[Click eStock] "SBS Expected to Rebound with Visible Efforts to Cut Production Costs in Second Half"

[Asia Economy Reporter Eunmo Koo] Hana Financial Investment has stated that SBS is passing through the final stage of adjustment, and expects a rebound starting from the third quarter of this year as efforts to reduce production costs become visible.

On the 5th, researcher Kihoon Lee of Hana Financial Investment evaluated in a report that SBS is going through the last period of adjustment. Lee said, “As long as there is no steep decline in TV advertising, digital revenues such as YouTube, Wavve, and CPS will show more than sufficient high growth to offset losses, and Studio S is capable of producing up to 15 works next year.” He added, “If the Hanhanryeong (THAAD) restrictions ease, it is highly likely that SBS will share similar momentum with other drama production companies holding captives, such as Studio Dragon and Jcontentree.” Although the disappointing performance of ‘The King’ will cause sluggish results until the second quarter, the outlook is positive with a high possibility of upward trend until 2021.

From the third quarter, as efforts to reduce production costs become visible, a rebound in performance is expected. Lee forecasted, “While online advertising has rapidly recovered after a sharp contraction in February, TV advertising may hit bottom in the second quarter due to the end of dramas aired in the first quarter and the potential departure of advertisers.” He also analyzed, “Due to the disappointing box office of the tentpole drama ‘The King,’ poor advertising sales and lack of improvement in advertising sales rates will likely result in losses in the second quarter.”

Furthermore, he said, “In the second half of the year, various programming slots previously reserved for the Olympics will be replaced with entertainment programs instead of dramas, significantly reducing production costs.” He added, “Although the third quarter (July to August) is traditionally an off-season due to vacation season, the situation where only domestic travel is possible means the business conditions will not be significantly bad.”

Digital revenue is expected to continue its high growth. Although YouTube’s revenue was only 6 billion KRW in the first quarter despite a sharp increase in views due to advertising contraction, it is expected to grow to the 10 billion KRW range by the third quarter at the latest. Wavve’s subscribers doubled compared to ‘Pooq,’ and quarterly revenue also doubled to 5.7 billion KRW. CPS negotiations will reflect last year’s retroactive amounts after the second quarter, and it is expected to rise to 500 KRW next year.

Studio S is also regarded as a growth engine. Lee said, “With more than 15 dramas next year and expansion to external OTT platforms, production plans will exceed 20 works.” He added, “Since Studio S was launched to break free from the limitations of terrestrial broadcasting, the frequency of tentpole productions will increase, and with about 40 pre-paid works, achieving this is fully possible.”