GHY's Strategy for Profitable Drama Financing
I've previously analyzed GHY Culture and Media (GHY)(SGX: XJB) given their close ties to renowned artist Jay Chou. As the production house behind many of Jay's highly lucrative concerts, GHY has demonstrated expertise in large-scale live entertainment events.
However, I was also curious about their business model in production of Chinese dramas, which tend to involve substantial financial risks compared to concerts. The heavy costs associated with drama production led me to question how GHY could turn a profit in this competitive industry.
Fortunately, further research provided useful insights into China's drama financing models. A detailed write up explained that most projects nowadays are co-produced or already purchased with major streaming platforms from the very beginning.
As quoted from the website:
“…The majority of dramas now are either co-produced by one of the major streaming platforms or are purchased by the streaming platform before filming even starts, meaning that the drama is guaranteed an airing platform even before they start filming. This decreases the risk involved in a drama never seeing the light – at the very least, it will likely get a web release on a set platform…”
These partnerships ensure dramas have a guaranteed distribution outlet even before filming commences. This pre-sale approach significantly reduces production risks. At minimum, co-produced dramas will receive a streaming release, recovering some costs. The article's analysis implied this model allows companies to offset financial uncertainty by increasing output volume over time.
GHY appears to be leveraging this strategy successfully. Their recent announcements revealed signing deals for three upcoming dramas. And they forecast additional collaborations in the pipeline.
|GHY Investment Presentation|
Of course, budget overruns during production still pose potential threats to projected returns. However, as both a studio and talent agency, GHY is well-positioned to contain expenses. Their established facilities in Malaysia and management of artists help manage costs internally.
All in all, GHY's strategic approach to co-productions with streamers exemplifies how entertainment firms can thrive in China's competitive drama market through mitigating financial uncertainty and maximizing production economies of scale. Their concert expertise and integrated operations further strengthen this model.
If you are thinking of watching their Short Form Tik Tok Dramas, do follow them on GHY TV.