A 100% Tariffs on Films Produced Outside the U.S. - Negative on Korean Film Production Companies

• The Trump administration proposed a new 100% tariffs at movies produced outside the United States. Korean contents account for about 8-9% of total viewing hours on Netflix globally.

• Top three listed film/drama production companies in Korea including Studio Dragon, CJ ENM, and ContentreeJoongAng are likely to be negatively impacted by the new major tariffs imposed by the U.S.

• Economics of making a movie is much cheaper in South Korea versus the U.S. Producing a film in South Korea can cost 30–70% less than in the United States.

Conclusion First

In the past several days, the Trump administration proposed a new 100% tariffs at movies produced outside the United States. This change in regulations is likely to negatively impact not just major U.S. based companies such as Netflix Inc (NFLX US) but also major Korean movies/drama production companies that have been some of the key beneficiaries of increasing foreign made contents at Netflix platform in recent years.

The top three listed film/drama production companies in Korea include Studio Dragon (253450 KS), CJ ENM (035760 KS), and ContentreeJoongAng (036420 KS). These three companies have outperformed KOSPI YTD.

However, due to the new 100% tariffs on films produced outside the U.S. regulation, the share prices of these three Korean companies are likely to be negatively impacted in the weeks ahead.

Squid Game 3 Official Teaser: (Source: Netflix)

It is estimated that Netflix spends about $17 billion on contents each year, including about 40% licensed and 60% produced contents. For Netflix, about half of the produced contents are made outside the United States (about $5 billion). It is estimated that Netflix has about 70% of international titles available in the U.S. and over 50% for non-U.S. content spend, while Amazon Prime Video has about 55% of international titles.

There are several ways that Netflix could change its content production including producing more contents in the U.S., reducing the overall contents produced or licensed outside the United States. Or Netflix could just raise its subscription prices in the U.S.

In addition to Netflix, other competitors including The Walt Disney Co (DIS US),

Warner Bros Discovery (WBD US), Comcast Corp Class A (CMCSA US), Paramount, Cinemark, and Cinemark would also be negatively impacted by the higher tariffs.

Korean Contents - Second Most Watched Globally on Netflix

Korean contents have become the second most watched globally on Netflix.

It is estimated thatKorean contents account for about 8-9% of total viewing hours on Netflix globally, trailing the U.S. production contents that account for about 56-59%.

Of the 500 most popular non-English titles on Netflix, 85 (17% of total) were Korean. "Squid Game" Season 2, "Love Next Door" and "Culinary Class Wars" were recently ranked as the most-watched Korean contents.

More than half of Korean titles in Netflix's top 100 were Netflix originals, with exclusively licensed content, mainly from CJ ENM (035760 KS), accounting for the remainder. Netflix planned to invest about $2.5 billion in Korean content production by 2028.