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Media & Entertainment

'Crash Landing on You' studio glides Netflix boom to new heights

Streaming war provides tailwinds for respected South Korean content creator

The K-drama "Crash Landing on You" features a South Korean heiress who falls in love with a soldier from the North. (Photo courtesy of Studio Dragon)

SEOUL -- 2020 was a banner year for K-drama as coronavirus-fearing consumers, stuck at home day after day, turned to streaming services for a strong dose of escapism.

But few on the production side have soared as quickly as Studio Dragon -- known for the hit series "Crash Landing on You," in which a South Korean heiress accidentally enters North Korea via paraglider and has an undercover romance with an army officer she meets there.

The company churned out 27 titles last year, with overseas sales surging. As streaming services invest heavily in content to take on the competition, the studio is poised to continue growing in the coming years and reach an ever-expanding global audience.

Studio Dragon was once part of the drama-making department at CJ ENM, a South Korean media powerhouse whose portfolio includes television and movies. The studio is now its own company under CJ ENM, having been spun off in 2016 for increased independence and to bring content to platforms outside the group.

The studio quickly acquired four production companies to snap up talent. It listed on South Korea's Kosdaq market for startups in 2017 and boasts 231 creators, including popular screenwriters, directors and producers.

Studio Dragon's revenue increased 12% to 525.7 billion won ($465 million) in 2020, with operating profit jumping 71% to 49.1 billion won. International distribution revenue accounted for 52.5% of companywide revenue in the fourth quarter -- up 20 percentage points on the year.

The studio owes much to its success on such streaming platforms as Netflix. The U.S. giant counted well over 200 million paying subscribers as of the end of 2020, providing content creators access to a much larger market than they would otherwise have.

Netflix had been keeping its eye on the quality of Studio Dragon's content since its early days, including popular titles like "Guardian: The Lonely and Great God," "Misaeng -- Incomplete Life" and "Signal." Netflix has taken a stake of well over 4% in Studio Dragon under a November 2019 deal, estimated at around $90 million, in which the studio agreed to provide 21 or so dramas to the platform over three years.

Studio Dragon made 27 K-drama titles in 2020, including the psychiatric ward romance "It's Okay to Not Be Okay." (Photo courtesy of Studio Dragon)

After the spinoff, Studio Dragon put together an army of creators through a combination of business acquisitions and in-house development. The company then sells its creative content to outside media platforms.

It is through that collaborative business model that Studio Dragon has honed its creative prowess. It departs sharply from the traditional approach where a TV studio controls the creative process while the production company is merely a contractor.

"Thanks to the rise of streaming platforms, we were able to escape from an earnings structure centered on domestic TV," a Studio Dragon insider said. "The competition between platforms to acquire dramas has also resulted in an uptick in unit prices for selling shows."

A drama can garner a budget well north of $20 million. That has allowed "Crash Landing on You" to film on location in Switzerland at length. The titles are being produced with the international market in sight.

Netflix has announced that it will spend nearly $500 million on South Korean content this year. Co-CEO Ted Sarandos has said the apocalyptic suspense series "Sweet Home" drew 22 million subscribing households in less than a month after it premiered.

Studio Dragon is expected to benefit the most from this round of investment.

The CJ group entered into a comprehensive tie-up with South Korean tech leader Naver last October. The deal resulted in Naver being a major shareholder in Studio Dragon at 6.26%. Plans include mining Naver's trove of web comics as source material for dramas.

Although Netflix reigns over the streaming platform space, it is engaged in a bitter power struggle with such rivals as Apple and Amazon.com. In South Korea, Netflix has to contend with streaming services from e-commerce giant Coupang and the Samsung group.

This indicates that the tug of war over top-shelf content will persist, at least for the time being, leaving production studios enjoying a sellers' market.

The timing of Studio Dragon's spinoff seems to have anticipated the golden age of streaming. Pandemic-driven demand enabled the company to vault into the upper echelons of Korean drama producers.

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