1 The Deal

By 1995, the Korean movie business was, to put it indelicately, in the toilet. The industry was making fewer films than ever before, fewer people were going to see them, and there were fewer and fewer theaters where you could see them, even if you wanted to. Worst of all, even when people did go, they rarely went to see Korean films—barely one in five tickets sold paid for Korea-made productions. If there were a future for cinema in Korea, one would have predicted it to be all Hollywood, all the time.

So when Miky (Mie-kyung) and Jay (Jay-hyun) Lee, a sister-brother team from one of Korea’s most prominent families, decided in 1994 to transform the nation’s movie business, the movie business scoffed. Plenty of other rich people had tried, lost a fortune, and left, humbled. What could two young people (in their thirties at the time) who headed a stodgy old sugar refinery have to teach the venerable film community? Who were they to upset the delicate balance that filmmakers, distributors, and exhibitors had created during the past three decades?

The Lees—two greatly different personalities—appeared unlikely to lead Korea’s movie revolution. Miky was a down-to-earth academic and eager movie fan, and Jay-hyun a businessman with a taste for sports cars. The sister and brother were raised as part of the incredibly rich and powerful Samsung family, more familiar with microchips and accounting spreadsheets than with celluloid and celebrities. But the Lees, whose passion for movies led to a vision of what Korean movies could become, defied the doubters, ignored the naysayers, and gambled over $1 billion on their combined abilities to revamp a dying industry.

Saving the Cinema

A generation earlier, Koreans had been huge movie lovers. In 1969, over 173 million movie tickets were sold (in a country whose population then was just 31.5 million). That year, 229 Korean movies were released, plus another 79 foreign films. From 1962 to 1987, Korean films greatly outnumbered foreign imports, thanks to a Motion Picture Law that said distributors could import one foreign film for every three local movies (one reason so many local movies were made). But, throughout the sixties and seventies, the military government censored and harassed film companies, driving most to bankruptcy. With the rise of television after 1969, people steadily shifted their gaze from the silver screen to the boob tube, and cinema attendance steadily dropped.

The Motion Picture Law was changed in 1985, quickly throwing the movie industry completely out of balance. Foreign imports grew swiftly—from thirty imports in 1985 to fifty-one the next year to eighty-five the year after that. In 1988, United International Pictures (UIP) became the first Hollywood studio to distribute its films directly in Korea, to the riotous protests of the local film industry—famously releasing snakes into two Seoul theaters during a screening of Fatal Attraction—but the change was inevitable. Hollywood distributors had the muscle and the sexiness, and by 1993, the low point, Korean movies took in less than 16 percent of the box office. The number of foreign releases kept climbing, topping three hundred a year in the 1990s, while the number of Korean films fell, dropping to forty-three by 1998.

If Koreans had little interest in their own cinema at the time, interest in their movies from abroad was positively scant. In 1995, just fifteen Korean movies were exported, bringing in a grand total of $208,679. The rare film might turn up on the festival circuit, but the country was perceived as anything but hip or cool.

One major reason Koreans were not much interested in their films back then was that movie producers were not terribly interested in them, either. The real action was in videocassettes, VCRs, and cable television. The sum of all Korean movie earnings in 1995 barely hit $40 million. That may be more money than you or I have in the bank, but for an entire industry, that is not a lot. The average Korean movie cost just 600 million won in 1990 (around $620,000 at the 2008 exchange rate). Even after large surges in costs throughout the 1990s, the average film budget still reached just 1.2 billion won by 1998.

Korea did have a screen quota, guaranteeing that every movie theater in the nation play locally made films at least 40 percent of the year, about 146 days (although a theater could reduce that to as low as 106 by showing Korean films during certain peak seasons). But the quota had little effect beyond the psychological. Before 1993, it was not really enforced. The movie business was in decline, and attendance shrank year after year. The industry simply failed to make movies that people wanted to see. After Hollywood and the international film industry won the right to distribute their movies directly, without a Korean company go-between, foreign competition grew tougher each year. With small and dwindling revenues, few investors were willing to gamble very much.

The big money was in electronics: VCRs and videotapes. Huge numbers of Koreans were not going to the movie theaters; they were, instead, watching videos at home. For much of the 1990s, the country had over 10,000 registered video rental stores, and probably just as many unofficial ones. As long as a movie made it into the theaters, it was almost assured of making several hundred million won from rental fees at the video stores, around 50 percent of a movie’s budget at the time.

Samsung, Daewoo, and LG, big appliance makers, pumped out millions of VCRs in the 1980s and ’90s. In addition, Korean companies like SKC and Saehan Media manufactured a huge percentage of the world’s videotape. Saehan Media alone accounted for 25 percent of the world market in videotape in 1997, cranking out 400 million tapes that year (exporting over 80 percent of them). SKC made about 12 percent of the world’s videotape around that same time. All these companies were investing in movies and entertainment, directly or indirectly. For example, Samsung created the video distributor Star-max in the 1980s, and from 1992 to 1995 directly invested in and produced movies through various affiliates.

Cable television as well, just started in 1994, was a popular investment route tried out by many of these conglomerates. For many years, it was an expensive flop. The big companies tried to get a piece of it anyway. Samsung had channel Catch One, and Daewoo had Daewoo Cinema Network. All bled money.

The point is, for many of the newest and biggest players in the Korean movie industry, movies themselves just were not very important. The real action was elsewhere. Korean films, neither sexy nor profitable, gave no one reason to imagine a different future.

Making these problems worse was an extremely disorganized and regional distribution system. Korea was divided into seven regions, with a small number of local businessmen controlling distribution in each. Filmmakers made movies mostly for Seoul theaters. When these movies were distributed to theaters in the rest of the country, anything could happen. Regional distributors might dutifully keep track of ticket sales and send their 40 or 50 percent back to the Seoul production house, but then again they might not. Sometimes big hits in Seoul would mysteriously underperform in other parts of the country. It was an unpredictable and at times bizarre system.

For example, back in 1994, one of downtown Seoul’s most important theaters, the Joongang Cinema, signed a deal with ShinCine Communications to distribute their film The 101st Proposition. The deal called for the Joongang to play the film a minimum number of weeks, with the exception that, should attendance drop below 1,500 people per day, the cinema could put in something else.

That same year, the film everybody wanted to see was Steven Spielberg’s Jurassic Park. The Joongang owner, like all other theater owners in Korea, was eager to get such an obvious blockbuster onto his screen. The 101st Proposition, however, was still under contract, and its attendance was not dropping below the lower limit of 1,500 people. At the time, even the biggest movies rolled out on few screens, usually just fifteen to twenty in the entire nation. In Seoul, a movie would show in only one or two theaters, so it took a long time for everyone who wanted to see a film to get in. With this much business at stake, getting the blockbuster of the year was a financial bonanza.

So the management at the Joongang took action. First they pulled their ads and promotions for The 101st Proposition, and attendance dropped a little. Next, the theater hired some thick-necked goons to stand out front to intimidate customers and prevent them from buying tickets. It did not take long for the film’s production company ShinCine to find out about this, but what could they do?

