[비즈한국] The stock market has recently been mentioning CJ ENM035760 as a beneficiary of President Lee Jae-myung. The reasoning is that President Lee’s culture-related campaign pledges could prove beneficial to the company. However, CJ ENM is a firm that has faced criticism from the Democratic Party of Korea in the past due to its track record of distributing conservative-leaning films and featuring former President Yoon Suk-yeol on its entertainment programs. Consequently, improving its corporate image remains a challenge for the company. Lee Gyeong-hu, the eldest daughter of CJ Group Chairman Lee Jay-hyun, currently serves as a management leader at CJ ENM. Whether she can leverage President Lee’s policies to strengthen her presence within the group is a key point to watch.
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The Fair Trade Commission (FTC) conditionally approved the merger of TVING and Wavve on the 10th. CJ ENM is the largest shareholder of TVING. While a specific merger plan has not yet been finalized, the media industry expects CJ ENM to become the largest shareholder of the merged entity, given current shareholding ratios.
Lee Ki-hoon, an analyst at Hana Securities, analyzed CJ ENM by stating, "The company is highly correlated with the new administration, so direct benefits are expected," adding that "(TVING and Wavve) will become the second-largest service after Netflix based on the number of domestic subscribers following the merger."
President Lee Jae-myung has pledged to strengthen state support for the entire creative process of K-content, foster K-culture platforms such as OTT (Over-The-Top) services, and significantly increase the cultural budget. Once the merger of TVING and Wavve is completed, the company can expect to receive government support. President Lee has long shown interest in domestic OTT platforms. During a presidential campaign rally in Pyeongtaek last May, he stated, "The country must support platforms like OTT to create our own."
Some in the opposition camp have criticized this stance. Representative Lee Jun-seok of the Reform Party remarked via social media in May, "It seems President Lee Jae-myung thinks only of nationalizing everything to profit from it," adding, "Among the dozens of public applications created by Gyeonggi-do pouring in tens of billions of won this way, some failed with fewer than 100 downloads."
The Democratic Party of Korea currently holds 167 seats, more than half of the 300 seats in the National Assembly. If the Democratic Party supports the President, it is enough to overcome opposition from other parties. However, the Democratic Party does not view CJ ENM favorably due to its past actions. Films like "The Admiral: Roaring Currents" and "Ode to My Father," released in 2014, and "Operation Chromite," released in 2016, were all evaluated as targeting the conservative base. Nevertheless, it is reported that there was pressure from the regime behind these choices. CJ Group Chairman Sohn Kyung-shik testified at a 2018 trial related to former President Park Geun-hye’s abuse of power scandal that "(Former President Park) made comments hinting that CJ had a leftist tendency, saying that since we have the capability to make good films, it would help the country if we changed our direction."
In 2022, CJ ENM faced controversy when former President Yoon Suk-yeol appeared on the tvN program "You Quiz on the Block." At the time, Yoon was the President-elect. The CEO of CJ ENM at the time was Kang Ho-sung, a former prosecutor who had worked with Yoon for a year at the Suwon District Prosecutors' Office Seongnam Branch in 1997.
The Citizens' Coalition for Democratic Media pointed out, "As concerns grow that a farce created by political intervention in broadcasting and the voluntary loyalty of a media conglomerate emerged on a popular entertainment show, there is growing anxiety about the upcoming aspects of collusion between the new power and the press." CJ ENM did not issue an official statement at the time.
Recently, the Democratic Party has not publicly criticized CJ ENM. Nevertheless, as negative public sentiment toward the company has not completely disappeared, improving its image remains a task for the future.
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There is another reason why CJ ENM is drawing attention. Lee Gyeong-hu, the eldest daughter of CJ Group Chairman Lee Jay-hyun, is working at CJ ENM alongside her husband, Jung Jong-hwan, who is also a management leader at the firm.
Chairman Lee Jay-hyun has one son and one daughter: Management Leader Lee Gyeong-hu and Management Leader Lee Sun-ho of CJ CheilJedang097950. Given the conservative atmosphere of family-run conglomerates (chaebols), the business world expects Management Leader Lee Sun-ho to become the next head of CJ Group.
However, it is not yet the stage to declare this definitively. The shareholders of CJ Corp, the holding company of CJ Group, consist of Chairman Lee Jay-hyun (42.07%), Management Leader Lee Sun-ho (3.20%), and Management Leader Lee Gyeong-hu (1.47%) based on common stock. The direction of management succession can change at any time according to Chairman Lee Jay-hyun's will.
Furthermore, Management Leader Lee Sun-ho has been involved in several controversies in the past, including a suspended sentence of 3 years of imprisonment with 4 years of probation for drug smuggling. Therefore, the possibility of his sister, Lee Gyeong-hu, succeeding the group if she proves her management capabilities cannot be ruled out.
However, CJ ENM’s recent performance is not good. Revenue fell 1.37% from 1.1541 trillion won in the first quarter of last year to 1.1383 trillion won in the first quarter of this year, and operating profit plummeted 94.29% from 12.3 billion won to 700 million won during the same period.
Choi Min-ha, an analyst at Samsung Securities, analyzed, "While the company is strengthening its profitability-focused management, it is disappointing that the speed of improvement is slower than expected due to the influence of the market environment," adding, "In particular, TV advertising revenue, which needs to cover fixed costs, is sluggish, and the speed of profit improvement for TVING and Fifth Season is slower than expected."
For CJ ENM, the inauguration of President Lee Jae-myung could be a turning point to change the atmosphere. Although CJ ENM has not issued an official statement regarding President Lee, it is reported that there are high expectations within the company. A recovery in performance is also expected starting in the second quarter of this year. In an IR document released in May, CJ ENM stated, "We will accelerate the recovery of profitability starting from the second quarter through growth driven by well-made content and live commerce."