Is anyone a big fan of Marvel comics or the Avengers film series? The Avengers, a blockbuster film which came out in 2012 was a worldwide mega hit. Its budget was around $220 million, and gained revenue of $1.5 billion worldwide. Due to its success, a sequel titled Avengers: Age of Ultron (I will refer to it as Avengers 2 on the rest of this blog for convenience) is currently being filmed and set to be released by May 1st, 2015. In Korea, The Avengers was commercially successful, gaining more than 7 million viewers. What excites Korean fans more is that part of Avengers 2 will be filmed in South Korea.
According to the article from The Korea Herald ‘Avengers’ sequel to film in Seoul, the Hollywood blockbuster will be filmed in and around Seoul from March 30 to April 9. It is the first time a Hollywood blockbuster will be filmed in South Korea, and is expected to bring some economic benefit to Korea. Most directly, 120 Korean cinematography staff will be hired and Korean actress will be in the film as well. Furthermore, economists calculated that economic benefit to Korea is around $23 million dollars, as the film can introduce Seoul to people all around the world and thus attract more tourists. According to the article from Korea.net Heroes of the Avengers meet again in Seoul, Korea’s vice minister of culture, sports and tourism said “hopefully, the world will be able to see Korea in a positive light and gain, through the film, an improved image of our nation.”
Actually, Korea offered a cash rebate of 20~30 percent of in-country production cost to attract the Avengers 2 production team to film in Korea. According to the article from the Korea Times Unseen cost of Avengers sequel , some people are concerned about the economic benefit. The cost of production taking in Korea is approximately $9.37 million, thus Korea will need to reimburse approximately $3 million. Furthermore, traffic jams and other negative externalities will occur during the filming process, which citizens of Seoul do not like at all.
Personally, I think it is a win-win situation for both Korea and the Avengers 2 production team. Avengers 2 production team can cut the cost of production through reimbursement from Korea, while Korea can introduce its beautiful country to the world through this blockbuster film. As Korea has never been a background of any Hollywood blockbuster film, I believe its economic benefit will bypass economic cost of reimbursement and other possible negative externalities. In the book A Random Walk Down Wall Street by Burton G. Malkiel, the author defines investment as a method of purchasing assets to gain profit in the form of reasonably predictable income. In this case, Korea is not purchasing asset but instead reimbursing (or cutting down) the cost of production for Avengers 2 production team. However, Korea is expected to gain profit in a reasonably predictable income – introducing Korea to the world and gaining foreign tourists. There have been many successful cases where a country could attract many foreign tourists due to film industry. One explicit case is New Zealand, where Lord of the Rings was filmed. New Zealand became one of the biggest tourism country; it is often referred as “Tolkien tourism”, which provided a massive boost to the local economy of New Zealand. Therefore, I think Korea made a right “investment”, and I expect that as Korea continue to attract film producers it will become a more attractive country for foreign tourists as well.