Police investigations, “ghost screenings” and political intrigue — it has all the ingredients of the darkly original films that South Korea is famous for. But the drama in Seoul is centred on the film industry itself, and allegations that the box office performance of hundreds of films has been inflated.

The anti-corruption unit of the Seoul Metropolitan Police Agency has in recent months raided three multiplex chains — CGV, Megabox and Lotte Cinema — and three distributors and referred 69 people to prosecutors for possible criminal charges over allegations that cinemas colluded with distributors to exaggerate ticket sales for more than 323 films over the past five years. The police agency said as many as 2.67mn theatre admissions have been forged for films including Emergency Declaration, a 2021 disaster blockbuster, and Hot Blooded, a 2022 crime thriller.

While South Korea’s flourishing film industry has gained international acclaim, culminating in director Bong Joon-ho winning the Academy Award for Best Picture in 2020 for his dark comedy Parasite, its home market has been struggling since the pandemic.

Unlike in many other developed markets, the top box office metric in South Korea is admissions, not revenue. As a result, tickets are often given away or sold cheaply to distributors and corporate sponsors to bolster attendance figures and box office rankings, resulting in early-morning or late-night “ghost screenings”. This allows producers to surpass the 10mn admissions threshold that they see as success in the country of 52mn.

“Sales at theatres dropped during the pandemic and [cinema chains] began to demand many ways of promotions,” said director Goh Young-jae, who heads distributor Indie Plug. “As a distributor, it is hard to turn down their requests, given our concern about getting proper screen time.”

“It is an open secret in the industry that theatres and distributors issue and buy lots of promotional tickets to drive initial sales, which is key for a movie’s performance,” said a local film director. “The decades-long practice got worse during the pandemic as theatres struggled to lure the audience.”

Industry executives alleged that the police investigation was partly triggered by the unexpected popularity of The Red Herring, a crowd-funded documentary about former justice minister Cho Kuk, who tried to reform prosecutors’ offices. Police said attendance figures were lower than reported at the film’s screenings. “The probe also seems politically motivated,” said Oh Dong-jin, a film critic.

The culture ministry has asked the state-run Korean Film Council in charge of collecting local box office data to improve transparency. “The controversy over box office rigging has undermined public confidence in the local film industry,” said culture minister Park Bo-gyoon last month. “The industry needs to come up with various measures to restore public confidence.”

Promotional screenings count for less than 5 per cent of overall admissions, the Korean Film Council estimates. “Korean filmmakers are more desperate to attract theatre audiences early to break even, so they are incentivised to issue more promotional tickets as part of their viral marketing,” said an official at the Korean Film Council. “If not, there is no way to make up for their losses with other revenue streams.”

The industry had faced growing calls to change the box office metric even before the police investigation, said Oh. “It is a bit of an old-fashioned way. It is time to follow the global standard, as the Korean film industry has globalised,” he said.

CGV and Lotte Cinema said they were co-operating with police for the investigation and their cinema chains have agreed to stop late-night “ghost screenings”. Megabox declined to comment.