Good morning and good evening. First of all, thank you all for joining this conference call. Now we'll begin the conference of the fiscal year 2024 first quarter earnings results by CJ ENM. This conference will start with a presentation, followed by a divisionary Q&A session. If you have a question, please press asterisk and one. That is asterisk one on your phone during the Q&A. Now, we shall commence the presentation on the fiscal year 2024 first quarter earnings results by CJ ENM.
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Yes, this is Kay Choi, Head of IR, CJ ENM. I would like to express my deep appreciation to all shareholders and analysts joining us today at our earnings call, despite your busy schedules.
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We will now begin our first quarter 2024 earnings conference call for CJ ENM. Please be advised that the financial results and business performance presented today are unaudited and may be subject to change upon review by an independent auditor.
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Today, we are joined by our CFO, Mr. Deuk-su Hwang, and the heads of the respective divisions. Mr. Ki-sung Hong, Head of Media, Mr. Kyoung-bum Ko, Head of Film, Mr. Hyung- kwan Shin, Head of Music, Mr. Sung-bae Park, Head of Commerce, Mr. Sean Choi, Head of our Global Business, Ms. Je-hyun Kim, CEO of Studio Dragon, Ms. Joo-hee Choi, CEO of Tving, and Mr. Yong-s oo Ha, CEO of CJ ENM Studios.
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We will begin with a presentation by the CFO on our business plan and objectives.
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Yes, this is the CFO of CJ ENM, Deuk-su Hwang. In the first quarter, we focused on enhancing viewership and traffic, improving the competitiveness of our platform and strengthening our brand strategy and digital commerce. The contents and commerce markets still face challenging conditions today, but we have put in place a tighter business strategy, aiming to improve profitability in our core business competencies while building out solid performance in both the domestic and global markets.
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We improved the competitiveness of our media platform building on the strong audience viewership demonstrated by our drama and non-scripted content with CJ ENM's cable TV viewership share, recording 29.7% as of April, and tvN ranking number one in target viewership share at 14.4%. Tving also saw continued traffic and subscriber inflows, with paid subscribers increasing by 13.4% QoQ and MAU exceeding the 7 million mark as of April.
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For our music business, we have been focused on debuting new artists and expanding global engagement. ZEROBASEONE debuted successfully in Japan, and LAPONE Entertainment's new girl group, ME:I, also made a successful debut, with other groups, INI and JO1, also active on the circuit after releasing new albums. As of April, first-week album sales in Japan recorded 818,000 copies, as we continue to deliver global success in our music business.
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On the commerce side, we have been working to strengthen the competitiveness of our brands across the beauty, fashion, and living categories while continuing to record digital GMV growth as we restructure our channel and platform operations. First quarter digital revenue was up 16.3% YoY, with mobile live commerce GMV, in particular, growing significantly, up by as much as 48.8% YoY as we reinforce the competitiveness of our platform centered around MLC.
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Market conditions this year continue to see fast change and intense competition. However, we will stay focused on our core competencies across our respective business lines and continue to deliver improved earnings and successful outcomes. I'd like to express my thanks to our shareholders and analysts, and with that, I will conclude my remarks.
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Next, we will move on to our financial results. Please be reminded that CJ ENM's quarterly and full year financial statements are consolidated results based on K-IFRS. Operating profit for the respective businesses are inclusive of internal transactions. We will now report on our company-wide business performance for Q1 2024.
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Yes, this is Jin-y oung Kim, Head of Finance. First quarter consolidated revenue was KRW 1,154.1 billion , up 21.6% YoY. We turned around to profit with operating profit of KRW 12.3 billion. The entertainment business recorded revenue of KRW 806.3 billion, and operating loss of KRW 13.9 billion. Commerce revenue was KRW 347.8 billion with operating profit of KRW 26.2 billion. Increased content delivery from Fifth Season and an increase in Tving subscribers were key drivers of top-line growth, while profitability improved thanks to solid performance from fashion brands and from the competitiveness of our platform.
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In the second quarter, we will continue our focus on premium content to reinforce audience ratings while boosting Tving traffic and subscriber growth. For music, we have the planned debut of new Japanese girl groups, ME:I and IS:SUE, and we'll be increasing engagements and concert performances by our boy group ZEROBASEONE and JO1. For commerce, we'll be strengthening mobile live commerce centered around our core customer segments with the aim of increasing our digital GMV. Please refer to the materials for further details by respective business.