Luckily, ShinCine had good ties with many young progressives willing to stand up for Korean movies. Even in the 1990s, progressives in Korea were used to taking their lumps from the people in charge (be they government or private industry). Plenty of producer Shin Chul’s friends had recently gotten work as schoolteachers around the city, so a friend called up the teachers and invited them to bring their students to see the movie.

To further vex the Joongang, one person went to the bank and changed his regular won to thousands and thousands of one-won coins—each worth about one-tenth of a cent, still legal tender, although not in general circulation. With movie tickets costing about 4,000 won each, that added up to a lot of coins.

North Korean Monsters

One of the most memorable films that Shin Sang-ok made while he was kidnapped by North Korea was the monster movie Pulgasari about an iron-eating creature that grows from tiny pipsqueak to mountain-sized behemoth.

The students came to see the movie, carrying great bags of one-won coins, much to the consternation of the thick-necked gentlemen and their employer. By this point, the whole mess had turned into an event. The goons tried intimidating the schoolkids, which led to plenty of shrieking and mayhem. Other progressive friends of Shin-Cine came down to support the drive, such as the well-known and always politically inclined actor Moon Sung-keun (who also starred in the film). Moon stood on a chair, shouting out the importance of Korean culture and Korean movies, the need for the screen quota, and similar credos. The Joongang management called the protestors communists. It was chaos.

In the end, the Joongang got its Jurassic Park. Worried that the situation was escalating and that someone could get hurt, ShinCine’s owner/producer Shin Chul asked producer Lee Tae-won (then the top producer in Korea) to intervene. Lee negotiated with the Joongang Cinema, and they decided that the dinosaurs would get to play. In exchange, Shin was promised a prime slot for one of his movies the following summer.

The point here is that much of the movie industry was, to be polite, disorganized. At times, to be less polite, it bordered on organized crime and impending anarchy. Instead of competing to make the best movies and getting as many people as possible to watch them, the movie business was focused on protecting itself from risk—keeping costs down and competition weak. Economists call this “rent seeking” (and no, it has nothing to do with looking for an apartment). It occurs when people (or businesses or organizations) look to improve their situation by protecting their market and manipulating the rules rather than by creating wealth or trading. Basically, we’re talking protectionism. Many movie industry businessmen in Korea were not taking risks to make money. They had, instead, created a safe system, where no one risked much, but no one made much money either. That safety was little more than illusion. Year after year, the film business continued to shrivel and flounder.

If something did not change, and fast, the Korean movie business risked dying altogether.

Into this confusing and depressing mess came Miky and Jayhyun Lee. Their company CJ Entertainment was born in 1995 on the upper slope of Mount Namsan, a small mountain in the heart of Seoul, just west of the traditional heart of Korea’s movie industry, called Chungmuro. Although nobody knew it at the time, CJ Entertainment would go on to revolutionize the Korean movie industry.

Wedged between the city’s old downtown and the northern edge of Namsan, Chungmuro had, in the colonial days, once been a trendy Japanese neighborhood. But in the years after the Korean War, it morphed into the home of many of the nation’s production companies and major cinemas. Huge and ancient movie theaters lay scattered throughout Chungmuro. The Scala Theater, built in 1935, featured a majestic Italian-style façade, reminiscent of the Teatro alla Scala near Milan. Just south of the Scala sat the giant, redbrick Daehan Theater, one of the biggest theaters in Korea, built in 1955. Between the giants lurked many other theaters, of various sizes and qualities, crammed into commercial spaces and other inglorious venues.

Miky Lee, vice chairman of CJ Entertainment, at her office in Seoul.

Jay-hyun and Miky had grown up right next to Chungmuro, within a five-minute walk to the Daehan Theater. Miky Lee in particular was a huge movie addict, seeing every film that played at the Daehan. Back then, a person who went to the movies as often as she did was called a “Hollywood kid,” even though she loved films from all over the world. In fact, the earliest film she remembers seeing was the Claude Lelouch film Vivre Pour Vivre, starring Yves Montand and Candice Bergen, but she saw so many films she cannot be sure which one she saw first. When she recalls her favorites today, her eyes light up—Mackenna’s Gold, starring Gregory Peck and Omar Sharif, and the films of Olivia Hussey, like Romeo and Juliet and Summertime Killer. Not content to watch only the movies showing at the Daehan, her father bought one of the first U-Matic videocassette players (the forerunner of Sony’s Betamax), and had his friends in Japan tape movies from television and mail them to Korea. Her father liked documentaries and samurai films, but Miky loved just about everything.

In addition, her grandfather had started Korea’s first privately owned television station, TBC, in 1964, and Miky used to go there with him to watch programs, such as the variety shows, as they were being filmed. She especially remembers the singers, classic performers like The Pearl Sisters and Shin Joong-hyun. But in those early days, television ran mostly American programming, featuring shows like Bonanza, Dennis the Menace, and The Man from U.N.C.L.E.

By the 1990s, Seoul’s breakneck development was leaving Chungmuro behind. The Daehan was torn down in the late 1990s, replaced with a nice but decidedly unromantic eight-screen multiplex. The Scala limped along, a faded, peeling shell of its former glory, until, in 2005, on the verge of being declared a historical site, it was torn down and turned into a parking lot. Half of Myungbo Cinema’s screens were closed, their spaces renovated and turned into the home of MTV Korea. Most of the other small theaters in the area have long since closed. Commercial and residential areas considered hip were now far to the southeast. Even other parts of Seoul’s downtown were growing up and cleaning up. But Chungmuro had barely changed. It had grown old and run down, its small shabby buildings lining labyrinthine streets.

CJ Entertainment, however, did not emerge from Chungmuro—it grew from a location above it, perhaps symbolically. Today, CJ Entertainment resides in a shiny modern building in the flashy, cooler parts of the city’s south, but in 1995, it called Namsan home, high up in an austere, black, fifteen-story office building.

Now, this is probably a good time to add that I know many people who do not like references to the movies as an “industry” or a “business”—it’s an art, don’t you know. Sure, the movies themselves are what count, and the great success Korean films have had over the last few years required artists, filmmakers with vision and talent, and all that good stuff. However, movies cost money. Big money. Not just money to make, but money for every part of the movie process. Making prints of the films for the cinemas (around $2,000 each), convincing people to see the movie (advertising), building the large, concrete boxes where people watch movies—all of these are expensive.

What to do? There had been no shortage of ambitious businessmen looking to take the plunge into the glamorous world of movie making. After all, what’s a few tens of millions of dollars compared to the hundred millions and billions of dollars earned in manufacturing and other heavy industries? Plus, one gets to hang out with celebrities. Though plenty of rich people and big companies had attempted to take control of Korea’s movie industry, none prior to CJ Entertainment had done much more than get their toes wet. No one really took the plunge. That’s what CJ Entertainment did—it took the plunge, going deeper into the water than anyone had gone before.

Korean movie industry success required not just great filmmakers, but also great infrastructure. Creating and maintaining infrastructure, companies, and business models is perhaps not as much fun as spending time with celebrities and great directors. But it is just as necessary. Which is where the Lees and their company CJ Entertainment came in. CJ was the first Korean entertainment company to think big. Sure, several conglomerates had made tentative steps into the movie and entertainment businesses, but CJ’s entire raison d’etre from the beginning was substantive and ambitious. CJ Entertainment led the whole entertainment industry to overturn the old order (or disorder, depending on how you look at it), breaking down the regionalism and protectionism that had hobbled Korea’s movie business. Along the way, they also alienated many, pissed off some, and changed the way the entire film industry worked, helping Korea to become the cultural heavyweight it is today.

