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CJ And SBS Point To Korean Recovery

The power of popular IP is helping boost revenue growth for two of Korea’s premier TV-focused media groups, CJ E&M and SBS, despite the country’s uneven macro environment.

Recent earnings from the two companies underline how digital exploitation of IP can generate returns, both at home and abroad.

At the same time, the results suggest that Korea’s ad market might be making a comeback.

Local associations (i.e. Kobaco) and media buyers (i.e. Cheil) indicate that Korea’s ad market could expand by over 3% in 2015, after marginally flat growth over the previous two years.

Korea’s overall broadcasting ad market, including free TV, pay-TV and radio, is expected to clock in at 3.5% growth, after three years of consecutive decline.

SBS generated its first quarter of ad growth for the year in Q3, and could post a stronger Q4 for a marginal increase across the full year.

Meanwhile, pay-TV giant CJ E&M, which is aggressively exploiting its content across mobile and OTT platforms, saw ad sales rise by a whopping 16% Y/Y in Q3.

The company is on track for 12% full-year growth in 2015.

The CJ way

CJ’s success in exploiting IP across multiple platforms, raising ad rates and developing new program formats, is all helping the company outperform the general market.

A run of successful new shows, a trend that started to accelerate with the debut of Superstar K on Mnet a few years ago, has accelerated in recent times with new hits such as Over Flowers, Miseng and, in 2015, Three Meals A Day (an outdoor cooking reality show), Shin Seoyuki and Show Me the Money 4.

The success of such shows has helped lift yields and revenues across CJ E&M’s premium sales packages (+19% Y/Y), reducing reliance on bonus rates and heightening competition with free TV.

At the same time, CJ executives have kept content and production costs under control. This has helped drive greater earnings momentum across the company’s TV division, expected to earn more than W50 billion (US$46 million) in operating income in 2015, its highest for several years.

IP sales & licensing in TV is also growing at a brisk pace, although growth in pay channel subscription fees remains flat.

Digital momentum

CJ E&M has also started to bet more aggressively on digital, debuting its Shin Seoyuki reality series on TV Cast, a streaming platform run by domestic digital giant Naver, where the show has notched up more than 50 million views.

CJ has also sold the rights for Shin Seoyuki to Tencent in China.

The series is already in the black and its success has helped CJ sell higher CPM online ad slots, benefiting other content providers in turn.

Naver has been aggressive in driving online video as it battles with YouTube, retaining only 10% of ad sales in a deal with SmartRep, an alliance of seven major Korean content providers, including CJ E&M.

CJ meanwhile is also seeing traction for its IP on international digital platforms, recently monetizing My First Time across Hulu and Dramafever in addition to TV Cast.

My First Time is a co-production with SK Telecom which features popular singer Minhoo (from the group Shinee).

SBS surprise

Broadcast-focused media group SBS grew turnover by 2% in Q3 with free TV ad sales up 3%, boosted by the popularity of new drama offerings. IP and program sales were relatively robust, driven by demand for season 2 of Running Man, led by China.

The rebound at SBS points to a recovery in the broader free TV ad market, with growth expected to come in at 4% this year.

SBS earnings have also improved due to tighter production costs. Operating profit is expected to come in at about W40 billion in 2015, after a loss last year.

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