K-drama stocks fall as Netflix to curb spending on films, shows

Netflix stock plunged 26 per cent after the company forecast a drop of 2 million customers this quarter. PHOTO: REUTERS

SEOUL (BLOOMBERG) - K-drama stocks, or shares of Korean drama production studios, slid on Wednesday (April 20) as Netflix said it will curb its spending on films and TV shows after reporting its first subscriber loss in more than a decade.

An equal-weighted basket of local drama producers' shares dropped about 2 per cent, underperforming the Kosdaq index that includes about a dozen of the stocks.

Netflix stock plunged 26 per cent in extended trading on Tuesday after the company forecast a drop of 2 million customers this quarter, also sending other streaming stocks lower.

Analysts, however, said the stock price retreat would be short-lived as Netflix is unlikely to cut its content investment in Asia, the only region in which the streaming giant saw subscriber growth in the first quarter. Netflix added more than 1 million customers in Asia, helped by popular new titles such as the South Korean drama All Of Us Are Dead.

Among the biggest losers in South Korea on Wednesday were major production firms including Studio Dragon and Jcontentree, with each falling as much as 6.3 per cent and 5.2 per cent respectively before paring losses. Studio Dragon is behind Netflix-streamed Crash Landing On You and Sweet Home, while Jcontentree created Netflix original D.P.

The basket of K-drama stocks has climbed nearly 9 per cent since the release of Squid Game in mid-September, with the series boosting the popularity of Korean content worldwide and prompting global players including Walt Disney, Apple and Warner Media to invest in local-language titles and original series to lure subscribers.

The Korean survival drama, depicting heavily indebted people playing deadly childhood games for a huge monetary prize, became the most popular series on Netflix.

Netflix announced its biggest line-up of Korean shows in January - with more than 25 programmes - after a six-fold global rise in viewing hours for the nation's shows in 2021.

Analysts said Netflix's spending cuts will most likely be in the United States and other regions outside Asia, while global players will continue to boost their spending in Korea.

"It is not bad for Korean companies," Mr Lee Ki-hoon, an analyst at Hana Financial Investment, said after Netflix earnings results. "Netflix will increase spending in South Korea because Asia is the only place where it is seeing growth."

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