Studio Dragon, a leading drama production company in South Korea, is facing significant challenges as it prepares to release its third-quarter results for this year. Known for producing hit series like Queen of Tears, the company is projected to report disappointing numbers, causing concern among investors and industry analysts.
According to a recent report from Samsung Securities, Studio Dragon’s sales for the third quarter are anticipated to reach 113.7 billion won. This figure marks a staggering 47.7% decrease compared to the same period last year. Additionally, the company’s operating profit is expected to drop to just 1.9 billion won, reflecting an astonishing 91.1% decrease. These results fall far short of market expectations and highlight the challenges the company is currently facing.
Several factors have contributed to this decline. A notable reason is the lack of blockbuster hits and a reduced number of productions. The soaring production costs of Queen of Tears have also played a crucial role in Studio Dragon’s financial struggles. The depreciation costs associated with this drama have severely impacted the company’s performance, particularly in the third quarter. Reports indicate that the depreciation cost for Queen of Tears alone amounted to 10 billion won during this period.
Queen of Tears was an ambitious project, costing a total of 56 billion won for its 16 episodes, which translates to approximately 3.5 billion won per episode. A significant portion of this budget was allocated to the actors’ appearance fees, which have become a growing concern in the drama industry. For leading actors, the standard fee now ranges between 300-400 million won per episode. This increase in production costs has made it increasingly difficult for dramas to turn a profit.
The drama industry is undergoing a notable shift, with many producers stating that, regardless of how cheaply a series is made, the budget must exceed 1 billion won per episode to be viable. This raises the question of profitability, especially when high-profile actors are involved, as their fees can consume a large part of the production budget. An industry insider noted that while the average production cost for a drama used to be around 300-400 million won per episode, it has now become common for shows to exceed 2 billion won per episode.
As a result of these challenges, Studio Dragon’s profits are expected to be cut in half this year. The company’s stock price has already taken a hit, plummeting from a peak of 100,000 won to just 36,250 won as of the 18th. The market capitalization, which was once over 2 trillion won, has also dropped to around 1 trillion won. These alarming figures have led securities firms to lower their target stock price for Studio Dragon to the 50,000 won range.
The financial difficulties faced by Studio Dragon highlight the broader trends and challenges in the South Korean drama industry. While the popularity of K-dramas continues to rise globally, the increasing production costs and the need for high-profile actors make it challenging to maintain profitability. As a result, many production companies may need to reevaluate their strategies to stay competitive in an ever-changing market.
In conclusion, Studio Dragon is at a critical juncture as it navigates the financial implications of producing high-budget dramas like Queen of Tears. The upcoming third-quarter results will be a significant indicator of the company’s future trajectory. With the current trends in production costs and market expectations, the company will need to find innovative ways to adapt and succeed in this competitive landscape. As the drama industry evolves, it will be interesting to see how Studio Dragon responds to these challenges and what impact it will have on the K-drama scene as a whole.
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