[In the Spotlight] Successful 'The Glory' but Struggling Studio Dragon

Sales Increased but Profits Decreased... Low Production Cost Recovery Rate
Institutions Sell Continuously Amid Profit Expectation Shortfall

[Asia Economy Reporter Park Hyungsoo] The Netflix drama "The Glory" Part 1, starring actress Song Hye-kyo, ranked 6th worldwide in the Netflix TV program category as of the 4th. It ranked first in South Korea, as well as in Hong Kong, Indonesia, Malaysia, Saudi Arabia, the Philippines, Taiwan, Thailand, and Vietnam. Expectations are high for Part 2, which will be released in March.

Although the drama has attracted attention, the stock price of the production company Studio Dragon is sluggish. According to the financial investment industry on the 6th, Studio Dragon's stock price fell 5.8% over four days from the 2nd to the 5th. During the same period, the KOSDAQ index rose 0.1%. Institutional investors have continued a net selling streak, resulting in underperformance compared to the market. Institutions net sold 16.3 billion KRW over three days from the 2nd to the 4th. Foreign investors recorded net purchases of 11.1 billion KRW.

With the popularity of "The Glory," which was released on Netflix on the 30th of last month, expectations for a stock price increase were high. However, institutional investors seem to be focusing more on Studio Dragon's Q4 earnings than the drama's popularity. The securities industry has begun adjusting expectations for Studio Dragon's performance. Hana Financial Investment estimated that Studio Dragon achieved 148.9 billion KRW in sales and 2.3 billion KRW in operating profit in Q4 last year. Sales increased by 1% year-on-year, while operating profit decreased by 63%. The operating profit achievement rate was only 13.4% compared to the market expectation of 17.2 billion KRW.

Samsung Securities also estimated that Studio Dragon's Q4 operating profit fell short of expectations. Minha Choi, a researcher at Samsung Securities, analyzed, "The drama 'Alchemy of Souls' is a fantasy romance genre that required relatively high production costs. Due to the increased amortization burden, operating profit likely decreased compared to the previous year."

The gross profit margin, which exceeded 20% in the first half of last year, also dropped sharply in the second half. Kihoon Lee, a researcher at Hana Securities, explained, "Studio Dragon's Q3 gross profit margin was 12%, and it is estimated to have fallen below 10% in Q4. It seems that simultaneously aired works were not sold at high ratings."

Studio Dragon recorded sales of 228.9 billion KRW and operating profit of 18.9 billion KRW in Q3 last year, increasing by 97.2% and 29.9% respectively compared to the same period the previous year. Eunjeong Shin, a researcher at DB Financial Investment, analyzed, "The proportion of OTT original sales with low production cost recovery rates was large. Due to transactions with new OTT platforms such as Amazon, Disney, Apple, and Coupang Play, the production cost recovery rate was lower compared to Netflix."

Following the disappointing results in Q4 as well as Q3 last year, it seems difficult to expect a stock price rebound in the near term. However, there is a possibility of increasing the production cost recovery rate through re-contracting with Netflix this year. The researcher predicted, "Seasonal works such as Sweet Home and Arthdal Chronicles, and the American drama series The Big Door Prize will be aired," adding, "Studio Dragon's stock price will reflect renewed expectations for this year after a period of adjustment."

This content was produced with the assistance of AI translation services.