C CGV, a company that is one of the world’s top ten cinema exhibitors and is also a major cinema technology developer, is to raise close to $800 million in order to shore up its finances after a devastating COVID era.
The company operates the largest cinema chain in its native South Korea and has significant numbers of screens in Vietnam, Indonesia, Turkey and mainland China, with smaller operations in Myanmar and the U.S.
It also owns CJ 4DPlex, which developed the technology for films to be augmented with practical effects, including motion-seats, wind, strobe-lights, simulated-snow, and scents. In addition, its ScreenX system provides screenings that use the side walls of an auditorium to create a 270-degree sensory experience.
The company said on Tuesday that its board of directors had approved a capital increase of KRW570 billion ($445 million) that will take the form of a rights issue to ordinary shareholders. The diversified foods to fertilizers conglomerate CJ Group is CJ CGV’s largest shareholder, but the cinema company has its own share listing. CJ Group said that it will take up its right and subscribe for the offer.
Separately, CJ CGV is seeking a further KRW450 billion ($352 million) of in-kind investments. These again involve CJ Group and investment in the CJ OliveNetworks tech subsidiary and are subject to court approval.
Before the pandemic, South Korea had one of the world’s highest rates of per capita cinema attendance, making the mid-sized nation with some 50 million population, the world’s fourth largest box office market.
The country was badly hit by stringent government disease control measures, causing cinema operators to lose hundreds of millions of dollars during 2020 and 2021. Some venues have been shuttered permanently, others have been converted into gyms and climbing walls.
It has been reported in Korean financial media over the past two years that under-pressure CJ Group had sought to find private equity buyers for CJ CGV and its Tous Les Jours bakery chain. But these both came to naught.
In North America, AMC continued to suffer losses through 2022. Cineworld, a European giant which owns the U.S. Regal chain, is currently in Chapter 11 protection from its creditors.
And while, attendance at concerts and other live-events have bounced back, audiences in Korea have only warily returned to cinemas. That may be a reflection of the multiple ticket price increases that cinema chains have forced through in an attempt to recoup lost revenues, or Korea’s highly competitive streaming market which offers massive choice of content at lower prices.
CJ CGV says that it is embracing the changes. “Although moviegoing is recovering, demand for alternative content such as special theaters such as 4DX and ScreenX, live concerts, and sports events is increasing,” said CJ CGV. Korean cinemas have experimented with multiple forms of alternative content from BTS and other K-Pop concerts to live sports events and this year’s 420,000 alternate content spectators already exceed 2022’s total. Reissues of classic films have also become more frequent.
“Participation in this capital increase is not simply a transfusion of money due to deterioration. It will help [CJ CGV] become better entrepreneurs,” said a CJ Group spokesman.
Diseases control regulations in Korea were lifted 13 months ago at the beginning of May 2022, but the box office market has not yet normalized. According to data from the Korean Film Council’s Kobis tracking service, gross revenues in the first five months of 2023 stood at KRW463 billion ($363 million). That is a 57% improvement compared with 2022. But the figure lags 40% behind the KRW775 billion achieved between January and May in pre-pandemic 2019.
CJ CGV’s overseas operations present a mixed picture. It has been reported that in Indonesia and Vietnam cinema box office has recovered to pre-pandemic levels, and in Indonesia exhibition rival Cinema XXI is now touting an IPO. But the huge China market is still struggling for normalcy.
