With JoongAng Group affiliates entering corporate rehabilitation proceedings, alarm has spread across theaters as well as the broadcast content industry, including dramas and entertainment programs. Beyond delays in film settlement payments, concerns are emerging over possible cutbacks in production, investment, and distribution, while uncertainty is even spreading to small and medium-sized enterprises that supply food and beverages.
According to the industry on Wednesday, Megabox's entry into corporate rehabilitation proceedings has increased the likelihood that settlement of film proceeds for movies released after May will be delayed. Under a settlement structure typically conducted on a monthly basis, sales generated from May onward could fall within the scope of the rehabilitation proceedings.
Film proceeds are based on contracts between theaters and distributors, with settlement typically occurring between 30 and 45 days after a month's closing. The settlements affected by Megabox's rehabilitation proceedings cover sales generated from April onward. While April screenings are reported to have been paid in full to each distributor, settlement payments generated from May onward fall under legal control under the rehabilitation proceedings. The industry has also raised the possibility that, depending on the future rehabilitation plan, repayment timing could be delayed, or it could lead to partial reductions or long-term installment repayment.
[May Admissions Up 25% Year-on-Year]
[Audiences Returned, But Recovery Hit With Cold Water]
['Goonche' Drew 2.23 Million in May, 3.6 Billion Won in Settlements at Risk]
['The Devil Wears Prada,' 'Super Mario,' 'Michael' Also on Edge]
The film industry is concerned that the recovery momentum at theaters could be halted. In fact, audience numbers in May this year showed a recovery, rising 25.1% year-on-year to 10,677,274.
Revenue, after excluding the 10% value-added tax and the 3% Film Development Fund, is split between theaters and distributors at a ratio of 45 to 55 (based on the metropolitan area). The distributor then deducts a distribution fee of about 10% and production costs before distributing to investors and production companies.
In particular, "Goonche" drew 2.23 million viewers over the month of May, generating 37.5 billion won in revenue. Considering that Megabox holds a market share of about 20%, the May proceeds that Showbox, which distributed "Goonche," should receive from Megabox are estimated at about 3.6 billion won. Regarding this, Showbox said, "The May settlement deadline has not yet arrived, but in the current situation it may be difficult to honor," adding, "The actual possibility of collection is a separate matter." Beyond "Goonche," films released around the same time, including "Super Mario Galaxy," "Michael," and "The Devil Wears Prada 2," are also expected to be exposed to settlement risk.
[Food and Beverage Suppliers Also 'Tense']
[72 Franchise Operators to Hold Countermeasure Meeting Soon]
[Screenings Continue for Now, But Future Lineup Cuts Feared]
Observers say disruptions could also arise in payments for payment gateway (PG) services, theater concession (F&B) supplies, and operational services such as cleaning and facility management. Some food and beverage suppliers reportedly considered halting deliveries to Megabox but decided to maintain transactions for the time being.
The theater operating structure itself is also a variable. Of Megabox's 114 stores nationwide, 72 are franchise outlets, a higher proportion than the 42 directly operated stores. The industry reports that if the rehabilitation proceedings are prolonged, the franchise operators plan to hold a separate countermeasure meeting soon to discuss how to respond. If the head office's control weakens, there is also the possibility of individual stores defecting or operations breaking down.
As settlement uncertainty grows, there are also concerns that content supply strategies themselves could contract. Analysts say that if distributors conservatively adjust their supply of films to certain theaters, citing the risk of unpaid receivables, it could lead to fewer screenings, creating a vicious cycle that leads to falling audiences and worsening theater revenue. "Some distributors tried to give up on releasing at Megabox but went ahead with screenings for now, though they appear to be agonizing over their future works," an industry official said.
[Successive Disruptions in Drama and Entertainment Production and Scheduling]
[Uncertainty May Spread Across the Content Industry Ecosystem]
Effects are also appearing in the drama production and broadcasting industries. "Rediscovery of Love," a drama produced by SSL, a subsidiary of Contentree JoongAng, has halted filming as it entered about a month of reorganization, citing the need to refine the script and seasonal factors. The work had targeted a broadcast in the second half of this year, but its schedule has become uncertain.
Some broadcast scheduling has also changed. JTBC scheduled "Han Moon-chul's Black Box Review" and "Lecture Battle Show: Fraudsters," which were set to air on the 24th and 25th, as off-air. The explanation is that it was an adjustment due to World Cup scheduling, but the industry does not rule out a possible connection to the group's financial situation.
Earlier, JTBC, a core affiliate of JoongAng Group, declared default on the 12th after failing to repay 20.6 billion won in securitized borrowings on time. Subsequently, major affiliates including JoongAng Holdings, Contentree JoongAng, JoongAng P&I, and Megabox JoongAng filed for the commencement of rehabilitation proceedings one after another on the 14th. JoongAng Holdings, Contentree JoongAng, and others also filed for preservation orders and comprehensive prohibition orders, and JTBC filed an additional rehabilitation application. On the 15th, the court issued preservation order decisions and comprehensive prohibition orders to Megabox JoongAng, JoongAng P&I, JoongAng Holdings, Contentree JoongAng, and JTBC, respectively.
