The phenomenally successful share floatation of Korea's CJ Entertainment earlier this year raised expectations of a film-fuelled boom reminiscent of Germany's Neuer Markt in the late 1990s.

As the nation's first film-related company to issue an IPO, CJ Entertainment broke new ground. The company's share price at first doubled, with investors citing the strength of the local film industry as grounds for their optimism. CJE's current share price is up a massive 182% on its pre-floatation value.

In recent years the Korean entertainment industry has drawn great interest from local investors, many of whom have already invested directly in film production through so-called "netizen funds" and the Hana Cinema Trust Fund (see Screendaily, November 28, 2001). With a 28% rise in overall admissions in 2001, together with a local market share estimated to surpass 49% nationwide, it would seem a perfect time for other Korean companies to go public.

Yet contrary to expectations, it does not appear that other Korean film companies will be rushing to follow CJ Entertainment's lead - for the time being, at least. Last year such firms as Kang JeGyu Films, Digital Dream Studios, Starmax, SRE Entertainment and Tube Entertainment all announced that they were preparing to go public. Much of the money was said to be earmarked for local production, in the hopes of netting a blockbuster like Friend (2001), which grossed $44m at home on less than a $2m budget.

Starmax was the first Korean film company to register with KOSDAQ on May 11 last year, but it failed the exchange's initial review. SRE Entertainment registered in September, but then withdrew before finishing the review process. Tube Entertainment, meanwhile, was bought out by CJ Entertainment in early November. Kang JeGyu Films and Digital Dream Studios still aim to go public, but have yet to register with the exchange.

Indeed, with venture capital still supportive of the industry, and given the generous financial support provided by the Small Business Corporation and the Korean Film Commission (KOFIC), film companies feel little need to rush into an IPO. Since most major Hollywood features are distributed directly or through CJ Entertainment (an original shareholder of DreamWorks SKG), local companies rely on domestic features for profits, and in this they have found plenty of assistance.

Much of today's film financing comes out of special cinema funds established by venture capital firms for the production of multiple titles over a period of several years. KOFIC or the Small Business Corporation will often contribute 10-40% of the fund's total amount.

From a two-year period up to September 2001, KOFIC supplied $10.8m through these funds, with the Small Business Corporation providing a further $37m. "It's like free money," says Stephen Kim, Principal of Samsung Venture Investment's Media & Entertainment Division. "Everybody's rushing to set up these funds."

Meanwhile, Korea's largest film studio Cinema Service had considered an IPO in the past, but abandoned its plans in February 2001 when it was bought out by Locus Holdings, a publicly-listed company. In 2001 Cinema Service captured a leading 22.6% market share on the strength of its domestic features, compared to runner-up CJ Entertainment, which netted 14.7%.