CJ Entertainment: A Pre-History

CJ Entertainment is part of the jaebeol (Korean business conglomerate) CJ Corp., a company much older than Miky or Jay-hyun Lee. Originally called Cheil Jedang, which means “first sugar factory” in Korean, the company was founded by the giant conglomerate Samsung in 1953.

The story began when Lee Byung Chull, son of a wealthy land-owner, started a rice mill in the 1930s, a project that soon went bankrupt. Lee regrouped and launched a trucking and real estate business in 1938, calling the new venture Samsung (“three stars”). This also went bankrupt. But the third time’s the charm, and by the end of World War II, Samsung was doing quite well. Lee added international trading to the company’s portfolio after the war, and grew even more successful during the Korean War. After it, Lee was one of the wealthiest men in Korea.

In 1953, Lee started Cheil Jedang, opening a sugar refinery in Busan. This was a big success, and Samsung (and Cheil) grew rapidly. Cheil also began to mill flour, and kept expanding, producing MSG, then other preservatives and food-related chemicals. From there, it naturally developed into manufacturing pharmaceuticals and other housewares. In 1954, Lee set up the Cheil Wool Textile Company, then kept buying companies and adding affiliates.

On May 16, 1961, Major-General Park Chung Hee carried out a military coup and took charge of the country. Park, former communist organizer (not to mention former teacher and former lieutenant in the Imperial Japanese Army), believed in strong government. He quickly set about reforming the nation, first politically, and, soon after, economically.

Lee at first fled Korea for Japan, worried that Park might have him in his reform crosshairs. But Lee and Park eventually reached an understanding—Lee and Samsung would work with Park and the South Korean government, promoting the projects and people Park wanted, while Samsung would get government favors and easy access to large amounts of credit. It was the birth of the Korean business conglomerate system, jaebeol. Samsung flourished, and grew faster and bigger than ever.

In the late 1960s, Samsung began to take a shine to electronics. Samsung-Sanyo Electronics started in 1969, and became Samsung Electronics in 1977. In that same year, Samsung began reverse-engineering color televisions and was soon exporting them, even before any television channels were broadcasting in color in Korea. In 1979, it also started making VCRs, and the next year microwave ovens. But the big shift at Samsung came when the company made the move into semiconductors. In 1974, it bought half of Korea Semiconductors, its first move into microchips, but it was not until the 1980s and the computer revolution that the scope and significance of this business became apparent.

By the mid 1980s, Samsung was already huge. The “Miracle on the Han,” or “Korean Tiger”—choose your cliché—meant that South Korea was no longer the poor, ravaged nation it had been following the Korean War. Incomes soared, jaebeol grew bigger and bigger, and Samsung did, in many respects, lead the way.

Jay-hyun and Miky Lee had grown up firmly a part of the Samsung family, the children of Lee Maeng-hee, eldest son of Lee Byung Chull. Miky was born in Knoxville, Tennessee, where their father attended graduate school in the late fifties and early sixties. The family moved back to Korea when Miky was a toddler (too young to remember anything about life in America). Jay-hyun was born soon after the return to Seoul. The two grew up in a life of privilege, in their grandfather’s large house near Chungmuro, along with many cousins and other relatives. Miky Lee was the eldest, but Jay-hyun Lee was the eldest male. Following Confucian tradition, he was raised to be the head of the family, while his sister was free to pursue her studies around the world.

Space Kimchi

With Yi So-yeon set to become the first Korean to travel into space in April 2008, the Korean Aerospace Research Institute made sure she would be able to take kimchi with her. It was no easy feat–usually kimchi is teaming with bacteria, but for space travel, scientists had to find a way to eliminate them from the kimchi.

Their father had pretty much retired in the seventies, so it was important to their grandfather, Lee Byung Chull, patriarch of the clan, that his grandson, the heir, be immersed in the family business as soon as possible. Jay-hyun attended prestigious Korea University, where he earned his BA degree in law (he is one of the few jaebeol heirs of his generation who never studied abroad). After graduating, he worked for two years at the Seoul branch of Citibank before coming to Cheil Jedang as a manager in 1983. Jay-hyun started in the finance and accounting division, the center of the family business, and moved around the conglomerate over the years.

Lee Byung Chull’s death in October 1987 led to a period of some uncertainty within the family as the various branches vied for control of the giant conglomerate Samsung. But by January 1988, Lee Byung Chull’s third son, Lee Kun-hee, had come out on top, ascending to chairmanship of the company. Lee Maeng-hee was given control of Cheil Jedang in 1988 (then known by the not-so-sexy name of Cheil Food and Chemicals), as a kind of consolation prize for not getting Samsung, the main focus of the family business.

Cheil was a staid, boring wing of Samsung—dependable, profitable, and not very exciting, certainly a world away from being an entertainment powerhouse, and far from being hot or happening. Food and pharmaceuticals were plain and dull—profitable, but only barely so (in 1994, Cheil netted a profit of just $9.4 million on $1.59 billion in sales). But it was here that Jay-hyun and Miky Lee would make their mark.

The business chugged along for the next few years in a relatively uneventful manner until 1993, when the family decided it was time to split up the company’s businesses and let each branch go its own way. Lee Kun-hee’s younger sister Lee Myung-hee took control of the Shinsegae department store chain. Lee Maeng-hee took Cheil Jedang, and abruptly passed control on to Jay-hyun. Now free of Samsung, Cheil suddenly had the freedom to pursue just about any option.

So Lee Jay-hyun (with his executives and advisors, of course) sat down and began to map out the company’s future. Despite strong pressure from the executive board to concentrate on Cheil’s traditional core, Lee decided that if Cheil were to thrive, it would need to diversify. With a foundation in confectionary, Lee thought it natural to continue in consumer-focused businesses, so, squaring the circle, he diversified by staying in consumer businesses: health, convenience foods, and entertainment.

On the entertainment side, Lee decided that, in the decades to come, making stories (original content, to use today’s business jargon) would be the ultimate driver of a whole array of new fields. Korea’s work-work-work mentality had pulled it up from a poor, post-war Asian nation to a thriving, middle-class country. It was now time to begin enjoying life. People were just beginning to work less, which meant they had more leisure time. Intellectual property, media, and creative content were the core of the future, even more than the hardware and technology Korea made for export. Whatever Cheil Jedang did next, making stories would allow the company to make its own future.

The Foundation

At the time, Samsung and several other jaebeol were already quite involved in the entertainment business. Samsung owned two television stations, a music label, and distributed the movies of Hollywood studio New Regency Productions (in which it owned a $60-million, 7.4-percent share). Daewoo distributed New Line titles in Korea. But both were minor studios in Hollywood, and both were charging their Korean partners extremely high fees. Lee Jay-hyun saw two major flaws in how the conglomerates approached the entertainment business: (1) their scope was entirely too small and timid for companies of their size, and (2) their budding entertainment divisions were already operating at significant losses. They were fragmented, and they had low budgets and low standards.

