[Click eStock] "SBS Expects High Growth in Digital Revenue from YouTube, Wavve, and More"

Hana Financial Investment Report
Growth Expectations Rise as Terrestrial Broadcasting Recovery Confirmed

[Asia Economy Reporter Minji Lee] Hana Financial Investment on the 14th forecasted that SBS's earnings will continue to improve due to high growth in digital sales from platforms such as YouTube and Wavve.

In the third quarter, SBS's revenue is estimated to have recorded 184.9 billion KRW, similar to last year. Operating profit is expected to turn positive at 5.3 billion KRW. Looking at standalone revenue, it is estimated to have increased by 4% year-on-year to 171.4 billion KRW. Advertising, which is recovering from the low point in the second quarter, is estimated to have decreased by 10% compared to a year ago, recording 79.3 billion KRW. The business including digital sales from YouTube and Wavve is expected to have grown by 20% to 92.1 billion KRW.

Lee Ki-hoon, a researcher at Hana Financial Investment, said, “Except for two dramas in the third quarter, variety shows were scheduled as replacements, and ‘Elis’ was supplied as a Wavve original, reducing production cost burdens. Digital sales from YouTube and Wavve are expected to continue their high growth trend, and selling and administrative expenses are likely to maintain a reduction trend due to the combination of retirement and emergency management systems.”

According to SK Telecom, the number of paid subscribers to Wavve exceeded 2.3 million at the end of September. This is a growth of 900,000 from 1.4 million in October last year. This is presumed to reflect the effect of originals, as Wavve plans to invest 60 billion KRW this year to supply exclusive VOD for 14 originals (9 dramas, 4 variety shows, 1 concert). Researcher Lee Ki-hoon explained, “Wavve is expected to continue additional investments amounting to 300 billion KRW by 2023, and the increase in subscribers will contribute to SBS's related revenue growth.”

The recovery trend of terrestrial TV is also noteworthy. Since July, the Advertising Business Outlook Index (KAI) for terrestrial TV has exceeded 100 for four consecutive months compared to the same month last year. This index uses the same month of the previous year as 100 for expectations, and since the survey began in February 2018, terrestrial TV has continuously contracted by around 10% annually, and the index has never exceeded 100.

Researcher Lee Ki-hoon forecasted, “If advertising recovery continues in the third quarter results, it could also boost expectations for digital high growth and Studio S. Considering the momentum from Ace Story in China, SBS is expected to show the highest growth potential among drama production companies.”