Allegations of widespread box office fraud have recently surfaced in the Korean film industry, shaking its foundations. The anti-corruption office of the Seoul Metropolitan Police Agency has referred 69 executives from major theater chains such as CGV, Lotte Cinema, and Megabox, as well as 24 distributors including Showbox, to prosecutors. The police claim these entities colluded to inflate ticket sales for at least 323 films over the past five years, providing false information to the Korean Film Council.
However, insiders in the Korean film industry argue that these practices were well-known within the industry for years and were not as malicious as they are now being portrayed. Much of the resentment within the industry is being directed towards major multiplex companies, which are owned by Korea’s largest conglomerates and have significant market power. Insiders assert that the conglomerates are ultimately responsible for dictating the practices that are currently being investigated.
The Seoul police have alleged that approximately 2.67 million theater admissions were forged in the last five years, including for films like “Emergency Declaration” (2021) and “Hot Blooded” (2020). In some cases, companies are suspected of engaging in “ghost screenings,” where distributors purchase bulk tickets for late-night or early-morning screenings held in nearly empty theaters to boost box office rankings.
The police have acknowledged the need for an improved system to prevent collusion between theaters, distributors, and production companies. Currently, there are no sanctions against distributors and production companies that collude with theaters, leading to a lack of accountability. Industry insiders argue that the so-called box office rigging involves distributors and production companies reserving blocks of seats for promotional purposes, a practice often demanded by multiplexes as a precondition for screen access. These promotional tickets are then counted as part of regular ticket sales, even though the actual turnout for these screenings is often lower than the reported admissions number. The use of an admissions-based system as the primary box office metric in Korea, rather than sales revenue as in Hollywood, exacerbates the issue.
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Some industry insiders have criticized the police for labeling all these activities as criminal, failing to acknowledge the nuances and varying practices within the industry. Companies frequently hold press screenings, VIP screenings, and industry screenings before a film’s release. The actual turnout for these screenings might be lower than the pre-booked seats, and in some cases, companies may buy tickets in bulk and cancel them later to maintain a certain level of reservation rate. Insiders argue that a system is needed to detect fraudulent cases. They caution against simplifying the issue by categorizing sold-out screenings with low turnout as crimes under the existing box office system.
Rumors about box office rigging surfaced last year during a COVID-19 slowdown in public moviegoing in South Korea. One notable example was the film “Emergency Declaration,” which broke the 2 million ticket sales mark in just 18 days, seemingly unlikely given the circumstances. As a result, the police raided local theaters and distributors’ offices in June 2023 and initiated an investigation.
Regardless of the investigation’s outcome, many in the industry welcome the potential for greater transparency in Korea’s film distribution and exhibition business. There have long been complaints about the lack of clarity surrounding marketing budgets, as directors’ compensation is based on profits from ticket sales after deducting production costs and marketing fees. Accurate data on how much is spent on a film’s marketing is not always available.
Criticism has also been directed towards the Korean Film Council for its alleged “reckless management” and weak oversight of the exhibition sector, despite not being the main target of the police investigation. The Ministry of Culture, Sports, and Tourism, which oversees the film council, has expressed concerns over the organization’s budget management and transparency in selecting funding recipients. The ministry emphasizes the need to restore trust and proposes shifting the current box office counting methods from admission-based to revenue-based.
In response to the situation, the ministry plans to revise current laws and impose fines on film distributors and theaters found deliberately omitting or manipulating box office data. The Korean Film Council aligns with the ministry’s perspective and supports initiatives to restore trust and improve the system.
The allegations of box office fraud come at a challenging time for Korea’s theatrical film sector. The industry is still recovering from the severe market downturn caused by the pandemic. According to the Korean Film Council, film admissions in the first half of 2023 totaled 58.39 million, only 57.8% of the average attendance during the same period from 2017 to 2019.
In conclusion, the recent allegations of box office fraud in the Korean film industry have exposed long-standing practices that were considered an “open secret” within the industry. While the police investigation focuses on collusion between theaters, distributors, and production companies, insiders argue that the major multiplex companies and conglomerates hold significant responsibility. The issue highlights the need for a more transparent and accountable system to prevent fraudulent practices and restore trust in the Korean film industry.
