Cj Entertainments International Strategy Media Essay

It was in 1990 that CJ first fully entered the overseas market by building lysine and synthetic seasoning plants in Indonesia. In the 1990s, CJ transformed itself from a food company to a life and culture enterprise. It diversified itself from being a former Samsung Group spin-off by expanding its pharmaceutical, bio and chemistry businesses. CJ became independently managed in 1993 and soon entered the food service and visual industries.

In 1996, CJ formally launched the Cheil Jedang Group. Since then, CJ has expanded its businesses into diverse fields such as media, entertainment, finance and information & communication businesses. CJ currently practices a very centralized business structure and organizes itself into 4 core business groups: food and food service, bio and pharma, entertainment and media, and home shopping and logistics. CJ has globalized by expanded its business internationally into China, Japan, South East Asia and Australia, US and Europe.

CJ Entertainment’s main goal is to invest, produce and distribute feature films. CJ Entertainment’s network expands far throughout the industry and is extremely diversified owning the rights to a vast number of films, running networks of multiplex cinemas, and distributing a wide selection of video and DVD titles.

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The company started out as the Entertainment Division within Cheil Jedang in August 1995 but renamed itself CJ Entertainment in September 1996 in conjunction with the distribution of its first film “Secret and Lies”. In April of 1998 the company opened their first multiplex theater, CGV KangByun 11.

Organization:

CJ Entertainment organizes its structure into 4 divisions: Management Support Division, Film Business Division, International Business Division, and Performing Arts Division.

Within these official division and business subcategories, the most significant business units are as follows:

Production:

CJ Entertainment has aligned with Domestic key production houses such as Sidus, Film Bom, Myung Film. CJ Entertainment invests in films and supports film directors to secure long-term market growth. In addition, through its 130 million dollar investment as a founding partner in Dream Works SKG in February 1995, CJ Entertainment has aided in production of countless DreamWorks films and holds exclusive distribution rights DreamWorks films in Korea.

Investments:

CJ Entertainment tries to minimize risk and maximize profit though its investments. As a major presence in Korea’s film industry, it gets deeply involved in managing whole production processes and through financing Korean films.

Distribution:

CJ Entertainment has the largest film distribution channel in Korea which is the key strength of this company. It distributes domestic as well as foreign films within Korea. Its film distribution network consists of more than 400 theaters nationwide.

The Multiplex:

In 1996, CJ Entertainment established its multiplex, CJ CGV through a joint venture with Australian based global multiplex theater chain, Village Roadshow, and Hong Kong’s Golden Harvest. It is currently operating 17 multiplex sites domestically. These multiplexes have created a new movie-going culture and experience Korean consumers causing many other theater companies to follow suit. The establishment of CGV theaters has helped grow market demand for films throughout Korea which has directly benefited CJ Entertainment’s Film Production Division.

Other Businesses:

Other than within the film industry, CJ Entertainment is expanding into new businesses like musical performances, online games, animation and talent management. Furthermore, CJ Entertainment also sells DVDs and is also involved in character licensing, TV production, online move portals and Cable TV programming as well as music production.

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CJ Entertainment’s International Strategy:

CJ Entertainment has been successfully internationalizing its business and is known throughout the entertainment world as a Korean entertainment powerhouse. CJ Entertainment is globalizing its business in three ways: by distributing foreign films in Korea, by distributing Korean films abroad, and by forming joint ventures with and investing in foreign production companies to produce and distribute foreign films in foreign markets.

Foreign Film Distribution in Korea:

CJ Entertainment’s first strategy for globalization is distributing foreign films in Korea by collaborating with overseas firms. They are also importing musicals from abroad into Korea.

DreamWorks, Paramount and CJ Entertainment:

CJ Entertainment has made strategic alliances with overseas film production companies and studios so that they have rights to distribute their foreign films in Korea. Currently they have exclusive rights to all DreamWorks and Paramount films, which are both large and powerful studios in Hollywood.

