K-drama hitmaker Studio Dragon in crisis as content head resigns

Studio Dragon Corp., a South Korean production company of Netflix hits such as "The Glory" and "Crash Landing on You," said on Monday its co-Chief Executive Officer and content creation head Kim Young-kyu has resigned from his position.

The studio, a unit of South Korean entertainment giant CJ ENM Co., stated in the disclosure that he also stepped down from his role as an inside director as of June 26. Although the company said his resignation was for personal reasons, industry insiders say he took responsibility for alleged employee embezzlement within the production firm.

CJ ENM’s parent CJ Group discovered financial misconduct of a producer at Studio Dragon two months ago, according to sources familiar with the situation. The employee is alleged to have misappropriated corporate funds, sources said.

Studio Dragon fired the producer and is considering legal action, sources added. It is understood that there are more employees involved in the allegation.

The CJ ENM’s split-off plans, produces and distributes Korean films and drama series. Its Netflix hit "The Glory" topped the streaming giant's non-English TV show chart in March of this year.

The company had been led by two co-CEOs, Kim Jey-hyun for business management and Kim Young-kyu for content production. As of June 26, Kim Jey-hyun is the sole CEO due to the content head’s resignation.

CJ STOCKS FALLING 

With the stepping down of Kim Young-kyu, the drama production house is facing the biggest crisis since its inception in 2016, market watchers say.

Studio Dragon’s stock finished at 57,700 won ($44.10) on June 26, down 0.52%. The price has plunged about 30% since last December, when "The Glory" was released.

The drop in stock price is in contrast to the company’s performance. It posted 697.9 billion won in revenue in 2022, up 43.3% on-year. The operating profit amounted to 65.2 billion won last year, up 24% from a year ago.

The production house’s first-quarter revenue for this year also soared 74.3% to 211.1 billion won, compared with the same period last year.

The stock has fallen as CJ ENM reduced drama series production due to a sharp decline in advertising revenue during the economic downturn. The lack of a major upcoming drama series to follow on the success of "The Glory" also pulled down shares.  

CJ’s other entertainment affiliates have also suffered share declines.

CJ CGV Co., a leading multiplex cinema chain, saw its stock plunge after it announced last week a plan to raise some 1 trillion won from CJ Group for debt repayment and new businesses. The movie theater unit’s stock finished at 9,790 won on June 26, its lowest price since 2008.

CJ ENM finished at 64,500 won on Monday, down about 45% from its one-year high in February of this year.

CJ Corp., the holding company of CJ Group, closed at 71,300 won on the same day, plunging about 38% over the past two months.

Write to Jong-kwan Park and Jun-Ho Cha at pjk@hankyung.com
Jihyun Kim edited this article.