Korea’s top cinema chains seek merger to counter box office slump

South Korea’s two leading multiplex operators Lotte Culture Works Co. and Contentree JoongAng Corp. have tentatively agreed to merge in a bid to counter a prolonged slowdown in domestic box offices, hit by the pandemic and the rise of over-the-top (OTT) streaming platforms.

The two companies, which operate Lotte Cinema and Megabox, respectively, said in regulatory filings on Thursday that they have signed a memorandum of understanding on their merger, adding that no final decision has been made.

They will embark on the merger process once it receives approval from the Fair Trade Commission.

Lotte Shopping Co. holds an 86.37% stake in Lotte Culture Works, while Contentree JoongAng Corp. owns 95.98% of Megabox JoongAng.

“We’ll jointly manage the merged entity for the time being. Specifics such as the merger structure and ratio will be decided at a later stage,” said a Lotte Group official.

Their combination is expected to generate synergy across film production and distribution, while strengthening their balance sheets. The two cinema operators each have their own film studios – Lotte Entertainment Co. under Lotte Culture Works and Plus M Entertainment, a unit of Contentree JoongAng Corp.

Their merger will give the combined entity control of 1,682 screens, overtaking current leader CGV’s 1,346.

The Korean film industry has been in the doldrums of late, weighed down by a decline in new productions, a lack of blockbuster releases and shrinking theater audiences.

In 2024, Lotte Cultureworks reached the breakeven point, but continued to carry accumulated losses totalling several hundred million dollars. Megabox JoongAng posted an operating loss of 12.7 billion won ($9.1 million) last year.

The outlook for the box office industry remains bleak as OTT players continue to siphon audiences from traditional theaters.

Even high-profile releases have struggled to draw crowds. “Mickey 17,” a sci-fi film directed by Oscar-winning director Bong Joon Ho, is South Korea’s top-grossing film so far this year, but it barely surpassed 3 million admissions.

Lotte and Megabox expect their combination to attract fresh investment, enabling them to roll out new services such as premium theaters and specialized screening formats to set themselves apart from streaming platforms.

Write to Jae-Kwang Ahn at ahnjk@hankyung.com
 


Yeonhee Kim edited this article.