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We will move on to hear from the CEO of Studio Dragon.
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Yes, this is Je-hyun Kim, CEO of Studio Dragon. Let me now take you through our key business highlights for the first quarter. Despite challenging media market conditions which prevailed in Q1, we stayed focused on improving our outcomes through a business strategy focused on in-house production, pre-buy, and volume deal plus, which we introduced as our strategy during the prior quarter. As a result, we were able to boost profitability and demonstrate organic growth.
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Revenue in Q1 was KRW 192.1 billion, down 9% YoY. Despite a lineup decline, big hits, including Queen of Tears and Captivating the King drove top-line growth. Operating profit was KRW 21.5 billion, down 0.4% YoY. With Marry My Husband and Queen of Tears, we achieved a high hit ratio both in and outside of Korea, with overseas sales performing solidly, with operating margins at 11.2%. We will continue this commitment to deliver improved margins in the second quarter based on our 2024 growth strategy.
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Studio Dragon has already proven the effectiveness of our new strategy through our performance in the first quarter. Although Q2 is also expected to present challenging conditions, we will carry on as we have in the first quarter to enhance the quality of individual titles while focusing on expanding our overseas presence to once again demonstrate our differentiated fundamentals that are distinct and unique to Studio Dragon only. Thank you.
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Thank you. We will now move on to the Q&A, and we ask that you ask no more than three questions per person due to the time constraint, focusing on major issues.
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Now Q&A session will begin. Please press asterisk one, asterisk and one, if you have any question. For cancellation, please press asterisk two, that is asterisk and two on your phone.
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The first question will be given by Eun-jung Shin from DB Investment. Please go ahead.
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I have two questions. First, you did take us through the top-line results for CJ ENM's Tving results, but can you elaborate and share more performance metrics showing what the current trends look like, especially after adoption of the ad support plan? Second question is for Studio Dragon. Congratulations on good results. However, there are some concerns in terms of how we should shape our outlook for the second quarter. Given the current situation, the advertising and OTT market, there may be some constraints at play. What would be your strategy going forward?
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Let me take you through our revenue and operating profit for Fifth Season first, and then move on to explain further about the advertising plan for Tving. In the first quarter, Fifth Season recorded revenue of KRW 170.5 billion and operating loss of KRW 16.6 billion. For Tving, revenue was KRW 88.4 billion and operating loss was KRW 38.5 billion.
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Regarding the ad plan for Tving, as our CFO, Mr. Hwang explained earlier, we have seen a tremendous traffic upside with traffic now at seven million or so as of April. In a matter of three, four months, traffic, which was in the mid five million range as of the end of 2023, has grown by nearly 30%. We have also been seeing a steep rise in our AVOD subscriber base as well. They now account for about 20% of our total subscriber base and continue to be a major source of new users. In terms of advertising revenue, we have also seen significant growth in line with these trends.
On a QoQ basis, it has grown by about three times. In the second quarter, as we have more promotion from KBO, we expect on a QoQ basis our advertising revenue to see close to 10x growth from the prior quarter. Subscriber base again has been growing significantly, driven in large part by the conversion of KBO streaming to paid services as of May. Again, this has triggered a steep rise in our user base and will allow us to deliver even better results at the end of this year.
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Moving on to our answer for Studio Dragon.
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Thank you for your question. Looking out post second quarter, I think in terms of the number of title lineups, despite the overall decline, we have already demonstrated the effectiveness of our focus on the individual quality of the titles. That in turn has led to overall improvement in profitability, which has already been demonstrated, and this is why we will continue with this line of focus. We have also continued to communicate that we want to continue to take part in co-production projects abroad, say in the U.S. and Japan, to accelerate the outcomes.
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Although I cannot name specific names at the moment, we are in talks with a major platform in the U.S., to set up four lineup titles together, and hopefully we will see more traction on two of those works within this year. We are looking to broaden outside of the existing business model that previously was very important to our drama studio to find additional value expansion through our IP portfolio.
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Currently there are no participants with questions. Please press asterisk one to give your question.
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Once again, if you have a question please press asterisk one, asterisk and one.
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The following question is by Shin Eun-jung from DB Investment. Please go ahead.
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I have a follow-up question regarding your operating loss on Tving. You mentioned a loss of KRW 38.5 billion. Considering that the amortization expense production cost has actually decreased significantly versus the prior year, I'm wondering why there was still a significant loss.
