[The Crisis of K-Content] Production Costs of 100 Billion Won and Appearance Fees of 1 Billion Won... Investment Plummets as the Bubble Bursts

① Actor 'Value' and Production Market's Lean Period Functional Relationship
30 Dramas, 100 Films in Storage
Production Costs Rise After Pandemic
Studios Struggle with Stars' Multi-Billion Won Fees

Editor's NoteThe K-content market is facing an unprecedented ice age. After the COVID-19 pandemic, competition intensified due to an oversupply of content, and production costs soared. As profitability worsened, completed films and dramas piled up in warehouses. Production companies and investment-distribution firms have run dry financially. We are now in an era of 100 billion KRW production budgets and 1 billion KRW actor fees. As production scales grew, investments contracted. Rising labor costs are the biggest cause of increased production expenses. In some cases, actor fees exceed the revenue generated by the work. We examined the functional relationship between actor fees and the production market’s bottleneck.

The photo and the main text are not directly related. [Photo by Pixabay]

The content market is crying out in distress. A veteran production company CEO who has made major commercial films for over 25 years lamented, “This is the first time production work has stopped due to blocked investments.” This statement conveys a serious sense of crisis. During the COVID-19 pandemic, the Netflix series 'Squid Game' created a global sensation, ushering in a golden age for K-content. As the market expanded, everyone rushed into production, but as the bubble burst, production sharply declined and funding dried up. Why is this happening?

Investment Plummets → Number of Productions Cut to One-Third

Films are completed but remain unreleased, piling up in warehouses, and dramas are drifting without scheduled broadcasts. According to data from the Korea Drama Production Association on the 28th, Korean dramas released through OTT platforms and domestic broadcasters reached a record high of 141 titles in 2022, during the K-content boom. However, this number shrank to 123 in 2023, and only about 100 are expected to be released this year. While overseas OTT productions have maintained similar levels, the number of productions by domestic broadcasters and native OTT platforms is declining.

The Korean Film Council estimates that about 100 films have been completed but remain unreleased. As investments in works fail to be recouped at theaters, new investments have contracted. According to the 2024 Korean film production status report released by the Korean Film Council, 27 films are scheduled for release, 49 films have completed shooting and are in post-production, and 26 films are currently shooting. Of the total 102 films, about 50 are commercial films, including 'Harbin' and 'The Black Nuns.' There are concerns that the situation will worsen as the number of new Korean films released in theaters in one to two years will significantly decrease.

The average production cost for dramas is about 50 billion KRW, reaching as high as 60 to 70 billion KRW. This is two to three times, and up to four to five times higher than 10 years ago. Film production costs have increased even more. The era when a total production cost of 10 billion KRW was considered a 'blockbuster' is over. Tentpole releases now reach 20 to 30 billion KRW in scale. The rising status of K-content in overseas markets has also influenced this. As OTT platform market shares have increased, production budgets of 20 to 30 billion KRW have become feasible. It is also rumored that the production cost of Netflix’s 'Squid Game' Season 2, scheduled for release in the second half of the year, approaches 100 billion KRW.

No Money... Overseas Top Stars’ Fees Skyrocket

Terrestrial broadcasters and major domestic film investment-distribution companies are reducing investments. It is estimated that domestic major film investment-distribution companies (CJ ENM, Showbox, Lotte Entertainment, NEW, Plus M Entertainment) have only about 10 films either starting shooting or preparing to crank in recently. CJ ENM, which was rumored to be withdrawing from the Korean film business due to poor conditions, has decided to invest in only one new project, Park Chan-wook’s new film 'No Choice.'

Native OTT companies have also drastically reduced the number of drama and film productions, and Naver and Kakao are also reducing investments. Production companies are equally burdened by the ballooning production costs. Since completed works are still piling up in warehouses, new investments are difficult. Moreover, as market profitability worsens and management conditions are no longer as favorable as before, production companies are locking their coffers.

According to the Financial Supervisory Service’s electronic disclosure system, Studio Dragon, which recently released tvN dramas 'Mom’s Friend’s Son,' 'Queen of Tears,' 'Graduation,' and the Netflix series 'Whirlwind,' recorded sales of 137.1 billion KRW and operating profit of 10.5 billion KRW in the second quarter of this year. Sales decreased compared to 163.5 billion KRW in the second quarter of last year, and operating profit dropped by 35.7%. SLL, which released dramas 'Family X Melo,' 'The Woman Who Plays,' and the Netflix series 'In the Forest Where No One Is,' recorded sales of 127.1 billion KRW in the second quarter, down 29% year-on-year, with EBITDA (earnings before interest, taxes, depreciation, and amortization) of 24.3 billion KRW and an operating loss of 5.3 billion KRW.

The biggest factor driving up production costs is the fees of so-called ‘A-list’ actors. Although the introduction of a 52-hour workweek on set has increased staff labor costs, this is negligible compared to actors’ fees. As overseas OTT platforms have actively entered K-content production, there are reports that top actor A received over 1 billion KRW per episode. Actor B reportedly earned 100 million KRW per episode in domestic broadcaster dramas in the past but now receives 500 million KRW on OTT platforms.

'Squid Game 2' still, not directly related to the main content
[Photo by Netflix]

The problem is that once fees rise, they are difficult to reduce. Production companies naturally rely on stars because they want actors with high overseas recognition as they increase the proportion of overseas rights sales. Broadcasters and platform operators ultimately have no choice but to reduce scheduling to meet the stars’ ‘expensive fees.’

A veteran production company CEO who made a film that attracted 10 million viewers said, “Global OTT platforms have poured huge capital into K-content, causing production costs to skyrocket and creating a strange market where only lead actors and star writers benefit greatly.” He added, “Actors present fees based on global OTT standards and ask to be matched accordingly. Although there are large differences in production costs between works, it is difficult not to comply.” Another production company CEO said, “It is frustrating that investment money does not circulate within the industry. We should not expect problems to be solved by just one or two hits. Long-term measures are necessary.”