DreamWorks Pictures, also known as DreamWorks, LLC, DreamWorks SKG, DreamWorks Studios or DW Studios, LLC, is an American film studio which develops, produces, and distributes films, video games and television programming. DreamWorks began in 1994 as an ambitious attempt by media moguls Steven Spielberg, Jeffrey Katzenberg and David Geffen to create a new Hollywood studio. [1] An alliance was created between CJ Entertainment and DreamWorks when Cheiljedang invested $130 million in the studio in 1995 as a founding partner. [2] (Right after this investment, Cheiljedang established its own entertainment division, CJ Entertainment.) That is, CJ Entertainment became an investor acquiring shares of DreamWorks in the early stages of its formation which distinguished it from the usual alliance between a film company and distributor. Through this alliance DreamWorks could establish a base of Asian distribution and CJ Entertainment could build up the foundation of distribution network in the United States.

In 1997, CJ Entertainment distributed the first DreamWorks film, “Peacemaker”, drawing 70 million moviegoers in Korea. Since “Peacemaker”, CJ Entertainment has been distributing a number of films successfully, such as “Deep Impact”, “The Prince of Egypt”, “Gladiator”, “Shrek”, “Beautiful Mind”, “Catch me if you can”, and “Transformers”.

“Transformers”, which is distributed by CJ Entertainment in 2007, is ranked at number one among foreign movies which have showed in Korea according to statistics by Korean Film Council, which has attracted about 7.44 million audiences. In addition, animated movie “Kung Fu Panda” of DreamWorks is the most watched animated film in Korea and drew around 4.67 million spectators. [3] 

On December 2005, CJ Entertainment got to sign a contract with Paramount as Paramount purchased DreamWorks SKG in a deal worth $ 1.6 billion. [4] According to this contract between Paramount and DreamWorks SKG, CJ Entertainment has distributed films from both companies into Korea. It also includes the exclusive distribution rights which UIP Korea (United International Pictures) had owned before. Market share of UIP Korea in 2006 was 7.6% in Seoul ranked at 5th and out of total audiences. Also it had occupied 19.2% of market share on foreign films ranked at 2nd. After UIP Korea lost its distribution rights with Paramount, however, market share of UIP Korea in Seoul decreased to 3.5% in 2007. At the same time, market share of CJ Entertainment in Seoul went up and it took the first place in 2007 accounting for 29.7%. Market share of CJ Entertainment on foreign films in 2006 has been 6.0% ranked at fifth place. Since the start of distributing films for Paramount, its market share on foreign films increased to 24.2% ranked at number one. As the statistics says, getting exclusive distribution rights from Paramount brought about big positive effect on CJ Entertainment’s market power.

CJ Entertainment

UIP Korea

Total films

Foreign films

Total films

2006

Market share

23.2%

6.0%

7.6%

Rank

1st

5th

5th

2007

Market share

29.7%

24.2%

3.5%

Rank

1st

1st

8th

Distributing musicals in Korea:

Beginning with musical, “Cats” in 2003, CJ Entertainment has also distributed musical performances into Korea, such as “The Phantom of the Opera”, “Jekyll and Hyde”.

Distributing Korean Films Abroad:

CJ Entertainment expands Korean film distribution overseas using 4 strategies: selling copyrights, direct distribution, airing Korean films and television programs on foreign television channels, and expanding CGV theaters abroad.

Selling Copyrights: [5] 

Though selling copyrights may not gain as much profit as directly distributing films abroad, because of the large risk associated with direct distributing foreign films CJ adoption the strategy of selling copyrights to gain profit while minimizing risk. Their copyright-selling strategy can be divided into 2 parts; selling original film copyrights and selling copyrights with permission to remake the film.

CJ strategy in selling original copyrights of Korean films by taking advantage of the Korean cultural boom. (Korean wave culture or Hallyu) This cultural wave is especially active in Asian countries so CJ has been most successful in selling their original versions of copyrights in other Asian countries.

