and OTT accounting for 61.6%. In 2019, theater revenue made up 52.5% and OTT made up 42.7%, but the market share has reversed in five years. As the film industry shrinks, the motivation for film investment disappears, leading to a vicious cycle of fewer blockbusters.
Even if a theater is not operating, it cannot simply close down immediately. An official from one theater stated, "Theaters operate on long-term contracts of 15 to 20 years, so it is not easy to close down just because performance is poor."
◇ Active efforts to overcome crises, including live broadcasts of baseball games
The industry anticipates that recovery in the domestic film market will be difficult in the short term and is trending towards other content besides movies. CGV recently signed a memorandum of understanding with the Korea Baseball Organization (KBO) to screen baseball games in theaters. Starting with the opening game on the 22nd, it plans to present two games every Sunday, along with live broadcasts of regular season, All-Star, and postseason games. CGV has previously achieved success by showing live performances of popular singers like Lim Young-woong, BTS, and IU, aiming to attract audiences by targeting content with a strong fan base.
Additionally, it is committing to differentiation through technological special screenings, such as the "four-screen X theater". To this end, CGV signed a strategic memorandum of understanding with Samsung Electronics and Harman on the 17th to build a future-oriented theater through artificial intelligence (AI) innovation. It is also focusing on expanding theaters in emerging markets like Vietnam and Indonesia where the film market is growing.
A CJ CGV official stated, "The way people enjoy content has changed significantly after COVID-19," adding, "Our policy is to promote growth by focusing on two pillars: upgrading theaters through technology and diversifying content."