The Korean film industry, which had been showing signs of recovery, is now facing uncertainty due to the corporate rehabilitation of Megabox Central. Despite a significant increase in theater revenue and audience numbers in the first quarter of this year, concerns are growing over the cash flow in the film industry as distribution fees and settlement payments incurred before the rehabilitation application have been classified as rehabilitation claims.
In the first quarter of this year, total theater revenue reached 318 billion won, a 58.7% increase compared to the same period last year, with audience numbers rising to 31.9 million, up 53.2%. Revenue from Korean films amounted to 233.3 billion won, with 24.01 million viewers, marking increases of 117.5% and 115.1%, respectively. These figures represent the highest quarterly totals since the COVID-19 pandemic began in 2020.
On June 14, Megabox Central filed for corporate rehabilitation at the Seoul Rehabilitation Court, which issued a preservation order and a comprehensive prohibition order the following day.
According to a notice sent by Megabox Central to distributors, unpaid settlement amounts incurred by June 14 are classified as rehabilitation claims, while amounts incurred after June 15 are categorized as public claims. The settlement amounts incurred before the rehabilitation application will be subject to repayment based on the future rehabilitation plan.
Although amounts incurred after June 15 are classified as public claims, the actual payment timing and conditions will depend on the existing contract settlement cycles and the progress of the rehabilitation process.
Regional theaters that settle ticket revenues through the headquarters are also affected, as some ticket sales have been classified as rehabilitation claims. These theaters, while operating under the Megabox name, are managed by separate entities and have been settling certain online and partnership ticket sales through the headquarters.
The issue lies in the fact that the timing and method of repayment for settlement amounts incurred before the rehabilitation application have yet to be determined. Rehabilitation claims will be repaid according to the court's rehabilitation process and the future rehabilitation plan. The actual payment situation for amounts classified as public claims incurred after June 15 will also need to be confirmed during the settlement process.
The Ministry of Culture, Sports and Tourism and the Korean Film Council are reviewing measures to prevent the impact of Megabox Central's rehabilitation from spreading throughout the film industry. On July 10, Minister of Culture, Sports and Tourism Choi Hwi-young, Korean Film Council Chairman Han Sang-jun, and representatives from the distribution industry and regional theaters held an emergency meeting to discuss the current state of the industry and support measures.
Minister Choi stated, "We must recognize that if the industry collapses, there will be no future for Korean cinema, and we will actively seek available policy measures to minimize the impact on the industry."
The Korean Film Council has been operating a 'Film Industry Impact and Issues Reception Center' since June 25. As of July 14, 27 companies have reported issues related to Megabox Central's rehabilitation.
The council is preparing to hold an explanatory meeting on the rehabilitation process in collaboration with a law firm by the end of July. Legal consultations are also planned to coincide with the bond filing process scheduled for early August.
While audience numbers and revenue increased in the first quarter of this year, the ongoing rehabilitation process highlights that the revenue generated in theaters and the settlement process according to contracts are crucial variables in the recovery of the film industry. The handling of settlement amounts incurred before the rehabilitation application and the payment situation for amounts incurred afterward are expected to be clarified through the court's rehabilitation process and future settlement procedures.
* This article has been translated by AI.
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