A love story set around an augmented reality game and Spain's iconic palace, the hit K-drama 'Memories of the AlHambra' is set for a US remake. Poster: Studio Dragon

South Korean TV productions are set to gain further international traction in global markets as Netflix, the world’s largest streaming entertainment service, has signed long-term contacts with two Korean drama production companies: Studio Dragon and Jcontentree.

The contracts, both signed in November for undisclosed sums, will bring over 40 Korean dramas to the streaming content provider over the next three years.

Netflix’s interest reflects a growing global appetite for K-drama.

Korea’s first Netflix original series, Kingdom,” which premiered in January 2019, was a massive international hit for its production company Astory. The historical supernatural thriller deals with class inequality, political struggles and zombies. A second season is scheduled to be on air in March 2020 as a Netflix original.

More deals are in the pipeline. Studio Dragon is planning a major overseas expansion by setting up a base in the US. It is also discussing remakes of some of its biggest Korean hits with a range of other US distribution firms. Meanwhile, new players in the online streaming context space, such as Apple, Disney and HBO, are expected to require more original content, and are also aiming at Asian markets.

All this indicates good times ahead for Korea production houses.

THAAD downs Hallyu

The Netflix contracts provide welcome news for the Korean cultural content industry, which has been hammered in what was formerly one of its biggest and most promising markets – China.

K-pop, K-dramas, and K-games had been wildly popular among Chinese: In fact, the term Hallyu (“Korean wave”) was coined in China.

That was then.

Beijing retaliated economically after Seoul agreed with Washington to install a US Terminal High Altitude Area Defense anti-missile battery in South Korean in 2016; it went operational in 2017. Sectors hit included Korean retailers in China and group-tour travel to Korea as well as Korean cultural content. No K-pop concerts are currently being held in China, no K-games are receiving approvals and no new K-dramas are being aired.

Since THAAD, concerns about the evaporation of the  China market “have been growing in the South Korean content industry,” Han Sang-woong, an industry analyst at Eugene Investment and Trust, noted in a report. “But, Korean drama is expected to move beyond China in 2020 to enter the North American market, the world’s largest content market.”

According to the securities house, the US broadcasting market is the world’s largest, with a 43% global market share as of 2017.

Netflix + Studio Dragon

Studio Dragon is South Korea’s largest scripted television production, marketing, and distribution studio under Korea’s largest entertainment company, CJ ENM Group. CJ ENM Group owns various film and music assets, operating 17 TV channels, including tvN, Mnet, and OCN, as well as cineplexes.

“As part of a three-year partnership beginning in 2020, Studio Dragon and its stellar roster of creators will produce original series that will be available to Netflix members all over the world,” Netflix said in a press release. “Netflix will also receive distribution rights to other select Studio Dragon titles.”

Netflix has already streamed Studio Dragon hits such as “Mr Sunshine,” “Stranger,” “Memories of the Alhambra,” “Romance is A Bonus Book,” and “Arthdal Chronicles.” It has also produced a Netflix original series, “Love Alarm,” which premiered last August.

The existing partnership has been enhanced through the new, three-year contract under which Studio Dragon will provide six to seven dramas a year, or at least 21 dramas in three years, to Netflix. Of these, two-three will be Netflix Originals.

Netflix + Jcontentree

The number of dramas Jcontentree supplies to Netflix will also expand under its new contract with the US firm,

“We made a contract with Netflix to supply six to eight dramas annually – 22 to 23 dramas in three years from May 2020 to May 2023,” a Jcontentree official told Asia Times “Under the contract, we will only broadcast them via [cable channel] JTBC in Korea; Netflix will have overseas broadcasting rights.”

Jcontentree is a branch of Korea’s Joongang Group, which owns cable TV channel JTBC, Korea’s number-two newspaper, various magazines and multiplexes. The company currently supplies two to three dramas a year to Nexflix.

The official also disclosed, “We are also discussing the production of Netflix original dramas.”

Beyond Netflix

Studio Dragon is thinking beyond Netflix, with a long-term plan to become a major drama producer in the global market. To this end, it plans to set up a local branch company in the US in the second half of this year.

As a stepping stone, it is currently discussing a US remake of its cop drama “Live,” with 20th Century Fox. “Live” (2018), one of the highest-rated Korean dramas in cable television history, tells the story of police officers – from the lowest-grade street patrol officer up to the highest ranks – in the busiest and most stressful patrol division in Seoul.

It is difficult to specify how much we will participate in the remake,” a company official said. “We may take part in just planning – or [actual] film making.”

The US version of “Live” will portray police work through the eyes of a young African-American policeman in a hardore area of Washington DC. The official expects the US version to screen in September or October 2020.

Discussions of remakes with other foreign production companies are also underway. In the pipeline are “Memories of the Alhambra,” “Oh My Ghost” and “Hotel DeLuna, Studio Dragon’s global head Park Hyun said, adding that “Memories of Alhambra” has drawn the attention of Emmy Award-winning producer Jon Cassar,

“Memories of the Alhambra” is a 2018 series, starring Hyun Bin and Park Shin-hye – a love story about a game company CEO and a hostel owner who get entangled in mysterious incidents linked to an augmented reality game connected to the iconic Spanish palace.

“We are establishing a strategy to expand our platform and business globally. We will not only sell finished content, we’re working with partners for remakes and co-productions, with all possibilities open,” said another Studio Dragon official. “Our goal is to create global dramas with our own IP. We will establish a US branch in the second half of next year to achieve this goal, not just to attract investment.”

More competition = more content

South Korean producers expect to benefit from upcoming competition between Netflix and new entrants in the OTT (“Over the Top” – ie direct, paid content streaming, via the Internet) market. Apple TV+ and Disney Plus both jumped into the sector in November.

Eugene’s Han said that Netflix’s cooperation with Studio Dragon and Jcontentree is intended to secure content in advance of its rivals. The Jcontentree official agreed. “Netflix is preemptively securing contents as late movers such as Disney Plus and HBO Plus are scheduled to enter the market,” he said.

According to Han, Disney will target the European market in the first half of 2020 and Asian markets in 2021.

Content is usually conducted six months before an OTT starts operations, Han said, adding that Disney is expected to start buying content Asian markets in the second half of 2020.

Why K-drama?

Global OTTs are drawn not just to the global trendiness of Korean dramas, but also their cost competitiveness.

“The average production cost per episode of well-known US dramas is around 4 billion won ($3.4 million). Assuming ten episodes in a season, the production cost of American dramas is around 40 billion won,” Han said. “On the other hand, ‘Arthdal Chronicles,’ the most expensive Korean drama ever, cost 54 billion won for 18 episodes – 3 billion won per episode.”

Following their Netflix deals, local securities houses have taken note of the two local firms.

According to Studio Dragon, 53 recommendations to buy its stock have appeared; no analyst recommends selling the share. Eighteen securities houses recommended Jcontentree shares with no sell recommendations, Jcontentree said.

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