"More Serious Than Expected"... Thought It Was a Big Hit but Faced a 10 Billion Won Deficit Crisis

Despite the success of the drama 'Good Partner,' SBS is expected to incur a loss ranging from 10 billion to 20 billion KRW in the third quarter of this year. Not only SBS but also most media companies, including CJ ENM, are projected to fall significantly short of market expectations for their third-quarter earnings, raising concerns in the industry that the situation is "more serious than anticipated."

[Photo by SBS Drama 'Good Partner' capture]

Recently, Hana Securities forecasted that SBS would record an operating loss of 24.3 billion KRW in the third quarter due to rising production costs and the failure of the Olympics to attract viewers. Researcher Lee Ki-hoon stated, "The high Olympic broadcasting rights fees remained a burden. The drama's performance was also quite disappointing." Yuanta Securities also predicted SBS's third-quarter operating loss at 10.9 billion KRW.

On the 14th, news emerged that SBS's president and executives decided to forgo 20% of their salaries in the fourth quarter to overcome financial difficulties caused by a sharp decline in advertising revenue. On that day, the SBS Management Committee posted a notice within the company stating, "This year's SBS advertising revenue will be the lowest since the company's founding."

The main cause of the deficit was identified as the failure of the Olympics to attract viewers. During this Olympics, the three broadcasters KBS, MBC, and SBS formed the 'Korean Pool (KP)' to negotiate broadcasting rights and share the costs. Although the exact broadcasting rights fees are confidential, it is known to exceed 1 trillion KRW. Despite securing the Olympic broadcasting rights at such a huge cost, the three terrestrial broadcasters recorded low viewership ratings of 0-1% during the Olympics opening ceremony. This is about one-sixth of the combined viewership rating (17.2%) of the 2020 Tokyo Olympics opening ceremony.

Although viewership rebounded with the performance of the national team athletes, most game ratings remained in the single digits, causing the so-called 'Olympic boom' to disappear entirely. Given this situation, there are even talks in the industry that this Olympics might be the last time the three broadcasters jointly broadcast the event live.

It was expected that the success of the drama 'Good Partner,' which aired in the third quarter, would boost advertising sales, but the increasing burden of content production costs is also significant. The drama 'Good Partner' started with a 7.8% viewership rating for its first episode and then drew attention throughout its broadcast by recording a peak rating of 17.7%, more than double the first episode's rating. However, an industry insider said, "The burden of production costs is high due to rising actors' fees," adding, "For profits to improve, there needs to be a trend where actors and staff share this burden together."

Hana Securities also forecasted that CJ ENM's third-quarter operating profit would be 14.6 billion KRW, falling far short of the forecast (54.9 billion KRW), and predicted that most media companies' third-quarter earnings would significantly underperform market expectations. Rising content production costs and the continued downturn in the advertising market were cited as major factors.