If a major company were to enter the entertainment industry, Lee thought, it had better enter as a major player. It made no sense to emulate the small players. He needed a grand approach that could take advantage of his scale and bring something new to the table. He also saw that the company needed credibility. To many people, there was no obvious or natural connection between being a food and pharmacy maker and being in the entertainment business. Why should anyone take them seriously? He would have to create a high-profile connection for Cheil to command respect in the industry.

Lee determined that Cheil could afford $1 billion in capital to launch the new venture, a sum he discovered didn’t go far in 1994 Hollywood. Universal Studios was priced in excess of $10 billion. Even minor production houses could cost $100 to 700 million—affordable, but too small to make a major impact. Nevertheless, he was convinced that a big splash was the way to go. Undeterred, he kept looking for options.

Fortunately, at the time, Lee’s older sister Miky was in New York City working for Samsung, looking for new businesses the company might invest in. Since earning her BA in 1981 at Seoul National University, Korea’s top school, Miky had for the next decade continued studying, first Chinese language and linguistics at Taiwan National University, then Japanese at Keiyo University. She earned an MA in Asian Studies at Harvard University in 1986 and worked there as a teaching fellow, then enrolled in Fudan University in Shanghai to work on her PhD.

But before finishing her doctorate, Miky decided to join the family business, and moved to their new Samsung America office in New York (well, across the river in New Jersey, but why quibble). She was the one who, in November 1994, heard about a tantalizing new movie studio that was being set up by some of the biggest names in the entertainment industry—Steven Spielberg, Jeffrey Katzenberg, and David Geffen: Dreamworks SKG. And they were looking for investors.

Dreamworks was created as a haven for artists, a place where movie creators, not the accountants, had the final say. Unfortunately, many people wanted to invest in Dreamworks and rub elbows with some of the biggest names in global entertainment. Hundreds of people. From Middle-Eastern oil tycoons to American entrepreneurs. The plan at Dreamworks was to build a $2 billion capitalization base. The three founders would throw in $33 million each, and $1 billion would come from a line of credit at Chemical Bank, leaving a shortfall of $900 million. Lee Jay-hyun thought it was an ideal opportunity—more credibility than Cheil could have imagined, and for a reasonable price. Spielberg, Katzenberg, and Geffen knew how sexy their idea was and how much people wanted a piece, so they were determined to keep artistic control. As a result, they were offering a very one-sided deal—they would take your money, but you could have no say in how the company was run. Pay your money and keep quiet.

That Cheil was an Asian company did not help. In the early 1990s, Japan was the great boogeyman of business, a rising juggernaut remorselessly buying up American companies and real estate, forcing Michael Crichton to write really, really terrible books. The fear was particularly acute in the movie industry. Sony bought CBS Records Group in 1988, then Columbia Pictures Entertainment for $3.4 billion in 1989 (renaming it Sony Pictures Entertainment in 1991). Matsushita Electric, an electronics manufacturer, bought MCA-Universal in 1990. Both companies were considered conservative, ruled by suits and the bottom line, with little regard for Hollywood’s art (of losing money) and history (of losing money). In many ways, Dreamworks was a reaction to those deals.

Before the Lees could even begin to put together a proposal, however, there was another giant hurdle to overcome: family. Cheil Jedang might have separated from Samsung, but they were all still part of the Lee Byung Chull family, and family courtesy required them to show Dreamworks to Lee Kun-hee and Samsung first. Samsung too liked the opportunity. So Lee Kun-hee and his executives flew to Los Angeles in February 1995 and met at Steven Spielberg’s home to make their $900-million pitch in person. But things fell apart. Through an interpreter, Lee talked about what Samsung was best at: semiconductors. And more semiconductors. “How are they going to know anything about the film business when they’re so obsessed with semiconductors?” Spielberg recalled in Time magazine. “A complete waste of time.” Already nervous about the size of the investment and the language and cultural barriers, the Dreamworks team said no. Samsung, unhappy that Dreamworks had refused to hand over creative control of their nascent company, wasn’t exactly banging down Spielberg’s door anymore either.

Clazziquai

Kim Sung-hoon (a.k.a. DJ Clazzi), Alex Chu, and Choi Horan were rejected by all the major labels in Korea for not being commercial enough. But today, Clazziquai has grown into one of Korea’s most popular indie groups and is now branching out into Japan and Taiwan.

Now Cheil Jedang had the freedom to make its attempt. Miky Lee left Samsung for Cheil, and soon Katzenberg approached them about making a deal. At first, the Dreamworks’ founder just talked business, making sure the Lees really understood their plans and goals. This was a business deal, and it was vital to make sure everyone was on the same page. Miky and Jay-hyun learned how films in America made money—how, at the time, international box office was worth about as much as that of North America, and home video was twice as much again. They learned about music labels and television production. “We knew we would have to create an entire industry,” says Miky Lee. “I didn’t know anything about the entertainment industry then. I was just excited to be working with Steven and David and Jeffrey. They really were a dream team.”

But Miky and Jay-hyun Lee were also able to impress the Dreamworks’ dream team with their love of movies and powerful vision— their vision for movies and for Cheil’s role in the movie industry. Miky Lee, a slight woman with big passions and an exotic, stylish flair, can go toe-to-toe with anyone when it comes to talking about great movies, both famous and obscure, arthouse and popular. Lee says she was impressed and surprised at how down-to-earth all three of the Dreamworks founders were. “They met me, this small woman, not even a man, who did not speak perfect English but who was not afraid . . . and we just understood each other.”

Dreamworks wanted to work with the Lees, but innumerable details had to be worked out. For three months, teams of executives and number crunchers from both organizations squared off in intense negotiations. The original Dreamworks business plan was as big as a New York phonebook. As talks continued, day after day, the deal grew, filling five giant black binders, each five inches thick. Negotiations only became harder after Microsoft billionaire Paul Allen agreed to chip in over half of the money Dreamworks needed, $500 million, taking away much of the Lees’ leverage.

Cheil asked for the Asian distribution rights to all Dreamworks movies, and for a real role in running the company. Katzenberg and his partners wanted total control, and even though the three of them (Katzenberg, Spielberg, and Geffen) had paid in only 10 percent of Dreamworks’ start-up capital, they were seeking two-thirds of its equity, suggesting they could repay the paid-in capital from Cheil over the next few years. But Cheil did not want to be repaid, not if it meant being shoved offstage. They wanted the clout that Dreamworks could bring, especially since so much of Jay-hyun and Miky Lee’s family were against the deal. Many people in their family thought Cheil had no business in the entertainment business, still thinking that movies were for poorly educated and “low” people. Tying themselves to three of the most respected figures in the world of entertainment was an important factor in gathering support inside as well as outside of Cheil Jedang.

