Cooperation with YLAB to Reignite Drama Series Ambition
The author is an analyst of NH Investment & Securities. She can be reached at hzl.lee@nhqv.com. -- Ed.
Studio Dragon boasts the strongest global track record among domestic content plays. Also boding well is: 1) direct production of western dramas through cooperation with Skydance Media; and 2) the addition of new drama series to its lineup via cooperation with YLAB. We expect the firm’s 1Q21 results to satisfy consensus.
Boasts strong global track record
We note that a majority of hit Korean dramas on Netflix last year (those included in the list of top-10 dramas) were produced by Studio Dragon. In particular, such hit Korean dramas ranked near the top of the list in many Asian countries where the Korean wave remains in force. We note that drama Sweet Home was a major hit in western countries, as well. Given its robust global track record, we believe that Studio Dragon should be at the top of global OTTs’ lists of potential drama production partners in Asia, especially given that they are now focused on expansion of their presence in the Asian market.
In addition, the firm is to release a new original drama for Skydance Media next year, a development that should further diversify its global track record. As the first western drama produced by Studio Dragon (jointly with Skydance), the new drama is to be meaningful in that: 1) being a western drama, the production cost should be much higher per episode; and 2) it is to signify the first direct dealing with a global OTT’s headquarters.
Cooperation with YLAB to reignite firm’s drama series ambition
Studio Dragon has signed a contract with online entertainment studio YLAB under which it holds the exclusive right to dramatize YLAB’s popular webtoons for five years. YLAB holds major blockbuster IPs such as Super String (hero stories) and Blue Spring (school theme) where characters from various popular YLAB webtoon works come together in one universe. We note that Burning Hell: The Kingdom of the Gods inspired the Netflix original zombie series Kingdom, and Netflix’s original drama Island (to be produced in 2H21) is also based on a Super String IP-based webtoon of the same name. Thanks to the deal with YLAB, Studio Dragon will now be producing drama series inspired by ‘consistent worldview’IPs, and this in our view should reignite the firm’s dream of multi-season drama series production (in the case of Arthdal Chronicles, the series failed after only two seasons).
1Q21preview: Price rise effects to be confirmed
Studio Dragon is forecast to book consolidated 1Q21 sales of W124.1bn (+3% y-y) and OP of W14.3bn (+24% y-y), with OP meeting consensus.
We attribute the likelihood of such sound 1Q21 results to healthy overseas sales and PPL/VOD revenue for major dramas (Vincenzo, The Uncanny Encounter), and higher sale prices for other dramas with limited domestic recognition.