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South Korean actress Jeon Do-yeon's winning of the Cannes Film Festival's best actress award on Monday offered a glimmer of hope for the local film industry which stands at a crossroads due to rising production costs and shrinking box office revenue.

Last year, South Korea was the fifth-biggest movie market in the world with attendance rising to some 166 million worth about US$1.1 billion, a sea change from 1996 when attendance was at a record low of 42 million. Over the past decade, its market share increased to 64 percent from 16 percent, and exports hit about $76 million in 2005.

But now this stellar achievement is being eclipsed by rising production costs, a sharp decline in exports last year and the onslaught of Hollywood movies, less than a year after South Korea's screen quota system was scaled down under pressure from the United States, according to industry officials.

In addition, South Korea's multiplex chains, owned by such conglomerates as CJ and Lotte, prefer to keep the "unequal" box office revenue split system at a time when most people in the movie production sector are bleeding money.

In addition to high salaries for top actors and directors, production companies face yet another financial trouble as a new labor pact between producers and movie workers is going to take effect on July 1. Under the deal, movie workers are to earn their wages on a weekly basis instead of payment based on a per-film system. "In South Korea, it costs an average 5 billion won to make one movie, twice the cost of that in Japan," said Oh Ki-min, president of the film production company Ifilm. "The Korean market is smaller and makes less money and the revenue is much smaller, but the production cost is much higher. This is totally wrong."

Currently, most Korean productions divide revenue fifty-fifty, while foreign films split revenue with theater owners sixty-forty, a business practice employed by local producers to encourage theaters to screen their movies when their films were unpopular decades ago. Rampant piracy of CDs and home videos in South Korea is also complicating efforts to offset soaring production costs.

For example, "The Host," a South Korean blockbuster with a record 13 million admissions worth about $90 million, is likely to rake in a mere $700,000 in CD and video sales. It is a far cry from the situation in the U.S. and Japan, where CD and home video sales can respectively amount to 250 percent and 300 percent of film revenue, according to industry sources.

But some point out that South Korea's movie industry is in a downturn, but profits will come along down the line as the business is cyclical in nature. Their optimistic view is based on an increase in the number of South Korean movies released over the past few years.

"The Korean movie market has a very solid foundation as it has great actors and directors. Despite overwhelming challenges, I think the future is positive," said Park Kyung-pil, president of an association of movie investment companies. "I just hope the film industry will ride out painful structural changes with the backing of the government."
SEOUL, May 28 (Yonhap News)