In addition, there was a third party who had to be appeased if this deal were to go through: the Korean government. Back before the Asian economic crisis of 1997, before Korea had been forced to go through a lot of painful restructuring, the national government was much more involved in the running of the nation’s businesses. It was all part of the jaebeol system: conglomerates were protected by the government, and in return were controlled by it. And this Dreamworks acquisition—in effect, sending hundreds of millions of dollars out of Korea—was just the kind of deal the Korean government was extremely skeptical about. Korea was a nation built on exports (or so the popular thinking went). Korea exported much and imported little. Today, that kind of controlling, mercantile thinking is much less entrenched in Korea. But back then, it was a significant obstacle, and Cheil Jedang had to present a thorough and convincing argument that this deal made good business sense, not just for Cheil, but also for the nation.

So negotiations continued. They were tough, but gradually the two sides developed a kind of camaraderie and mutual respect. Many in the movie business were nonetheless skeptical. But finally, in June 1995, a deal was made. For its $300 million investment in Dreamworks SKG, Cheil Jedang would receive the right to distribute Dreamworks’ movies in Asia (excluding Japan, which originally went to UIP, and later to Japanese distributor Kadokawa). The Lees had what they wanted from the beginning: credibility. Being part of Dreamworks meant they were serious. It gave them scale. It made them different from other players and wanna-bes in the Korean movie business. “You cannot make your interests or your hobby into a business,” says Miky Lee, adding with a laugh, “But I guess I did.” At thirty-five and thirty-seven years old, Jay-hyun and Miky Lee had become two of the biggest movie moguls in Asia. Now they just needed to make some movies.

Making Movies

The whole negotiating process with the Dreamworks team had been a crash course in the entertainment industry for the Lees, especially for Miky, who had little business background. After they concluded the deal, on the plane ride back to Korea, Jay-hyun explained to his older sister the full extent of his plans for the future. Dreamworks was the foundation of CJ Entertainment (as Cheil would soon call its movie division) ensuring they had access to some of the best Hollywood films. But they still needed to learn how to become a successful movie studio, that is, how to produce and distribute movies. So CJ Entertainment made its first attempt at producing: J-Com. If you have never heard of J-Com, that is understandable. This was one CJ Entertainment venture that never took off.

In 1995, the biggest success in Korea was not a movie, it was a television show called The Sandglass (Morae Shigae). The story of two best friends who grow up on opposite sides of the law, but told in the shadow of the Gwangju Massacre of 1980 (where hundreds of civilians were massacred by soldiers in the southwest city of Gwangju after rising up against military rule), became a monstrous hit in January and February 1995, peaking with an incredible 65.7 percent rating, meaning nearly two-thirds of all the households with televisions in Korea were watching. So the Lees hired The Sandglass’s director Kim Jong-hak and writer Song Ji-nah, and spent $2.5 million to set up J-Com as a separate entity, based on the Han River island Yeouido, in the center of Seoul.

There were big plans for J-Com. The company talked about sending people to Dreamworks for training, and said that by 1999 it would have completed nine movies, fifteen television programs, and ten animated projects. Reality, however, hit hard and fast. J-Com’s first film, Inshallah (about a graduate student holidaying in Algeria who gets mistaken for a drug trafficker) was a huge flop. Other projects stalled, burning through money while Cheil waited. Perhaps most seriously, J-Com completely alienated Chungmuro. “We were very ignorant. We thought that film and television were all the same,” says Miky Lee. “I naively thought we’d be welcomed by the movie community, but setting up a film company with TV people was a mistake.” Before long, J-Com was history.

The period between 1996 and 1998 was turning into a bad time for the young CJ Entertainment. Despite her love of their young entertainment business, Miky Lee had to leave the company in 1997 for medical reasons and go to the United States. To have her dream company snatched away, just as it was getting started, for health reasons beyond her control, hurt Lee deeply: “I was annoyed and depressed.” It would be years before her health improved enough that she could resume work at the helm of the company she helped to found. With Jay-hyun busy running the entire Cheil Jedang conglomerate (which itself was changing its name to CJ Corp. at the time), a series of Cheil executives took the reins of CJ Entertainment.

Despite CJ Entertainment’s high hopes, its first original production, Inshallah, was a big dud when released in 1997.

Then, at the end of 1997, came the biggest challenge of all, the Asian economic crisis. It began in Thailand that summer, when a weak economy, high interest rates, and large current account deficits caused the baht’s value to plummet. From July 2, 1997, to January 1998, the baht’s value fell by half. The currency crisis spread quickly beyond Thailand’s borders, to the Philippines, Malaysia, and Indonesia. By the autumn, the problem spilled into Korea, where the nation’s overvalued won began to take a serious beating. Its value slid from about 760 won to the US dollar to 900, 1,000, and then 1,200. And it kept falling. In just a couple of months, the won plummeted all the way to 1,700 won to the dollar, and many feared it could keep on collapsing.

For Korea’s film industry, it looked like a disaster. Western films accounted for around 70 percent of the box office at the time. Suddenly, all deals signed in the preceding months doubled in cost. International deals, usually signed in US dollars, forced Koreans who imported movies to pay twice as much.

As tough as the situation might be for an importer, who might have several hundred thousand dollars, or even a few million on the line, for Cheil Jedang and CJ Entertainment it was a catastrophe. The $300-million Dreamworks deal was to be paid in three installments, and with the won in freefall, the third $100-million installment was due. Cheil Jedang was a big company, but at the time, money in Korea was tight. Banks were no longer lending. Resources everywhere were stretched thin, to the breaking point. Just affording the $100 million at the original exchange rate would have been incredibly difficult. Now that the dollar was twice as expensive, payment was all but impossible.

The Dreamworks payment schedule was ironclad, with no wiggle room. If Cheil missed a payment, the bank would automatically slap on a $10 to 20 million penalty that Cheil could ill afford. At the same time, Dreamworks desperately needed cash flow, too. It was still the early days of the company. Its first films, like Peacekeeper, had fizzled at the box office. Gladiator and Saving Private Ryan were both in production, eating through money at a fantastic rate. Despite the contract, Jay-hyun Lee decided they would have to ask Dreamworks for flexibility.

As soon as the Cheil team approached Dreamworks, they knew why Cheil was coming and immediately said “No.” No bank would lend the money. Cheil negotiators spoke with billionaires all over the globe. But with Dreamworks’ value at an all-time low, Asia paralyzed with an economic crisis, and the rest of the world afraid the crisis might spill onto their shores, no one was interested. Cheil negotiators approached every person and every company they could think of for help, but came up empty.

Finally, the Cheil negotiators returned to Dreamworks to say they had but one option left—to liquidate some of Cheil’s Dreamworks shares. That, however, was forbidden in the original deal. With the Lees out of choices, Dreamworks investor, Microsoft billionaire Paul Allen agreed in June 1998 to buy enough shares to allow Cheil to make the deadline. As the sale violated the original agreement, everyone agreed to keep this deal a secret. While Cheil Jedang remained a significant owner in Dreamworks, it had lost 50 percent of its share, and was down to a $130-million stake.

After that, Cheil and CJ Entertainment quickly recovered. Their first multiplex was opening (more on this in a moment). The won slowly recovered a little, too, inching its way back to 1,200 won to the dollar, taking the worst strains off of the economy. Knowing the J-Com format didn’t work, CJ Entertainment went to Uno Film, Shin-Cine, and Myung Film to create an alliance of production companies. Cheil told them that it would provide financial support in return for their making quality movies. “Don’t be constrained by anything,” Jay-hyun Lee told them. This strategy would prove to be much more successful, as all three companies were churning out plenty of films and more than a few hits.

