Only film investment anddistribution functions will be left under the banner of CJ Entertainment whilethree lucrative subsidiaries - television arm CJ Media, exhibitor CJ CGV andonline arm CJ Internet - are being moved into a holding company to be takenover by parent company CJ Corp.
CJ Corp stated that thechange, which is subject to shareholder approval, would enablethe group to "aggressively invest in the three main growth businesses" - CJMedia, CJ CGV and CJ Internet.
Stock market analysts seethis as an attempt by CJ to remain competitive in a diversified environmentwhere major telecoms KT and SK Telecom are investing in film and media. CJEntertainment is understood to have relatively small funds and returns, encumbering it in its development of the three businesses.
Last year saw CJEntertainment phase out of Korean film production to focus on investment,distribution and globalisation. Now industry pundits are voicing concerns thatwithout the substantial moneymaker and backbone of CJ CGV's multiplexes, CJEntertainment will not be able to finance as many films in the future.
"There's been a lot of speculation,"Mark Shaw, CJ Entertainment's CFO and head of International, told Screendaily. "But we will be investingin more films in 2006 than we did last year." In 2005, CJ invested in 19 filmsin total.
Shaw describes thede-listing move as "a step back in order to huddle up and provide the bestpackage to represent the company's full value" rather than having to answer toshareholders every time "a month-to-month fluctuation occurred depending onwhether a film does well or not."
With new offices in LA and
Whether or not there is achange in CJ Entertainment's funding power, Kim Mi-hyun, head of the KoreanFilm Council's research and development department says: "No lack of money orinterest is coming into the film industry from different sectors like thetelecoms. A change in CJ Entertainment's situation might not have that great aneffect on the industry as a whole."
On the other hand, with theseparation of distribution and exhibition within CJ, more competitive, non-CJfilms might have a better opportunity to be screened in CJ CGV theaters, "whichcould be a healthier development for the industry," says Kim.
The corporate announcementcame after a year in which CJ Entertainment's main competitor Showbox toppeddistributor rankings nationwide with 33 million admissions and the top threefilms of the year. CJ Entertainment came in second with 30 million, with adecreased market share across the board, even though it distributed 15 moretitles than Showbox's 24, according to an independent report frominvestor/producer IM Pictures.