CJ ENM Reports Operating Loss of 50.3 Billion KRW in 1Q, Returns to Deficit

Performance Decline Due to Advertising Contraction and Production Cost Burden

CJ ENM announced on the 4th that it recorded an operating loss of 50.3 billion KRW in the first quarter under the Korea International Financial Reporting Standards (K-IFRS) consolidated basis. Sales decreased by 0.9% year-on-year to 949 billion KRW.

While the entertainment business saw a decline in profits due to a contraction in the advertising market amid the economic downturn, the commerce business improved profitability through a one-platform strategy. A CJ ENM representative stated, “The decrease in advertising spending due to the global economic slowdown and continuous investments to secure content competitiveness affected profitability. We will continue to reorganize to strengthen business competitiveness and focus on improving profitability through advanced content scheduling and distribution strategies.”

In the first quarter, the media platform division’s sales dropped 16.6% year-on-year to 277.9 billion KRW, hit hard by seasonal off-peak periods and a shrinking advertising market. During the same period, increased production costs due to content expansion and reduced profit contributions from the advertising sector led to an operating loss of 34.3 billion KRW.

The film and drama division’s sales rose 9.2% year-on-year to 236.1 billion KRW, driven by expanded overseas distribution of premium intellectual properties (IPs) such as the drama Island and variety show Seojin’s Family. However, poor performance of films Ghost and Count and the absence of deliveries from Fifth Season resulted in an operating loss of 40.7 billion KRW.

Music division sales increased 31.2% year-on-year to 119 billion KRW, but operating profit fell 43.2% to 8.1 billion KRW. Nevertheless, live sales surged significantly with successful events such as KCON 2023 THAILAND, the Street Man Fighter concert, and the ATEEZ world tour. Additionally, music label achievements stood out with strong sales of Kep1er’s second Japanese single ‘FLY-BY’ and JO1 DVDs.

The commerce division posted sales of 316.1 billion KRW and operating profit of 17.5 billion KRW in the first quarter. Profitability improved as the one-platform strategy, which organically combines multi-channels such as TV, e-commerce, and mobile live commerce along with the company-wide value chain, expanded a high-margin product portfolio including health foods, travel, and fashion. Strengthened efficient marketing strategies also contributed to growth.

In the second quarter, CJ ENM plans to focus on improving profitability by ▲ enhancing platform competitiveness through synergy between linear and online video services (OTT), ▲ securing mega IPs and strengthening global partnerships, and ▲ expanding the music industry value chain. The media platform division aims to recover TV advertising revenue and strengthen growth of TVING based on strong content competitiveness. The linear channels will expand variety programming featuring top creators such as Dance Singer Yulangdan, Business Genius Baeksajang, and Byong Byong Earth Arcade 2 to boost ratings and buzz. TVING will increase market share by strengthening its original content lineup with titles like After School War Activities Part 2, Everything We Loved, and The Dessert, as well as expanding overseas partnerships. Notably, from the end of the first quarter, the success of After School War Activities and awards for the Body Price Cannes series are expected to drive subscriber growth starting in the second quarter.

The film and drama division will focus on expanding distribution channels by securing premium IPs targeting the global market and expanding partnerships with global OTT platforms. Recently, CJ ENM diversified its global OTT partnerships beyond Netflix by selling Gumiho 1938 to Amazon in the U.S. and Family to Disney+. Fifth Season is expanding content sales with delivery plans for Wolf Like Me 2 and Book Club 2.

The music division will accelerate growth momentum by focusing on the global performance of its own artist lineup. In Japan, following JO1 and INI, DXTEEN is preparing to debut in May. ZEROBASEONE, formed through BOYS PLANET, is set for a full debut in the second half of the year. Additionally, releases such as JO1 and INI single albums, ENHYPEN mini album 4, and the Japanese event LAPOSTA 2023 by Lapone are ramping up activities of existing artists, which the company expects will expand profitability.

The commerce division will continue the one-platform strategy framework, focusing on securing product competitiveness and restoring profitability. It will accelerate the development of planned mobile live commerce platforms such as Edge Show and Butina Life, which achieve sales volumes comparable to TV home shopping, to secure differentiated content commerce competitiveness. Through its subsidiary Brandworks Korea, CJ ENM plans to strengthen the business competitiveness of exclusive brands such as Odense and Brooks Brothers to enhance market competitiveness.

A CJ ENM representative said, “CJ ENM is focusing on strengthening business competitiveness and enhancing business sustainability through organizational restructuring and strategic realignment. From a mid- to long-term perspective, we will concentrate on strengthening profitability through securing strong content competitiveness, building advanced platforms, and diversifying premium IP distribution.”

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