Ironically, however, the economic crisis that nearly destroyed Cheil and CJ Entertainment also helped revive them, giving the entertainment company an unexpected advantage. The crisis forced many potential competitors to hold back or withdraw entirely from the movie business. IMF-mandated restructuring forced many of the most sprawling jaebeol to focus their energies on core businesses and sell off tangential side projects. Suddenly, CJ Entertainment found it had much less competition from its conglomerate competitors.

The Rise of the Multiplex

On that same plane ride back from securing the Dreamworks deal, Jay-hyun had also told Miky it was vital that Cheil establish multiplexes in Korea. It was not enough to have the movies, they also needed to have the screens to show their films.

Today (in 2008), CJ Entertainment’s multiplex franchise, CJ CGV, is the biggest theater chain in Korea, with around 20 percent of the nation’s 1,900 screens. But while nice, fancy multiplexes are a given in South Korea today, as in much of the world, it is easy to forget that in 1995, going to the movies was a completely different experience. Korea’s movie theaters of yesteryear were gorgeous heaps of moldy, concrete nostalgia. Large screens with theater-style stages at the front were mounted low, just above the stage. This made them perfect for patrons sitting in the front row, whose entire field of vision was filled by the screen. Most of the one-screen theaters were clustered together in cities’ downtowns, a short walk from one another, so you could easily see several films in a day without too much hassle. When it rained, the roar could fill those cinderblock sound stages, especially when the roof did little to keep the water out (just like in Tsai Ming-liang’s cinematic poem to the grand old Asian theaters of the past, Good-Bye Dragon Inn).

Plus, they served beer. Very civilized.

The Other Majors

Of course, CJ Entertainment did not change an industry by itself, nor is it the only major studio in Korea. In fact, it is not even the only sugar refiner to become a major entertainment powerhouse.

That’s right, the Orion entertainment empire–comprised of the movie distributor Showbox, the multiplex chain Megabox, and the cable TV outfit On Media–also got its start in the confectionary game. Orion started as Tongyang way back in 1956, and over the years diversified, spread into sixteen subsidiaries, and grew into a jaebeol in its own right (Orion separated from Tongyang in 2001).

The owner of Tongyang, Tam Chul-Kon, was looking to move into something different. “Something fun.” So in the mid 1990s, Tam selected three workers in their late twenties, and created Apex, a company with a dream mandate: “Do whatever you want for three years.” Its three young executives tried a little of everything—liquor distribution, electronics, you name it–losing money at everything. Even today, Woody Kim (Kim Woo-taek), one of the original three, today the CEO of Mediaplex, laughs at the thought of the naïve chaos of those early days.

Along the way, however, they created one solid moneymaker for Apex: Tooniverse, a cable TV station that specialized in animation. It was an instant hit. At the time, cable made an insignificant blip in Korea. Begun only in 1994, no one knew yet what to make of cable. But a whole cohort of the Korean population knew what to do with Tooniverse. At its peak, in the early evening, when Korean children were all at home from their cram schools and taekwondo classes, supposedly studying, Tooniverse sometimes scored ratings higher than the terrestrial free-to-air channels (which are normally in a totally different class than cable). Recognizing a good thing, the Apex bosses kept adding channels—movie channels, music videos, computer-game channels—and soon On Media was born. Today, while CJ Entertainment and Mediaplex duel it out for the label of top movie studio, On Media is the number one cable TV company, accounting for about 20 percent of all the cable TV ratings in Korea.

Around the same time Tooniverse was starting, Apex executive Woody Kim stumbled into the multiplex business. Cheil Jedang had been working on building a gorgeous multiplex in Korea’s first Western-style shopping mall, the COEX, in the rich southeast of Seoul, but the jaebeol Daewoo managed to outmaneuver Cheil and win control of the project. But the 1997 economic crisis rocked Daewoo harder than most conglomerates, and suddenly the jaebeol was forced to sell the sixteen-screen theater. At first Daewoo tried to sell it to Cheil, but Daewoo insisted the sale also include two other multiplexes. Because of Cheil’s money problems at the time, then-executive director D. J. Ha decided it was too pricy and turned down the offer. Instead, Tongyang bought it and formed a 50-50 joint venture with Loews Cineplex Entertainment, naming the new business Megabox.

Of all the new multiplexes that began opening at the time, the COEX Megabox was the most successful, thanks to its prime location. It packed in audiences all day, every day. In its first eighty-four days in business, that one theater sold over 1 million movie tickets. Woody Kim knew a good thing when he saw it, and quickly moved to expand the company’s show-business businesses.

To complement Megabox, a movie investment and distribution company called Showbox was started in 2002. In 2002, Showbox and Megabox were united to form Mediaplex, and the whole shebang went public in 2005.

In its relatively short history, Showbox quickly found itself distributing many of the biggest films in Korean history—Kang Je-gyu’s Taegukgi, which broke all the records in 2004 to become the biggest film ever in Korea at the time; Park Kwanghyun’s Welcome to Dongmakgol, the biggest film of 2005; and Bong Joon-ho’s The Host, which in 2006 re-broke all of Taegukgi’s records.

Woody Kim may not have had any experience in the entertainment business, but he wisely surrounded himself with people who did, like Jeong Tae-sung, a former movie producer and co-founder of the Pusan International Film Festival’s Pusan Promotion Plan. Kim made Jeong his Chief Operating Officer, his No. 2. Jeong, a soft-spoken boss, tends to see the business more on the creative side, providing a solid balance to Kim’s corporate ways.

Because of the multiplex deal that got Tongyang’s Megabox going, CJ Corp’s D. J. Ha laughingly blames himself for creating his company’s biggest competitor. He also jokes that he is responsible for CJ’s other major competitor, Lotte Cinema.

Back in 1996, when Cheil Jedang was just formulating its entertainment plans, Ha was looking for good locations for the future CJ CGV movie theaters. He knew the then-CEO of the Lotte Department Store chain quite well. Ha happened to know that Lotte was planning some major expansions, and thought maybe they could work together. His pitch went well and they agreed on five locations around Korea to try out the plan. But at the very first location, in Ilsan (just northwest of Seoul), CJ and Lotte got into an argument over terms and conditions. Lotte got angry, canceled the whole project, and paid millions of dollars to CJ for defaulting on the deal. Apparently, however, CJ’s multiplex plan was very convincing, because Lotte decided to create the Lotte Cinema franchise. Today it is the second-largest movie chain in Korea, and has expanded into distribution and production, too.

And, of course, there are and have been other majors. Before Mediaplex became CJ Entertainment’s biggest movie competitor, Cinema Service held the rival role. One of the most successful movie directors of the 1990s and 2000s, Kang Woosuk, founded Kang Woo-suk Productions in 1993, changing the company’s name to Cinema Service in 1995. From the beginning, Kang prided himself on his pure commercialism, creating a series of commercially successful, if artless movies throughout the 1990s.

