East meets East: China's increasing appetite for South Korean entertainment

A still from the Korean movie Miss Granny, which will be remade into a Chinese film in 2015.
Source: CJ E&M

China's economic boom is creating new expensive tastes—but not in food.

In just four years, Chinese investors have flooded South Korea's service sector by 940 percent, from $100 million in 2010 to $940 million in 2014, based on records from Korea's Ministry of Trade, Industry & Energy. This is largely attributed to China's increasing commitment to Korean media and entertainment, according to Keehyun Lee, head of the policy research division at state-run Korea Creative Content Agency.

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More specifically, investors from Asia's economic dragon are using their financial clout in South Korea's entertainment industry so that movies and TV shows increasingly cater to Chinese tastes. Although the Chinese seem to be muscling into South Korean media, the cross-border collaboration is proving there are mutual advantages for both countries.

"The inflow of Chinese investments into the Korean entertainment industry [has] synergistic effects," Lee said. "There are now opportunities for both Chinese and Korean entertainment industries to grow together by co-planning, co-investing, co-distributing, and co-developing marketing strategies."

The most popular form of investment has been to acquire major company stakes. Alibaba announced last August it would invest 100 billion won in Korean films. Separately, Chinese media and contents company Huace pledged $50 million in October to become the second largest stakeholder of Korean movie studio NEW.

Elsewhere, China's Juna International just bought 3.4 million shares of Chorokbaem Media, Korea's largest drama production company.

China's taste for the dramatic

A scene from "My Love From Another Star," the most popular Korean drama in China
Source: My Love From Another Star

Although Korean companies can use the capital to boost production budgets and quality, Chinese companies stand to benefit from "the superiority of Korean entertainment" production that has managed to garner so much global demand, Lee said.

The influx of capital is driven by high demand for Korean content in major cities like Beijing and Shanghai, according to Lee. For instance, the 2013 Korean smash hit online drama "My Love from Another Star" sparked a cult craze in China and amassed a whopping record viewership of nearly 3 billion—more than double China's population of 1.3 billion.

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The high demand is inflating costs for distribution rights, increasing this revenue stream, according to Chris Jung, chief operating officer of Showbox Mediaplex, one of the largest film distribution companies in South Korea.

Until last year, cost for distribution rights of Korean dramas was roughly $10,000 per episode, but it has soared to $100,000 to $200,000 per episode this year on the back of surging popularity, Jung said.

Mike Suh, vice president and head of international business at Korean CJ E&M, agreed with Jung, saying that according to CJ's partners in China, the prices of Korean dramas increased six to 10 times over the past year.

"It seems the prices of Korean drama have increased due to intensified competition among online video sites in China," Suh said. "To attract traffic on their sites, they are competitively seeking well-made Korean content which share similar cultural background and feature popular Korean stars in China."

Is this a Korean or Chinese movie?

More aggressive Chinese players choose to partner with Korean companies to co-produce content, rather than to buy company stakes outright.

Showbox's production of the 2012 movie "Mr. Go" involved a 25 percent investment from Chinese film production company Huayi Brothers, Jung said. Showbox accepted the partnership "not because we needed the money but because we wanted to make this film as a Korea-China co-production, so that this movie can be released in both markets," and to learn how to become a global player, he said.

A Chinese star was cast for one of the leading roles in "Mr. Go" but Jung does not believe Chinese investments dilute the representation of Korean culture and identity in movies and dramas. Targeting multiple audiences allows the movie to "be a Korean movie for Korean audience, but at the same time, Chinese movie for Chinese audience," he said.

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Before China's interest in South Korean entertainment, Japanese actors or actresses were heavily recruited and cast as a strategy to attract a Japanese audience, Suh said. Increasingly, use of Chinese or Korean stars who are popular in China helps advance the same strategy: growing a global fan base.

The ties that bind

The free trade agreement signed in early November by China's President Xi Jinping and his Korean counterpart, Park Geun-Hye is expected to increase the speed of Chinese investment in Korean media even more. The trade deal clarifies film production and copyright terms that will help remove investment barriers.

A film co-production deal was also signed by the two countries in September that will allow Korean films funded by Chinese investors to be acknowledged as China-produced films, Lee added. "This would increase the speed of partnerships between Korean companies with film production skills and Chinese companies with abundant investment budgets," he said.

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This pact will allow Korean companies to avoid China's import quota limits.

Some Korean companies are prompting alliances with new media types. CJ is working on projects with Chinese digital media streaming services such as iQiyi and Youku that could stream CJ's entertainment content online—the most popular platform that Chinese viewers use to access Korean content.