“OTT growth slowdown is an opportunity”... Can Studio Dragon find a breakthrough in the U.S. market?

[Financial News] A securities industry analysis suggests that slowing growth in the global over-the-top (OTT) market could present a new opportunity for Studio Dragon. The fiercer the competition with YouTube becomes, the more likely global OTT platforms are to once again pursue differentiated original content.
Amid a downturn in South Korea’s drama production market, expansion into the U.S. market has emerged as a variable in the company’s medium- to long-term valuation.
On the 13th, KB Securities lowered its target price for Studio Dragon to 32,000 won but maintained its “Buy” rating. Reflecting the weak content industry outlook, it applied a price-to-earnings (PER) multiple of 22, a 50% discount to global OTT peers.
The company’s results are expected to improve despite a decline in the number of productions. KB Securities estimated the company’s third- and fourth-quarter operating profit at 14.8 billion won, up 40.9% from the same period a year earlier and expected to meet market expectations. The total number of episodes supplied is expected to be 64, down eight from the previous year, but revenue is forecast to rise 12.2% as the company supplies a global OTT platform with 22 episodes of the blockbuster series “Slowly, Intensely.”
The key question is the direction of investment by global OTT platforms. Choi Yong-hyun, an analyst at KB Securities, said, “Major platforms have recently been focusing on live content and advertising, but original content remains the key way to differentiate themselves from competitors.” He assessed, “If competition among OTT platforms to secure content reignites, Studio Dragon, with its production capabilities, could benefit.” 
Particular attention is being paid to the possibility of securing orders for up to three series in the U.S. market in 2027. The contracts have yet to take concrete shape, so the near-term impact on the share price is limited. But if they result in actual orders, the company could be reassessed for its expanded overseas production base and growth in its intellectual property (IP) business.
Choi added, “Global OTT platforms are unlikely to reduce their investment in original content.” He continued, “The point at which orders for U.S. series become visible will be a turning point in confirming Studio Dragon’s medium- to long-term growth potential.” 


[email protected] Kim Gyeong-a Reporter