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Let me take your question regarding Tving. Ahead of the planned pricing markup at the start of this year, we did release quite a significant number of titles according to our planned timeline. Starting late last year up to first quarter this year, major original titles including A Bloody Lucky Day, Death's Game, Pyramid Game, EXchange, et cetera, were launched, which led to a slight increase in accelerated depreciation expense. However, things are expected to normalize in the second quarter, helped in large part by the conversion of KBO streaming to paid services. We will see a decrease in further depreciation costs on original titles and expect to deliver better operating profits in the second quarter.
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Currently, there are no participants with questions. Please press asterisk one, asterisk and one to give a question.
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The following question is by Lee Ki-hoon from Hana Securities. Please go ahead.
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I would like to ask more on Tving. You mentioned how advertising revenue is expected to increase significantly in the second quarter. I think you mentioned close to 10 x growth versus last year. I may be mistaken, but I'm not quite sure what the size of advertising revenue was in the first quarter. I don't think it is noted in the slides. And also for comparison purposes, could you give me a rough idea of how much advertising revenue you recorded last year? A second question, you mentioned how, because of the release of a lot of original titles, you did see significant operating loss in Q1.
I think, regarding the KBO streaming related expense, could you share more details about the depreciation schedule for KBO IP rights? A third question regarding the merger between Tving and Wavve. I do understand that you may not be able to comment much, but since the issue does appear to be rising to the surface a little bit more, could you just give us a little bit of a status update?
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Last year in the absence of AVOD, our advertising revenue was very limited, coming in under KRW 10 billion because essentially we only had alternative advertisements on our real-time streaming channel that was live. In comparison, we expect to be able to boost up advertising revenue in a big way this year.
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Let me take your second question regarding the depreciation for the KBO broadcasting rights. The depreciation is based on, or we apply straight line depreciation from the start to the end of the KBO season.
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Regarding your third question regarding the M&A between Tving and Wavve, you will know through media reports that we did sign an MOU last year in December. At the moment, we are in discussions about business cooperation, regarding further details of the merger as well. From Tving's perspective, the major priority right now is to leverage the content competitiveness of each side to really build overwhelming market share on the OTT market as a first priority. Once things are fleshed out in greater detail, we will try to communicate that through a disclosure filing.
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Currently, there are no participants with questions. Please press asterisk one asterisk and one to give your question.
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The following question is by [Non-English content] from KB Securities. Please go ahead.
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I have a question regarding Tving. After conversion to paid payment scheme in May, it does seem based on third party data that you have seen some churn of existing subscribers. How do you assess the situation, in particular the churn, and how do you intend to respond? Second question regarding commerce. I think you saw better than expected results in the first quarter. Do you think that this can be sustained going forward? If there are any big changes, could you provide an update?
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Let me address your question regarding subscriber attrition for [Non-English content] post May. I think you're looking at the traffic numbers, which may look and appear as if there is some outflow. But I think this is just after conversion to paid services. It's just that we had such a significant body of previous users that were doing the service for free, and they are now gradually transitioning to the paid scheme in batches. We are in this time of conversion, which is why traffic may look low at the moment. But if you look at paid subscriber acquisition, which we track on a weekly basis, actually enrollment is at a record high. And for KBO, in just one week after pay service conversion, we saw significant increase in subscribers just in that single week alone.
Overall paid subscribers is seeing steady increase. And because we had such a significant body of traffic for KBO, I think we're just now seeing a transition, a gradual transition of that traffic to the subscriber base.
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Yes, this is Sung-b ae Park from Commerce. The reasons why we were able to do better than expected results in the first quarter: first of all, our SS fashion, or SS season fashion product, actually saw quite good performance. Also, e-commerce saw robust revenue and profit growth. Going into the second half of the year, we are quite constructive and have a positive outlook because the commerce time, a big promotion that we already did, or started in the second quarter, has already been delivering good results, triggering a good inflow of users. The effect of our revised membership scheme is also materializing. We have good outlook, or good expectations, for the second half.
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Currently, there are no participants with questions. Please press asterisk one, asterisk and one to give your question.
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Once again, if you have a question, please press asterisk one, asterisk and one.
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Today's record call for CJ ENM and there are no pending questions. Thank you everyone.
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This concludes the fiscal year 2024 first quarter earning results by CJ ENM. Thank you for your participation.