Strength in Low-budget, High-efficiency Content Production
The author is an analyst of NH Investment & Securities. She can be reached at hzl.lee@nhqv.com. -- Ed.
CJ ENM’s 4Q21 OP should come in around W88.1bn, missing consensus. The success of TVING exclusive content Drunken City Women and the firm’s own IP INI for its music business are encouraging, but costs related to Jirisan at its media arm, and an initial marketing burden for its commerce domain look inevitable.
TVING cruising via exclusive content and differentiated programming mix
TVING’s MAU exceeded 4mn in December. The box office success of exclusive mid-form drama Drunken City Women (on the heels of exclusive entertainment shows Girl’s Gossip Class and Transferring Romance) assures Season 2 production. Strengthening seasonal flagship IPs should lead to mid/long-term margin improvement for TVING. CJ ENM is proving once again the strength of low-budget, high-efficiency content production.
In addition, CJ ENM differentiates itself from competing OTTs in terms of broadcast scheduling by utilizing a wide variety of media. In the case of high-budget TVING original works such as Yumi’s Cells and Happy New Year, they were released simultaneously in theaters, or were aired with a time lag on TV channels. In this manner, 1) profitability is to strengthen on securing of ad sales; and 2) viewer flows into TVING in the middle of drama runs is expected to be effective.
4Q21 preview: In-house IP growth sustaining at music division
We expect CJ ENM to post consolidated 4Q21sales of W992.8bn (+5.1% y-y) and consensus-missing OP of W88.1bn (+0.2% y-y). With the exception of the firm’s music business, earnings are to disappoint.
Media: The ads market is recovering, but the firm likely faced: 1) high-base effects (y-y); and 2) an inevitable cost burden for Jirisan. As Jirisan was a tent pole, the cost burden was high, but general ad sales fell short of expectations due to low box office returns. R/S deferral for subsidiaries also likely weighed.
Commerce: Despite peak seasonality, we believe that billings growth was tepid. Initial marketing expenses related to platform unification (which started in May) also likely remained in play.
Movie: A larger-than-usual cluster of foreign blockbusters were released at yearend. Meanwhile, the spread of Omicron limited theater attendance, and Romance Without Love (released in November) failed to hit BEP, with an audience total of 600,000.
Music: Brisk album sales divided as the firm’s own IP INI (510,000 copies), JO1 (430,000 copies), and N-Hyphen (1.2mn copies; managed by music label Belief Labs). Profits related to the 15th Street Woman Fighter concert are also to be recognized.