A Study on the Structural Changes in Korean Video Industries: Impacts of Opening The Market

Park, Namkee(Dept. of Mass Communication The Graduate School Yonsei University)

In the late 1993, as 80% of Korean population has VCR's and almost trillion won is circulated in the Korean video industry market, at this moment, Korean video industry is making more important effects than any other visual industries. Korean video industry, however, has lack of governmental protection and support for itself, in spite of the fact that increasing market demand and its predictable potential highly influence the related industry as a software industry. It is also pointed out that the employee in the video industry are short of recognition of the economic impacts and cultural implication of their products.

With the understanding of this situation, the purposes of this study are (1)to find out the circumstance and process of American visual industry's launching into Korean video industry market, (2) to analyze the present problems embeded in the market structure and market behavior in Korean video industry, and (3) to suggest the desirable improving methods.

Four research problems are set up as follows;

Firstly, in what process does American visual industry leading by Hollywood launch into the Korean video industry?

Secondly, what were the situational factors at the beginning of the Korea video industry in the 1980s, and what were the reactions taken by the Korea video industry and/or the Korean government to the market-opening pressure of the develop countries?

Thirdly, what are the influencing elements to the market structure of the Korean video industry after the openning of the market? And, what king of role does the main group of the domestic video industry take in the existing video market?

Fourthly, what are the problems in the Korean video market, and what methods can be taken to improve the structure of Korean video industry?

The results of this study are as follows.

Major productions of Hollywood(so-called Hollywood Majors) are extending their market shares in Korean video industry since 1987, when the United States started to strongly press Korean video industry to open its market. At this moment, Hollywood Majors are supplying Korean video market with a lot of their programs which mark 55% of the total amount of the current video programs in Korea, and are sharing over 70% of Korean video sailing market.

Minor video production companies have taken the initiative at the dawn of the Korean video industry. However, it has been gradually allowed that several Korean conglomeratism who have tried to increase market share of their hardwares(VCR's etc.), participate in video software(video programs etc.) industry. It can be said that the affiliated production companies and/or their subsidiary production corporations of the Korean conglomerates have heavily influenced the whole Korean video software industry and also hardware one so far. Considering the additional economic advantages of video softwares, they overcompete themselves to purchase the copyrights of the foreign video programs instead of producing their own programs. As a result, they pay Hollywood Majors the royalty which is approximately 50-60% of the their whole revenues, and, to make things wores, poor minor productions are losing their market share in this field.

American major productions are getting to change their existing license-saling system into direct distribution system. This trend is due to the fact that the size of the Korean video industry is speedily extended to make the window effect which can produce more economic profit by the introduction of cable TV and satellite broadcasting, and the owners of copyrights can secure high value-added interests and maximization of their revenue. Because of direct distribution system of American major productions, Korean copyright rates. They, therefore, are consolidating the direct dealing system through their affiliated agencies instead of rental distribution of programs.

These changes in market structure result in new tendencies as follows:

Firstly, due to the lack of funds, the minor productions tend to produce programs by OEM, sublet by American and/or Korean major production companies.

Secondly, video programs have been distributed so far under the chain structure; production companies -> distribution companies -> wholesale dealers -> rental shops. But it getting shifted to the dual structure which has only direct-sale companies and rental shops, defunctioning domestic distribution companies and wholesale dealers.

Thirdly, in the area which has over-crowded video rental shops, they are overcompeting with each other by lowering the rental price. This makes a number of small-sized rental shops be closed experiencing the economic problems.

These tendencies show that the growth of Korean video industry in quantity doesn't mean the improvement in quality, and domestic productions are losing their grounds by American major productions.

Fortunately, the direct-saling system of sell-through method is now operating to overcome the present difficulties in Korean video market. It can offer the chance to produce programs for the depressed minor productions, and it also enables them to participate in the program-saling market including the existing video-renting market which has already reached to the saturation point.

In conclusion, considering its economic value-added interest and distinctive cultural implications, Korean video industry has to develop more realistic and appropriate counterplans, and need to strengthen is competitive power.

* Key Words: Korean video industry. Hollywood Majors. opening the market, direct distribution of video programs, economic effects, cultural implications.