Global Content Industry Booming
The authors are analysts of KB Securities. They can be reached at drlee@kbfg.com and bh.yi@kbfg.com, respectively -- Ed.
Global content industry continues to boom amid COVID-19
We maintain POSITIVE on the Media sector. Demand for over-the-top content has been skyrocketing amid the COVID-19 pandemic, resulting in influxes in new subscribers and time spent watching content. Global media companies such as Netflix, Walt Disney and AT&T are ramping up investments in OTT media services, paving the way for Korean production companies.
Rising licensing revenue from China
Licensing revenue from Chinese OTT platforms has been rising. In the wake of China’s unofficial censure of Korean-made products, the broadcast of Korean content in the country has been effectively banned. However, some Chinese companies such as iQIYI and Tencent Holdings are continuing to make strategic investments in procuring quality Korean content in their attempt to lay the groundwork for a competitive edge in Asia.
Expect more partnerships between content providers and webtoon platforms
Recently, the astounding success of the Netflix Original K-drama Sweet Home (2020) has spotlighted the global competitiveness of Korean webtoon intellectual property, potentially encouraging more collaborations between content providers and webtoon platforms. Future partnerships would be win-win situations, providing content providers access to proven IPs with a diverse range of themes while allowing webtoon platforms to showcase their content within a new revenue stream.
Five industry players well-positioned to benefit We believe five Korean players—Studio Dragon, Jcontentree, Next Entertainment World, KidariStudio and Pan Entertainment—are well-positioned to benefit from current industry trends.
Studio Dragon: (1) Increasing leverage on content pricing as OTT platforms procure high-quality content amid intensifying competition (2) Content competitiveness providing scope for overseas expansion.
Jcontentree: (1) Rich library of proven content (2) Foray into OTT market via Korean OTT platform TVing (3) Tencent Holdings’ equity investment behind potential foray into China.
Next Entertainment World: (1) Rising value of content (2) Solid performance at home and growing licensing revenue from abroad (3) Rising no. of TV dramas supplied to global OTT companies.
KidariStudio: (1) Unrivaled competitiveness in women-focused content IPs with good prospects for growth in licensing revenue (2) Clearer visibility for overseas revenue as well as rising operating leverage thanks to in-house content sales (3) Both subscriber base and distribution network to widen following acquisition of Lezhin Entertainment.
Pan Entertainment: (1) Top-line growth driven by increasing no. of K-dramas (2) Higher pricing enabled by diversifying client base and success of K-dramas (3) In-house production of content IPs resulting in profitability improvement.