Korean conglomerate CJ Group, which has a reputation as a leading food and consumer product manufacturer, is now prospering in the media and entertainment business.

Ten years ago, the media and entertainment sector made up only 11 percent of the conglomerate’s total revenue, but since 2011, this proportion has increased to 18 percent and is inching towards the 20-percent mark.

The operating profit from this business segment has also increased by 24 percent over the past four years, which totals up to 877 billion won ($737 million).

The group has successfully transitioned from the food industry to the media and entertainment industry, and is now one of Korea’s leading companies in the sector.

Some analysts even consider the CJ Group powerful enough to change the landscape of Korean pop culture.

Due to this success, CJ Group chairman Lee Jay-hyun’s personal wealth has increased massively through direct and indirect ownership of company shares.

His stake in media and entertainment-related companies under his conglomerate, which amounted to 188 billion won in 2005, is now worth over 1 trillion won due to successful entertainment programs such as “Three Meals a Day,” “Reply” and “Over Flowers” series.

The Korea Herald Superrich team reviewed reports and data related to CJ Group published since 2004 to track the chairman’s accumulating wealth.

After Lee established CJ Group in 1996, he founded movie theater subsidiary CJ CGV, film producing affiliate CJ Entertainment, and program supplier CJ Media in 2005 -- investing 286.4 billion won in the media and entertainment sector until 2004.

During this time, the entertainment sector made up only 11 percent of the conglomerate’s total revenue.

However, operating profits from the entertainment sector were high as it totaled 118 billion won or 28 percent of the conglomerate’s total profits of 417.1 billion won.

Directly and indirectly owning the subsidiaries, Lee’s shares were worth 188.3 billion won, which was 36 percent of his total number of shares including those of other companies which totaled to 519 billion won.

From the mid-2000s, CJ Group’s media and entertainment business quickly expanded as subsidiaries Primus Cinema and TV channel tvN were created in 2007 to make a total of 10 entertainment-related affiliates.

However, in the early days of tvN, programs were often provocative and contained fabricated materials that resulted in disciplinary action from the Korean Broadcasting Commission. The broadcaster even recorded losses of 10.4 billion won in its first year and saw eroded capital. As a result, its largest shareholder, CJ Media, invested 12.6 billion won in an effort to help tvN get back on its feet.

Meanwhile, CJ Media saw sales growth as it ranked first in gaining the highest number of viewers among multiple programs providers in March 2007, with nine different channels dedicated to film, music and games.

Thus, despite the recorded losses, profits of subsidiaries increased by 14 percent, and chairman Lee’s personal net worth recorded 1.1 trillion won. His shares of the 10 subsidiaries were worth 260 billion won which increased by 71.7 billion won in two years.

Listing subsidiaries on the stock market further drove growth in sales.

In 2010, CJ E&M, which was previously known as O Media Holdings Ltd. -- formed by merging CJ Media, CJ Entertainment, On-Media, CJ Internet and Mnet Media -- was listed on the stock market. Cable TV business CJ Hellovision soon followed two years later.

The revenue growth of entertainment-related subsidiaries have since passed 15 percent. From 2011 to 2014, the annual revenue growth was 18.4 percent, 17.3 percent, 19 percent and 17.8 percent. The average revenue growth over the past four years were 18.3 percent, and during these years business profits averaged at 219.3 billion won -- 24 percent of CJ Group’s 911.3 billion won total profit.

In the past year, CJ Group’s media and entertainment subsidiaries grew the most. The subsidiaries were successful in different areas such as broadcasting, film, home shopping and music. As a result, CJ E&M’ s share price rose from last year’s price of 40,750 won to 86,400 won, and CJ CGV’s share price increased by more than 2.25 times.

In accordance with the increase in profit, the value of Lee’s shares in the three companies increased from 416.9 billion won in 2011 to 553.7 billion won in 2014.

As of Jan. 18, Lee’s shares are worth 3.4 trillion won, of which 1.7 trillion won are CJ E&M and CJ CGV shares, earning him 600 billion won for the past year.

Lee holds 2.38 percent (922,309 shares) of CJ E&M’s shares and holds a 42.14 percent stake in CJ E&M’s largest shareholder holding company CJ Corp.

He earned 347.8 billion won from CJ E&M and 248.4 billion won from CJ CGV, earning a total of 596.2 billion won from the media and entertainment subsidiaries.

However, despite the success, CJ Group is facing a crisis due to Lee’s imprisonment.

He was found guilty of operating a slush fund worth 620 billion won; charged with embezzlement, malpractice, and tax evasion worth 160 billion won in July 2013; and sentenced to 2 1/2 years in prison.

Though, due to his ailing heath caused by the Charcot-Marie-Tooth genetic disease, his confinement has been suspended eight times to enable him to receive treatment at the hospital.

Despite the success of CJ’s media and entertainment subsidiaries, Lee is unfortunately not at in a state to enjoy the success.

By The Korea Herald Superrich Team (seoyounglee@heraldcorp.com)

----------------------------------------------------------------------

Hong Seung-wan
Cheon Ye-seon
Bae Ji-sook
Yoon Hyun-jong
Min Sang-seek
Lee Seo-young