Failed World Cup bet sinks South Korean media giant’s Disney dream

SEOUL – From soju-fuelled film festival parties to court-led restructuring, a K-content powerhouse’s mistimed global expansion and ill-judged bets on World Cup football and Olympic rights ended up derailing its dream of becoming South Korea’s Disney.

Less than two years after it was hosting the hottest event at Asia’s largest film festival, South Korean entertainment giant JoongAng Group’s parent company and its affiliates – including its film and TV studios, plus cinema chain – have officially declared financial distress, after its JTBC broadcast arm defaulted on 20.6 billion won (S$17 million) of debt.

Corporate cards have been halted, employee pay cheques briefly failed to materialise and even celebrity guests experienced late fee payments, local media reported. JoongAng, South Korea’s second-largest media group, is struggling to urgently cut costs as it services an estimated 2.8 trillion won of debt.

The company’s woes reflect a costly bet on the global boom in South Korean entertainment. In a push to scale up, JoongAng’s affiliates expanded aggressively across film production, streaming-era TV shows and sports broadcasting, including a US$500 million (S$647 million) deal for domestic rights to air the Olympics and the World Cup games. 

But as South Korea’s World Cup team suffered an ignominious exit from the tournament after three matches, South Korean internet users ask who is worse off: JTBC, which paid hundreds of millions to screen less than five hours of home team action; its correspondents at the World Cup with corporate card payment issues; or Korean American fans in LA who bought tickets anticipating national team success – and had to watch South Africa play Canada.

JoongAng’s troubles are being closely watched well beyond South Korea’s US$100 billion (S$130 billion) content industry. Media executives around the world are cautiously looking for clues on how far the disruption could spread through content pipelines and what lessons it offers for navigating an industry being reshaped by consolidation, cost pressures and artificial intelligence.

“This is the toughest moment in JoongAng Group’s history,” vice-chairman Hong Jeongdo said in a letter to employees. “It is a painful but necessary step to preserve the company’s future.”

The outlook looked far brighter back in 2023, when Hong, the eldest son of the conglomerate’s founder, laid out an ambitious vision for the company.

“Our final test is creating a company like Disney in South Korea,” Hong told employees as he outlined the group’s goal for an initial public offering for SLL, a studio behind the Netflix hit series All Of Us Are Dead (2022) and Culinary Class Wars (2024 to present). Unlike other affiliates, SLL has not filed for rehabilitation. But its long-planned initial public offering has yet to materialise.

From the late 2010s, the Hong family embarked on an acquisition spree. JoongAng built a stable of about a dozen content studios, including a stake in US-based producer Wiip, a studio behind The Summer I Turned Pretty (2022 to 2025) and Mare Of Easttown (2021).

It also expanded into adjacent businesses such as a children’s indoor playground operator and a minor stake in domestic streaming platform Tving, owned by rival South Korean media company CJ ENM. In 2021, the company secured investments from financial investors including Tencent and Praxis Capital Partners.

It turned out that the deals were made at peak prices. As global demand for South Korean content surged during the pandemic, studios raced to produce new series. Competition for talent intensified, driving actor and creator fees sharply higher and pushing production costs to more than double and triple in some cases.

Despite booming global demand for K-dramas, studios have struggled to translate their popularity into profits as streaming platforms retain ownership of original content and traditional broadcasters contend with declining advertising revenue.

The number of TV dramas produced in South Korea fell to 115 last year from 141 three years earlier, according to a report by Korea Investor Relations Service. TV advertising revenue is estimated to fall about 40 per cent from 2022 to 2026, it said. 

JoongAng’s international ambitions faced additional headwinds. Hollywood labour strikes disrupted production schedules just as the company was expanding in the US through Wiip, which it bought for US$120 million in 2021.

Major global streaming platforms became more selective about content investments, squeezing opportunities for local producers. Rising interest rates added another challenge, driving up financing costs for companies that had borrowed heavily during the industry’s expansion.

JoongAng was particularly exposed because of its vertically integrated structure, which spans content production, distribution and movie-theatre operations. The model was designed to capture value across the entertainment chain when cinema attendance and TV viewing habits remained strong. Instead, the decline in moviegoers and shrinking traditional TV viewership hit multiple parts of the business simultaneously.

Its costliest wager was on exclusive broadcasting rights for the Olympics and the World Cup. In 2019, before the pandemic reshaped the streaming landscape, the group secured domestic rights to the Olympics from 2026 through 2032 and the World Cup through 2030 for about US$500 million, expecting to recoup the investment through sub-licensing deals and advertising sales. 

But its financial woes accelerated after that investment failed to pay off as expected. Public broadcasters balked at the price tag for licensing, while shrinking television audiences undermined advertising demand even around the events, eroding the economics of the deals.

“Ultimately, the most important issue is the broadcasting-rights contracts with the IOC and FIFA,” JoongAng’s attorney Lee Wan-shik of Lee & Ko told reporters after the group’s court receivership hearing, according to local media. “This is not a matter of seeking to cancel the contract agreements. We will work to reduce losses through negotiations.”

JoongAng’s challenges reflect a broader shift in the global entertainment industry. Live sports rights have become some of the sector’s most coveted assets, prompting media companies and streaming platforms to commit billions of dollars to secure exclusive access even as the path to profitability remains uncertain.

At the same time, industry executives are increasingly questioning whether the economics of content production remain sustainable for South Korea’s entertainment industry.

Calls are growing for structural changes that would curb soaring production costs and give studios a greater share of intellectual property rights, allowing them to participate more fully in the long-term upside of successful content.

On June 30, the Seoul Bankruptcy Court placed JoongAng Holdings, Contentree JoongAng, movie theatre operator Megabox and investment affiliate JoongAng P&I under court-led rehabilitation. While JTBC won approval for a voluntary restructuring plan, questions remain over whether the group can keep its studio business afloat.

JTBC declined a Bloomberg News request for comment, saying it could not provide information regarding the rehabilitation proceedings.

One closely watched test case is Hope, director Na Hong-jin’s upcoming thriller and one of the most expensive South Korean films ever produced.

JoongAng-affiliated companies and outside financial investors backed the project ahead of a planned mid-July release, betting it could become a record-breaking box-office hit.

Industry executives say the rehabilitation process raises concerns over whether those investors will ever recover their money or get share of ticket sales.

“There is substantial uncertainty regarding the ultimate success of this restructuring,” said Kim Sang-man, a credit analyst at Hana Securities, adding that the group might need to sell off profitable subsidiaries for it to work. BLOOMBERG