Negotiating Power Takes Priority Over IP Acquisition [The Second Take]

Ownership and Utilization Are Different Matters
Now Is the Time to Prove Ourselves With Results

The content industry is facing tough times. Production costs are rising while revenues are declining. It has become a landscape too challenging to sustain with domestic capital alone. This is a time when the ability to endure is being put to the test. Some observers point to securing intellectual property (IP) as the key factor. However, ownership and utilization are separate issues. Although hit titles are released every year and IP assets are accumulating accordingly, there are few cases where these have been turned into substantial profits. "Squid Game" is a rare exception. The franchise expanded into reality shows, clothing, video games, and paid amusement spaces, and was even developed into a digital slot machine. Bloomberg estimated its derivative value at over 1 trillion won. However, this IP has belonged to Netflix from the start.

Still cut from the movie "Gunche".

There are no cases where a Korean production company has expanded its business this far using its own IP. Most efforts remain at the level of tourism marketing. Last month, the Korea Tourism Organization and Studio Dragon agreed to establish a "Hallyu Olle Trail." The aim is to incorporate tourism elements from the pre-production stage. However, this is merely the belated organization of long-standing practices. Due to a lack of human resources within local governments and the absence of utilization guidelines, the impact is likely to be only temporary.

The situation is similar for film and drama IP remakes. While news emerges about popular domestic works being remade overseas, their share of the industry's total revenue is minimal. Once the rights are sold, the original creators' involvement ends. No matter how successful the remake is, there is no expectation of additional profit. In 2024, exports in the broadcasting and video sector reached 1.981 trillion won, up 40% from the previous year. However, the average operating profit margin for the 21 listed production companies remained at minus 32%, indicating continued losses. Only a few, such as Studio Dragon and Showbox, managed to turn a profit. This shows that an increase in exports does not necessarily translate into increased earnings for production companies.

Turning IP into a franchise is a separate challenge. This requires not only capital and distribution networks but also a great deal of trial and error. Currently, the domestic production industry does not have such capacity. The more urgent task is to strengthen the bargaining power in production contracts themselves. Even if the entire industry does not change, individual production companies can first demonstrate results through their own performance.

For example, director Yeon Sang-ho leveraged the trust built through works such as "Train to Busan" to pre-sell his follow-up titles "Gunche" and "Lost Paradise" overseas before their theatrical release. In the case of "Gunche," a significant portion of the net production cost of 17 billion won was recouped prior to release, lowering the break-even point from 5 million to 3 million viewers, a figure that was surpassed within ten days. With "Lost Paradise," the entire net production cost was recovered solely through pre-sales. The head of the North American distributor for "Gunche" cited the director's filmography as a stronger basis for the contract than the content itself. This performance enabled more favorable terms for subsequent contracts.

Movie still cut from "Fahrenheit House."

If the achievements of individual directors have produced such results, a different approach is needed at the company level. In particular, it is urgent to change the settlement structure. Instead of simply receiving a lump-sum payment for production, production companies must secure at least a small share of profits based on box office performance. To achieve this, it is necessary to first secure notable results on overseas platforms such as Netflix.

Diversifying distribution is also essential. "Fahrenheit House," co-produced by Run Up Company and Hive Media Corp, surpassed its break-even point and reached number one at the box office in Vietnam within a week of release. Run Up Company has already released a series of localized films in Vietnam, such as "The Last Wish" and "Plastic Surgery to Hell," through its Vietnamese subsidiary. This is a case where direct investment overseas led to profit generation and is noteworthy in that it overcame the limitations of the domestic market.

All these efforts are aimed at the same goal: building a track record of proven results and settlement experience, and then leveraging that as a condition for subsequent contracts. How to utilize IP comes next. The priority is to establish the qualifications for doing so.

This content was produced with the assistance of AI translation services.