On the other hand, in the case of selling copyrights meant for remake, CJ Entertainment tends to target the Hollywood film market. Hollywood is the biggest film market in the world but as ideas have starting to run dry, Hollywood studios and production companies have begun to investigate the Asian film market to come up with fresh and exotic film ideas. Numerous Korean copyrights were sold and achieved success in the Hollywood film market including “Il Mare”, which was remade in Hollywood as “The Lake House.” Korean films “Old Boy” and “My Sassy Girl” currently have remake copyrights currently held by Hollywood studios.

Direct Distribution: [6] 

Though a direct distribution strategy has a higher risk than selling copyrights and has minimum guarantees, it is impossible for CJ entertainment to avoid this kind of risk in expanding business in the international market. It will be costly to set up the distribution network for short term, but in the long term perspective, this strategy offers more of a guarantee that there will be channels available to allow their movies to be distributed continuously. CJ entertainment chose this strategy of direct distribution as the primary strategy to target Japanese market with the release of “The King And The Clown” even though they could have choose to just sell the copyright. Because they distributed the film themselves CJ made a higher profit.

CJ Entertainment is actively trying to expand its distribution of Korean films abroad and is currently exporting to Korean films to over 20 countries around world in Europe Asian, and the Americas. CJ entertainment directly distributes mainly in Japan, China and the United States focusing its American distribution in conjunction with DreamWorks SKG. CJ Entertainment and DreamWorks’ relationship is very strong and DreamWorks has agreed to help CJ market its films in America more aggressively.

Targeting the Home-Video and Television Markets: [7] 

CJ entertainment releases many Korean movies which were box office hits in the Korean market through the American cable TV and have been fairly successful. They use the strategy of putting Korean films and TV Shows on American television because the television market in the United States is quite big unlike Korean television market and in general television audiences are much quicker at following consumer trends than film audiences. Especially in cities with a high population of Korean immigrants, TV stations that have some Korean programming can be successful as many Korean-Americans watch Korean programs on TV to feel more tied to life back “home”. Currently, MBC, KBS, and, SBS have program offerings in American. CJ Entertainment operates channel “CGV” which is Korean movie cable channel in the US offered in select markets.

Launching CGV Multiplex Internationally: [8] 

CJ CGV, the movie theater affiliate of CJ Entertainment, has recently been expanding its theaters and has opened three multiplexes in China. Through expanding Korean multiplexes in China, CJ is hoping to create a foundation for a development and distribution network by setting up this operating system in China directly. They hope that the multiplexes can play a role as a bridge to connect Korean and Chinese culture as well as further spread the interest for Korean films further supplementing the “Korean wave culture” in the Asian film market.

In the future, CGV plans to expand its business to the other big cities in China such as Beijing or Shanghai, and within 5 years plan to set up as many 30 multiplexes. However, business in China is not proving to be as easy as once thought because of the Chinese film industry developing so fast. Thus, CJ Entertainment is currently trying to pursue a luxury image and one of high quality to differentiate itself from its Chinese rivals. One of its CGV theaters, a joint venture between CGV and a Chinese partner, was recently recognized by the Chinese government as the nation’s best-quality theater.

Based on the Korean culture boom and due to their success in China, CJ Entertainment and CGV plan to open additional international sales in other Asian countries such as Vietnam, India, and Japan. They have recently also open a theater Los Angeles to cater to customers in Koreatown.

Joint Ventures with Foreign Studios:

One of CJ Entertainment’s main international strategies from the beginning has been to invest in foreign production companies. By doing this CJ’s hope has been to be able to invest in foreign film markets and make profits without having to risk releasing Korean films in foreign markets as demand is not that high. CJ has focused on creating ventures with and investing in studios mainly in the American and Japanese markets as they have the most profitable film industries.

America:

CJ Entertainment starting out investing in the American market by investing in the start-up of DreamWorks SKG. Since CJ’s initial investment of $130 million DreamWorks has grown to be one of the world’s most profitable and respected movie studios. Because of CJ’s investment into DreamWorks early on, it was actually able to be a founding partner and now gets profits every time the studio makes a successful movie. This deal allowed CJ Entertainment to gain profit and recognition allowing it to further invest in other American film companies.

