Some of Studio Dragon’s Q2 numbers are through the roof. But its stock price continues to tank and the story the Korean production powerhouse is telling the market now is all about expansion, diversification, spreading its love across streaming platforms – including Disney+ and YouTube – and assembling the pieces to enable the transformation into a global studio.

Korea’s Seoul-based production powerhouse, Studio Dragon, has its hands full at home, its heart firmly on planting a stake in the U.S. by early 2020, and its eyes clearly focused on strengthening its programming alliances in the escalating streaming wars. Plus, company bosses talk about “enhanced original content” and continuing to “fortify IP competitiveness”, all of which is driving the highest-ever revenue for both TV and digital advertising.

Investors don’t appear to be as impressed, at least not as impressed as they were when the high-value agreements to produce Netflix originals were all new and shiny, and before China shut down the mega-lucrative Korean content pipeline over Korea’s support of the U.S.-backed THAAD missile defence system.

For all the positive performance in the second quarter, including stellar revenue gains over last year and the highest programming revenue in five quarters, Studio Dragon’s stock price continues to nosedive to record lows of KRW59,900 (19 Aug) and near record lows since the company listed in Nov 2017.

During the Q2 earnings call earlier in August, Studio Dragon talked about its 72.6% increase in second quarter revenue to KRW128.2 billion/US$106 million. Operating profit was up 47.3% year-on-year to KRW10.8 billion/US$9 million even with the mega-expensive historical drama Arthdal Chronicles for Netflix at nothing more impressive than breakeven. The KRW7.3 billion/US$6 million net profit reported for the quarter was lower than last year’s KRW8.9 billion/US$7.3 million, with a margin of 5.7%.

Costs of the 18-episode Arthdal Chronicles – said to be around KRW54 billion/US$44.5 million – were covered by a presale to Netflix. The series, popularly called Korea’s Game of Thrones, has performed relatively poorly in Korea though, with ratings peaking at 7.705% for episode four, dropping to a low of 5.767% for episode nine and never rising again beyond the 6.8% level for the first two parts (source: AGB Nielsen nationwide). The series, which airs on Saturdays/Sundays at 9pm on CJ ENM’s tvN cable channel, is divided into three. Part two ended on 7 July. The third part premieres on 7 September, so there’s runway for a recovery.

Studio Dragon chief executive, Jinnie Choi, attributed the company’s Q2 financial performance to “enhanced profitability” of other titles that drove programming and sales revenue, such as supernatural romantic/crime drama, Abyss, and romance drama Spring Night for free-TV broadcaster MBC.

But the 16-episode Abyss, also sold to Netflix, struggled at home in tvN’s Monday/Tuesday prime-time drama slot. The series premiered at 3.858% on 6 May, and it was downhill from there, dropping to a low of 2.035% on episode 14 and limping to a 25 June finale that recovered too slightly to make a difference. Netflix does not disclose consumer take up.

Spring Night, which tested MBC’s new earlier drama slot at 8.55pm on Wednesdays and Thursdays, didn’t break the double-digit ratings mark either, building slowly from ratings of 3.9% for the 22 May premiere to the finale at 9.5% – better than Arthdal Chronicles though at nowhere near the cost.

CJ ENM is optimistic about the rest of this year, describing the way forward as Studio Dragon 2.0 and citing dramas such as Hotel Del Luna (where the optimism is already justified) and Watcher, both of which are available on PCCW’s Viu streaming platform in Asia.

Hotel Del Luna, about a hotel for ghosts, premiered on tvN on 13 July above 7% and broke through the 10% ratings mark at episode nine. The series finale is on 1 Sept. Crime thriller Watcher for CJ ENM’s OCN channel, airs on Saturday/Sunday at 10.20pm. Watcher’s highest rating so far is 6.094%; the series finale is on 25 Aug.

Other titles driving Studio Dragon’s optimism are romcom Accidental Landing (releasing Nov 2019) and Melting me Softly (Oct 2019), which Choi said “will give us enhanced results” along with shows like single-camera medical/romcom Dr John (based on the Japanese novel On Hand of God), which premiered on 19 July on free-TV network SBS. Choi pointed to Dr John, which hit 12.3% ratings on 26 July, as an example of Studio Dragon’s diversification.

Choi is also on the lookout for expanded/diversified business models and is in discussions with new global streaming/OTT players. This, she told investors, would secure the company’s future growth.

Also part of the plan is acquiring a U.S. production company in a joint project with parent company CJ ENM. Choi said Studio Dragon’s U.S. office would be up and running either later this year or in 2020. CJ ENM already has a presence in the U.S. through the L.A.-based CJ America.

As for China, once a pot of gold for Korean companies, Studio Dragon hasn’t totally written off its Chinese projects. Choi acknowledges that progress has been slower than expected. But she adds, work on script development hasn’t stopped entirely. Almost two years after Korea and China clashed over Korea’s deployment of a U.S. missile defence system, that conflict has been overshadowed by a new one between Korea and Japan linked to Japan’s colonial legacy. As we went to press on this magazine, China looked set to play mediator. A real life drama that could, in the end, boost Studio Dragon’s fortunes in a bigger way than fiction.

Published in ContentAsia Issue Four 2019, 26 August 2019