[비즈한국] Since the Netflix original animation ‘K-Pop Demon Hunters’ was released on the 20th of last month, it has caused a sensation, topping the global film rankings in 41 countries. This film transcends mere entertainment; it is influencing not only Netflix but also the earnings outlook for domestic entertainment companies.
Netflix announced on the 17th (local time) that its second-quarter revenue reached $11.079 billion (approximately 15.44 trillion KRW), a 15.9% increase from the same period last year, with earnings per share (EPS) of $7.19. Operating profit stood at $3.775 billion, a 45% increase compared to the same period last year. ‘K-Pop Demon Hunters’ and ‘Squid Game Season 3’ were cited as key factors contributing to the growth in performance.
What is striking is that ‘K-Pop Demon Hunters’ is not a sequel or a remake, but a completely original animation. Furthermore, the original soundtrack (OST) sung by the fictional K-pop group in the film proved its impact by dominating music charts, reaching 2nd place on the main Billboard album chart ‘Billboard 200’ and 6th place on the main singles chart ‘Hot 100’.
Netflix stated in this earnings report, “In this shareholder letter, we emphasized the musical success of this film, and we expect it to lead to the spread of fandom for the fictional K-pop group within the film.”
Kim Hoi-jae, an analyst at Daishin Securities, noted, “Netflix mentioned countries where content production is possible even during the pandemic, and they also cited Korean content in their fourth-quarter results last year—where they surpassed 300 million subscribers for the first time in history to achieve record-high performance—as well as in their first-quarter results this year, which broke that record again.”
This phenomenon shows that the borders for content consumption have disappeared. For investors, this could represent a new opportunity.
First, the spread of K-Content is positive in that it is linked to the growth of all industries related to the content. K-Content is no longer limited to dramas and movies. It is now possible to generate revenue through a structure where fandoms expand via OSTs and animations, leading to increased sales in concerts and merchandise (MD). For this reason, there are expectations that the success of ‘K-Pop Demon Hunters’ will contribute to increasing the visibility of earnings for domestic listed entertainment companies that have a high proportion of concert and MD sales.
Kim Yoo-hyeok, an analyst at IBK Securities, said, “The success of K-Pop Demon Hunters is expected to act as a factor that strengthens the growth momentum of concert and MD sales for entertainment companies.” Analyst Kim further explained, “The fact that animation and OSTs are simultaneously successful in various countries around the world can be interpreted as the expansion of the K-pop genre's penetration rate, and because this ultimately leads to an expansion of the fandom, we can expect concert and MD performance to exceed market expectations.”
In particular, moving beyond the ‘core fandom,’ the ‘light fandom’ introduced through content is becoming a new demand base. They are driving various industries by consuming concert tickets, merchandise, and digital content.
Im Soo-jin, an analyst at Daishin Securities, interpreted this by saying, “The key point is that despite being content with a strong ‘K-pop color,’ demand occurred simultaneously in various countries. It is an empirical signal that the consumption of K-pop, which was previously centered on ‘core fandom,’ is expanding to ‘light fandom’ through content as a medium.” Analyst Im evaluated, “In particular, the even response across Asia, North America, and Europe is positive as it implies the possibility of an expanded potential demand base for future global concert tours.”
For investors, it will become increasingly important to go beyond simply choosing content-related stocks and instead analyze which IP (intellectual property) will move the market and how far the reach of that IP’s influence will extend.
Jang Ji-hye, an analyst at DS Investment Securities, stated, “By attractively handling Korean sensibilities—such as Korean lyrics, Korean food, senior-junior/fandom culture—and Korean characters—such as shamanism, grim reapers, and tigers—within the animation, it has proven that the most Korean things can be the most globally successful content.”
About 20 years ago, the drama ‘Winter Sonata’ created the concept of ‘Hallyu’ (Korean Wave) in Japan. The ‘Yon-sama’ craze was more than just simple popularity. A single drama moved a country’s sentiments and market, and those emotions expanded into consumption and industry. The same is true for today’s K-Content. Turning emotion into assets is the task that investors must undertake now.