CJ Entertainment has recently been striking up more deals and joint ventures to attempt to gain a larger network, financing, and distribution channel in the United States. CJ has recently signed a development deal to develop and produce films for four years with 1949, and production company run by Chris Columbus who has directed such films as “Home Alone”, “Harry Potter and the Sorcerer’s Stone”, and “Rent”. In November of 2009, CJ Entertainment formed a deal with Fortissimo Films, an international film sales and financing company. This deal was not just about production but allowed CJ access to Fortissimo’s fast film libraries for use on its television stations back in Korea.

Apart from investing in and making joint ventures with actual production companies, CJ Entertainment is becoming more active in the Hollywood film industry by investing in individual films themselves. In October of 2009, CJ became co-financier of “Dino Mom”, an animated feature film directed by John Kafka, the man who worked on both “The Adams Family” and “Rugrats” series.

Japan:

CJ Entertainment’s focus on investing in the Japanese film market has been fairly similar to that of its investment in Hollywood, to form relationships in networks within the market so that one day CJ can be a successful and dominant player.

As the Japanese and Korean film markets are more similar than the that of the markets of Hollywood and Korea, CJ has been able to directly distribute its films without having to make joint ventures with Japanese companies. CJ has recently started to, however, in order to make distribution easier as well as tap even more into the profitable Japanese film market. In April 2010, CJ Entertainment announced that it was going to create a joint venture with Japanese entertainment company, J-Toy, which owns and operates Japanese multiplexes and is affiliated with Japanese film studio, Toei. The joint venture is creating the company, CJ Entertainment Japan, which plans to produce 4-5 multinational films a year. In addition, CJ hopes to distribute over ten Korean films a year into the Japanese market and keep production running at Toei to produce an additional 5-7 Japanese films a year for distribution in Japan and Korea. On the subject of the merger CEO, Katherine Kim, said, “The company signals the start of [CJ’s] global management…We’re confident that the combination of CJ’s distinct contents and T-JOY’s revealing platform capacity in Japan will bring new order and conventions to the world’s second-largest film market.” [9] 

Conclusion:

Our conclusion I regards to CJ Entertainment’s International Strategy is that they are doing an amazing job thus far. Though the Korean film industry is currently popular and achieving success, we believe that it has been very smart for CJ to invest in overseas film markets that are more stable and consistently success to help the company manage risk. We also think that it was very smart of CJ Entertainment to form distribution relationships with many foreign studios as it early on signifies CJ as a friend not rival to major studio powerhouses. As CJ’s presence abroad grows, they may not face as much competition as a studio that just jumped into a foreign market because for instance Paramount would not want to stomp over CJ in the American market for then they might loose distribution in South Korea. We believe that CJ is doing all the rights things but have a few suggestions for their future growth.

Continue to Invest in Foreign Studios:

We believe that the smartest thing CJ Entertainment could do is to invest further in foreign studios, production companies, and movies. Not only does this allow for CJE to gain more profit, but it allows the company to form more relationships that it will need to be a global entertainment player. The film and entertainment industry is very dependent on relationships and respect and if CJ keeps investing in foreign studios and jointly producing successful films it will gain more respect and power in the industry and will eventually be able to operate successfully abroad without the aid of joint ventures. Operating abroad in this fashion will gain the most profits.

Expand More CGV Multiplexes Overseas:

We believe that in expanding more CGV theaters abroad it will be easier to distribute CJ Entertainment and CJ Entertainment affiliated films. Not only this, but we believe that the theaters themselves will be successful, especially in the U.S. market. CGV theaters and multiplexes in general offer the movie-goer an experience that extends past the viewing of the actual film. Currently in America, theaters of this caliber are not offered but demand should certainly be there. We believe that CGV theaters should be expanded into the states as a luxury theater that people want to spend an evening in. The “experience” of going to see a movie is what many entertainment critics say has been lost in the American market and CGV could bring that back. If successful, film critics may highly praise the theaters and CJ bringing even more respect for the company.