Cinema Service exchanged the top Korean distributor spot with CJ Entertainment between 2000 and 2004. For a time, it even had ambitions to be as big as CJ Entertainment, adding a multiplex chain (Primus), a studio and soundstage for filming (Art Service), and a coffee franchise (Holly’s). To fuel that growth, Cinema Service merged with the online gaming company Netmarble in 2003, giving it the muscle it needed to play with the big boys. When director Kang smashed the nation’s box office records with Silmido in 2004, the future looked brighter than ever.

Just a year later, however, the Cinema Service empire was all but gone. Never able to get along with its gaming partners, Cinema Service split from the merger in 2004. Coincidentally, CJ bought Netmarble around the same time, turning the company into CJ Internet. Cinema Service was able to buy its freedom, but CJ kept a large share of the company, including a majority of the Primus multiplex chain, and the two merged their international sales teams.

In addition, as competition heats up now, many other entertainment companies have concluded that they, too, have to grow or risk being swallowed up by their rivals. MK Pictures, iHQ, and Prime Entertainment are three of the largest production houses that have been growing and diversifying.

With so much change constantly fomenting in the Korean movie industry, the contrast with its neighbor Japan is striking. In Japan, the biggest players have dominated the movie industry for decades. Shochiku, founded in 1895 as a kabuki theater group, moved into the movie business in 1920, and is still going strong today. Toho came along in 1932, followed by Toei in 1951. After starting in l945 as a book publisher, even the relatively young Kadokawa company has been making movies since the early 1970s.

In Korea, the first movie was made in 1923, and the industry flourished for decades, but none of the big studios of the 1960s still exist, cut down by Park Chung Hee’s decidedly arts-unfriendly administration. CJ and Cinema Service were both founded in the mid-1990s, Mediaplex after that. Prime, MK Pictures, and iHQ are younger still. Today, five years in the business makes a company a veteran. Companies form, merge, split, re-merge, and metamorph with stunning frequency. While the constant change can be disorienting to some, it can also be seen as a sign of vitality and growth.

Sure there were drawbacks—poor sound systems, small lumpy seats, dodgy air conditioners, and the occasional critter scampering across the floor—but they had character. Screens could be more brown and splotchy than silver. Distributors were known to cut films, not just for content (I remember the cuts made to that shocking piece of violence and depravity, Before Sunrise), but to get the movies under a two-hour screening time, which would allow theaters to hold more screenings per day. Focus was optional. The seats, it bears repeating, were lumpy, had no legroom, and often squeaked loudly with the slightest movement.

In one of the strangest quirks, people used to be able to enter the theater any time after buying a ticket. For the top films during the hottest months, that basically meant that everyone with a ticket tried to force his or her way into the movie about fifteen minutes before it ended. When it did end, the seated viewers would get up and push past the new patrons in a mad, chaotic turnover, featuring much squeezing and stepping on toes, but little movement. Then, fifteen minutes or so before the end of the movie, those patrons, who’d already seen the ending in their rush to get in, started heading for the doors, creating an early changeover that then repeated itself.

But the theaters had character. And beer.

Throughout the 1980s and 1990s, theaters were on the decline. With most of the country seemingly content to watch videotapes at home, movie attendance dropped year after year. With attendance in decline, so too shrank the number of screens. In 1997, that number bottomed out at just 497. Ticket sales reached their low point in 1996 at just 42.2 million. By comparison, ticket sales hit 173 million in 1969, the biggest year ever for movies in Korea.

When a really popular movie did arrive (usually from Hollywood), long runs in a small number of theaters were the rule. Sellouts for even marginally popular films were common. On weekends, business-minded middle-aged women bought up all the tickets, then scalped them to desperate customers (which is how I saw Star Wars: Episode I—The Phantom Menace).

Clearly, an upgrade was in order. But who would spend the millions needed to build modern multiplex theaters—with impressive sound systems, sharp screens, comfortable seats, and the like—when the industry was clearly on the decline? Again, CJ Entertainment led the way.

Miky Lee first encountered the multiplex when she went to Harvard and was immediately captivated. Although many people in the West complain about the lack of cultural diversity, to Lee the American movie industry was heaven compared to Korea in the 1980s. Those years, she said, were Korea’s “dark age,” a time of censorship and general government oppression. Even for someone from a successful family like hers, it was difficult to travel abroad back then, even harder, in many ways, than for the average person. The Korean government was firmly against any kind of conspicuous consumption, and foreign travel was definitely considered a luxury, well worth squelching.

But traveling to America presented a world of choice at every turn, especially for books and movies. Harvard Square had an art-house cinema, and just down the road were multiplexes with Hollywood fare. Lee met a group of Korean students at school who organized regular movie nights, where they watched such not-so-high-minded films as Pink Flamingo and Kentucky Fried Movie. The thought of helping to develop diversity in Korean cinema was an exciting thought for Miky Lee.

So, soon after signing the deal with Dreamworks, the Lees realized they still needed someone to learn from. They asked themselves, “Who is the biggest filmmaker in Asia?” At the time, that person was Raymond Chow, of Golden Harvest of Hong Kong. Golden Harvest and Australia’s Village Roadshow had been aggressively expanding their multiplex businesses around South Asia, in Thailand, Malaysia, and Singapore. Chow said he’d been talking with Samsung for years about getting something similar going in Korea, but reported the process as agonizingly slow. For Cheil, slow was not an option. They asked Golden Harvest to make a proposal, and soon Village Roadshow signed on, too. In December 1996, CJ Golden Village, or “CJ CGV,” as we now know it, was born.

As with the Dreamworks investment, convincing the foreigners was only half the battle. People at home were just as appalled at the thought of huge multiplexes descending on Korea. Old theater owners were dismissive: “What do you know?” they would snort. “We’ve been doing this for fifty years.” Others called it “doomsday.” Village Roadshow was confident; they had built theaters all over the world, so why not Korea? The only way to find out was to try.

But before an attempt could be made, Cheil would have to get some regulations changed. A lot of regulations. The rules concerning movie theaters were put in place in the beginning of the twentieth century, when the Japanese colonized Korea, and had not changed significantly since. There were rules on the locations of bathrooms and on space required between theaters. All told, twenty regulations needed to be changed or rescinded. Each required seemingly endless paperwork and lobbying with government agencies, which required three or four trips to the government daily for months.

What Cheil did have in its favor, though, were sites. Around Seoul were several old Cheil Jedang factory locations. At first they looked around the southwest of the city, in old, rundown Yeongdeungpo and out by Gimpo International Airport. But in the end, they decided on Gangbyeon, in the eastern part of the city, where a new electronics market was just opening. They originally planned for an eighteen-screen multiplex, but strong objections by Village Roadshow and Korea’s other theater operators (who had convincing arguments against the economics of the multiplex), forced a down-scale to eleven.

The CGV Gangbyeon 11 opened in April 1998, and from the first day enjoyed huge turnouts. “It was beyond our expectations,” said D. J. Ha, executive director of CJ Entertainment at the time. “We should have opened the eighteen screens.” Almost immediately, everyone knew the multiplex idea was a winner.

