21 of 28 claims filed by franchise theaters

Restructuring plan due Dec. 1

A meeting of film industry stakeholders held in July in connection with the launch of Megabox Joonggang's court receivership proceedings. [Ministry of Culture, Sports and Tourism]
A meeting of film industry stakeholders held in July in connection with the launch of Megabox Joonggang's court receivership proceedings. [Ministry of Culture, Sports and Tourism]

Delayed settlement payments stemming from Megabox Joonggang's court receivership proceedings have been tallied at about 2.5 billion won ($1.87 million), with 75 percent of the claims coming from franchise theaters. Industry estimates put the total unpaid amount at 23 billion won — more than nine times the officially reported figure.

Lee Jae-jeong, a Democratic Party of Korea lawmaker on the National Assembly's Culture, Sports and Tourism Committee, released documents Monday obtained from the Ministry of Culture, Sports and Tourism and the Korean Film Council, saying the Megabox receivership "is not simply a matter of one company's management but an issue that could affect the cash flow of regional franchise theaters and small and midsize distributors, importers and marketing firms." Lee added that the ministry and the council "must continuously monitor the scale of damage and the progress of the receivership, and actively review necessary countermeasures — particularly to prevent the burden from spreading to small and micro film businesses with limited financial capacity."

According to the documents, claims totaling 2.46 billion won had been filed with the Korean Film Council's damage reception center for the Megabox Joonggang receivership through the end of August. The amount covers settlement delays that accrued up to June 14, when Megabox Joonggang filed for receivership. Unpaid claims from that period have been classified as rehabilitation claims and will be repaid according to a restructuring plan approved by the court. The repayment schedule and ratio have not yet been determined.

Of the 28 claims filed, franchise theaters accounted for 21, or 75 percent. Marketing firms filed three claims, distributors two and others two. By region, Gyeonggi Province had the most franchise theater claimants with nine, followed by three in North Chungcheong Province, two each in Incheon and Jeju, and one each in Gwangju, South Jeolla Province, Busan, North Jeolla Province and South Gyeongsang Province.

Franchise theaters operate under the Megabox brand but are run by independent operators. Ticket revenue generated through carrier discounts or mobile payment services is collected centrally by the parent company and then settled with the franchise operators. When the parent entered receivership, those revenue amounts were also frozen as rehabilitation claims.

Distributor losses were tracked separately. A Korean Film Council survey of 105 distributors conducted in June found 5.26 billion won in uncollected screening fees across 52 titles from 23 companies. Distributors typically receive roughly half of ticket revenue as screening fees about 45 days after a film's run ends. Small distributors that depend on the returns from one or two films face an immediate liquidity crisis if settlements are delayed. Cascading losses to promotional, marketing and design firms are also a concern.

Industry estimates far exceed the official tally. The Distributors Alliance puts the unpaid distribution fees owed by Megabox Joonggang at about 15 billion won, based on ticketing data from the integrated box office system. The Megabox Franchise Theater Council estimates unpaid settlements across roughly 70 franchise theaters nationwide at about 8 billion won. Combined, the two figures reach 23 billion won — more than nine times the amount recorded by the damage reception center.

The franchise theater filing data also suggests the official count is an undercount. Megabox operated 72 franchise locations as of the first quarter of this year, yet only 21 filed claims. Franchise operators appear to be prioritizing the survival of the Megabox brand over recovering their outstanding receivables.

The crisis traces back to a liquidity crunch at Joongang Group. After JTBC failed on June 12 to repay 20.6 billion won in securitized borrowings, its parent Joongang Holdings, ContentreeJoongAng and Megabox Joonggang filed for receivership two days later. Seoul Bankruptcy Court granted the opening decision for Megabox Joonggang on June 30. The company must submit its restructuring plan by Dec. 1, and the repayment ratio and schedule for unsettled amounts will be included in that plan.

The film industry is calling for early repayment before the restructuring plan is approved. In July, the Film Industry Alliance — a coalition of 15 organizations representing directors, producers and other film professionals — urged Megabox Joonggang to seek court approval under Article 132 of the Debtor Rehabilitation and Bankruptcy Act to prioritize repayment to small and micro businesses. The Ministry of Culture, Sports and Tourism and the Korean Film Council have been operating the damage reception center and providing legal consultation on filing claims, but have yet to announce direct measures to shore up the liquidity of affected companies.


shee@heraldcorp.com