Is it a burden for actors to receive high salaries?
The Korean drama "Queen of Tears" produced by Studio Dragon is currently creating a global fever. Because this work invested up to 40 billion won in production costs for 16 episodes, its success is of great interest to the public.
Recently, news about male lead Kim Soo Hyun's salary became a controversial topic. There is information that Kim Soo Hyun proactively asked to reduce his salary to 300 million won/episode (total of 16 episodes is about 88 billion VND) to reduce the burden on producers, in the context of the Korean film industry. are having difficulty.
But there are still many people who are upset because A-list stars receive too high salaries, causing production costs to increase.
However, according to The Bell: “From a manufacturing company perspective, such large-scale investments do not pose as much of a burden as commonly feared. As production costs increase, the scale of revenue and profits earned by the manufacturing company also increases.
In this case, Studio Dragon completed the recovery of investment capital even before the film aired.
The profit structure from the television film business stipulates that the production company can recover part of the production costs before releasing the film, through revenue from television stations (broadcasting fees) or revenue. advertisement.
However, with the emergence of global OTT (streaming platforms) like Netflix and the “simultaneous broadcasting” model, the profit structure has changed.
5 years ago, the production cost of each Korean television episode was about 500-700 million won, a total of 16 episodes could hardly exceed 10 billion won. If production costs increase, the capital recovery rate will certainly decrease. Because movies are only broadcast on television, there will be limits on broadcasting fees and advertising revenue.
However, nowadays, due to competition between OTTs, many big-budget blockbusters (big IPs) are released, up to billions of won per episode. This means that the production company has another large source of revenue coming from OTT.
"Queen of Tears" paid back before going on air
In the case of a movie with "huge" production costs like "Queen of Tears", the capital recovery rate through tvN broadcasting fees is estimated at about 50%. Studio Dragon aims to return capital and earn remaining profits from Netflix.
In general, blockbuster films are produced with almost confirmed pre-sale of rights. Studio Dragon has signed a contract to provide content for Netflix from 2020 to 2022 with 6 movies at the same time, and 2 original movies each year.
According to the contract terms at the time, the capital recovery rate through Netflix was 60% of production costs. IP giants are said to have higher premiums than that.
Considering that Netflix bought the rights to the movies “Mr. Sunshine” (2018) and “The King: Eternal Monarch” (2020) with a 70% return rate, “Queen of Tears” is estimated to have guaranteed at least 70% of its costs. production fees from Netflix. In other words, the broadcast fee (50%) and pre-sale fee from Netflix (70%) exceeded the break-even point (BEP) for the producer.
An industry insider said: “Queen of Tears receives a higher capital recovery rate than other works. Because the value of the names of screenwriter Park Ji Eun and actress Kim Soo Hyun is very high."
Assuming, “Queen of Tears” earns at least 20 billion won in broadcast fees and 28 billion won in pre-sale fees on Netflix, Studio Dragon has guaranteed a 20% profit, even without counting other profits.
Additionally, Studio Dragon can earn additional revenue through advertising sales, soundtracks and domestic VOD services.
As the viewership rating increases, Studio Dragon will receive more incentives from tvN. It is known that the incentive level is usually 7% of production costs. In the case of “Queen of Tears”, it was around 2,8 billion won.
In the future, manufacturers can also profit from selling copyrights to other countries.