At the time, CGV was managed by Park Dong-ho, an affable man with a boyish, slightly untucked style and a strong fondness for Peter Drucker’s management ideas. Park came from the food products side of CJ Corp., where he’d spent ten years in meat processing. “Although the two businesses are quite different, from a management perspective I saw no big difference,” he once told me, then quoted Drucker: “It’s all about creating value.”

Coincidentally, just as the Asian economic crisis had nearly ruined Cheil, a similar problem in reverse soon happened at CGV. Golden Harvest was moving through a major transition, splitting its operations into production and distribution. The distribution side made an initial public offering, but soon after, its share value fell steeply and Golden Harvest was in trouble. To shore up his company, Raymond Chow sold his company’s share of CGV for cash. In 2002, Village Roadshow left, too, selling its shares to Asia Cinema Holdings (a Dutch private equity company), which in turn sold most of its stake to CGV and other investors in May 2005.

The Modern CJ Entertainment

In 1997, CJ Entertainment became independent of Cheil Jedang, becoming an affiliate instead of just a division, and in 2000 was fully spun off. Although its first attempt at producing original movies (J-Com) had not gone well, CJ Entertainment remained active in investment, distribution, and international sales. In 2000, it scored its first monster hit, distributing Park Chan-wook’s JSA: Joint Security Area. JSA was just the second “mega-blockbuster” in Korean history, following up a year after Shiri, Korea’s first. The tale of a mystery at the Demilitarized Zone dividing North and South Korea earned nearly $27 million at the box office (and led to endless bickering over which film was the bigger hit, JSA or Shiri) and launched the impressive career of director Park Chan-wook.

JSA was CJ Entertainment’s first big hit.

CJ Entertainment also looked to expand from early on. In 1997, it bought the music video channel M.net, which has ever since been Korea’s most popular music-video channel. Its cable wing soon began to grow, adding the Food Channel in 2000, NTV in 2001 (renamed Home CGV in 2002), and many more. And in 2002, it grouped all those television channels together under the name CJ Media. Today, with nine channels, CJ Media is the second biggest cable TV company in Korea.

Other additions include CJ Cablenet (cable-TV multiple-systems operator) in 2000, Internet gaming company Netmarble in 2004 (online gaming company, renamed CJ Internet), M-Net Media (music publisher and star management), and CJ Joycube (the Korean distributor of Microsoft’s Xbox video game system).

Perhaps most surprisingly, after two years of rumors and false starts, CJ Entertainment bought its number one rival, Cinema Service, in 2004. The two companies had traded the No. 1 and No. 2 top distributor spots, bouncing between 15 and 22 percent of the Korean movie market between 2000 and 2004. Considering that the two companies together accounted for 40 percent of the movie market share, many were frightened of the merger, worried CJ Entertainment would use its leverage to bully the rest of the industry. As it turns out, other competitors quickly rose up to take Cinema Service’s place, and although CJ Entertainment continues to be the biggest player in Korea, it is far from overwhelming. In addition, the CJ Entertainment-Cinema Service deal had more than a few bumps, as Cinema Service separated from CJ Entertainment just months after the deal. But in early 2005, the two merged their international sales departments.

CJ Entertainment’s other big move came in 2002, when it went public, followed by CJ CGV in 2005. Why was CJ Entertainment’s IPO a big deal? Because being a public company means a much greater level of public accountability. A public business must publish its accounting books for anyone and everyone to see. As a result, businesses become more transparent, making the whole industry more efficient and fair.

After CJ Entertainment went public in 2002, many other Korean entertainment companies followed suit. Mediaplex (owner of Showbox and Megabox) did the same in 2005. And countless production and distribution companies have also gone public, although many of the more recent deals were a lot more dubious in nature. These companies were smaller, and did not have the financial foundation to go public, so many had “backdoor listings.” That is, they bought out or teamed up with larger, more stable companies (manufacturers, tech companies, and the like) to improve their bottom line. Now, some of these deals might be shakier than CJ’s IPO, done just to raise money for the owner, who then bolts as soon as the share price runs into trouble. The excess of publicly traded movie companies was a major factor in the glut of films made in 2006 and 2007. The important thing is that these deals helped make the entertainment industry more open and transparent.

Ironically, CJ Entertainment has since delisted, going back into the fold of Cheil Jedang (renamed CJ Corp. in 2002), so it can reorganize and perhaps go public again another day. But CJ Entertainment did lead the way to a modern film business in Korea, where business comes first, ahead of backroom deals and egos (not that that there aren’t any backroom deals or egos now—this is the entertainment business, after all). And that is a good thing for everyone who loves Korean movies.

CJ Entertainment distributed many of Korea’s top directors’ films, including Kim Jee-woon’s A Bittersweet Life.

Despite all the deals and the business wheeling and dealing, the biggest moment for Miky Lee came at the end of 2004, when her health improved enough that she was finally able to return and rejoin Jay-hyun at the helm of the company she loves. The changes to the Korean movie industry since her departure in 1997 were overwhelming. The business had grown and grown, going from strength to strength. Annual admissions shot from 47.5 million to 135 million, and Korean film box office figures soared from 25 percent to 59 percent. “I was really shocked, although not in a bad way,” she says. When I asked her to name some of her favorite Korean films of recent years, she quickly rattled them off: Tale of Two Sisters, Sympathy for Mr. Vengeance, Save the Green Planet, A Bittersweet Life, and Secret Sunshine. All great films. And except for Two Sisters, all CJ Entertainment films.

The industry continued to grow over the next couple of years, peaking in 2006 with 163.9 million admissions and with Korean movies taking in 64.7 percent of the box office.

Not all changes in the industry over the years were positive, though. “I think people were a little proud and complacent,” said Miky. “They got used to making money automatically. No one was worried, and that worried me.” She also thinks that the lack of diversity in the film business is a related problem. “That’s something I ask about every day. It depends on people’s creativity. It is not a problem you can solve with money.”

Since its founding in 1995, CJ Entertainment has grown into the largest movie distributor, investor, and multiplex chain in South Korea, with leading affiliates in cable television, online gaming, music, talent management, and more. Some people praise CJ Entertainment for moving Korean movies and entertainment into the age of globalization. Others deride the company for much the same reason. But together, the Lees were integral to changing the Korean movie industry, turning a large, staid company, known for making snacks, shampoo, and pharmaceuticals, into a sprawling entertainment giant.

Bottom line, though, is that the Lees are still not satisfied. Not with CJ Entertainment and not with the Korean movie industry. “I think we are still in the process of building our industry,” says Miky. “We have not accomplished anything yet. We are not there yet.”

CJ Entertainment did not single-handedly transform the movie business in Korea. But the changes at CJ Entertainment do symbolize Korea’s great industry-wide changes. Despite the many upheavals and trials the cinema scene has been through, and the adversity it has had to deal with, the general trend over the past ten years has been toward transparency and openness, with respect for business fundamentals and the need for high-risk, high-reward entrepreneurialism. No one knows what Korea’s industry will look like in ten years (or even tomorrow), but the foundation has been laid.

A foundation, however, is not a house. Business may have created a strong foundation, an environment for filmmakers to succeed, but it did not make the movies. It took visionary and talented filmmakers to push Korean films to the next level. And the most ambitious of these filmmakers is Kang Je-gyu.