Soaring Korean Drama Production Costs Drive Push for IP Franchising

The South Korean drama industry faces a significant challenge as production costs continue to skyrocket, driven by escalating fees for lead actors and writers. These costs now represent an unsustainable 50-60% of total budgets, a stark contrast to the early 2000s when per-episode actor fees were in the millions of won. The landmark moment came in 2007 when Bae Yong-joon reportedly earned over 200 million won per episode for "The Legend," solidifying a disproportionate allocation of funds towards top talent.

This cost inflation is not a recent phenomenon but a result of decades of industry evolution. The introduction of the "mandatory external production system" in 1991, aimed at fostering a diverse production ecosystem, initially boosted costs. Subsequent growth, including the rise of private broadcasters like SBS and the advent of cable TV in the 1990s, further expanded the industry. This expansion led to increased competition for limited star actors and writers, driving up their compensation. The global success of dramas like "Winter Sonata" and "Dae Jang Geum" in the 2000s further fueled this trend, as securing popular Hallyu stars became crucial for pre-selling content to international markets like Japan and China.

The landscape continued to shift in the 2010s with the emergence of comprehensive programming channels and the growing influence of global Over-The-Top (OTT) platforms. Dramas like "Descendants of the Sun" (2016) and "Mr. Sunshine" (2018) incurred total production costs of 13 billion and 43 billion won, respectively. The implementation of the 52-hour workweek in 2018 also contributed, normalizing staff wages and increasing shooting days, leading to a 20-30% rise in net production costs. The current decade has seen another surge, with global OTTs like Netflix and Disney+ investing heavily in Korean content, leading to per-episode costs of 3 billion won and series with tens of billions in total budgets.

In response to these escalating costs, which are now making it difficult for domestic broadcasters and even some OTTs to sustain production, the industry is turning towards intellectual property (IP) franchising as a key strategy. While Korean dramas remain relatively inexpensive compared to U.S. productions, their profitability has diminished. The industry is seeking new revenue streams beyond traditional broadcasting and exhibition to offset the financial burden and maintain its competitive edge in the global market. This strategic shift is seen as a necessary step for the continued growth and sustainability of Korean cultural exports.