YLAB shifts to sustainable model after 'Teach You a Lesson' success

For viewers who enjoyed the Netflix series “Teach You a Lesson,” one of the platform’s most-watched TV shows worldwide in the first half of this year, the webtoon “Get Schooled” may already sound familiar, as the show was originated from the comics.

“Get Schooled” was produced by comic and media company YLAB, one of the pioneers of the Korean webtoon industry. Their portfolio of intellectual properties (IPs) includes well-known titles such as “Jungle Juice,” “Study Group,” “Terror Man” and “IRL Quest.”

For “Teach You a Lesson,” YLAB produced both the original webtoon and the live-action series, showcasing its ability to expand its IPs across different forms of media.

“Based on our previous experiences, we tried to address real-life issues that viewers could relate to through a clear cathartic structure that delivers a strong sense of excitement,” YLAB CEO Kang Cheol-gu said in an interview with The Korea Times.

“We also focused on preserving the personalities of the original characters and portraying their complex emotional arcs, and I think those elements contributed to the strong response.”

YLAB was founded in 2010 by Youn In-wan, a renowned comic writer who gained recognition in Korea and Japan in the 1990s and 2000s through works such as “Island” and “Blade of the Phantom Master.”

As webtoons began developing into a full-fledged industry in the late 2000s, the company started as a webtoon studio with an established production system and went on to pioneer the concept of a shared universe in which characters from different titles coexist within the same world.

As the industry continued to expand through the growth of paid webtoons, overseas expansion and transmedia adaptations, YLAB listed on Korea’s tech-heavy Kosdaq market in 2023. As of March, it owned 110 webtoon IPs, the largest portfolio among Kosdaq-listed webtoon companies.

In March, the company appointed Kang, a former chief financial officer of Olive Young and CJ O Shopping and CEO of Studio Dragon, as its new CEO as part of the company’s efforts to strengthen its corporate and monetization structure.

From legacy to sustainability

In the second quarter of this year, the company posted 20.45 billion won ($14.84 million) in sales, up over 80 percent from a year earlier. Its operating loss extended 4.5 percent to 1.89 billion won during the same period, but improved from 4.05 billion won three months earlier.

Despite having an extensive IP portfolio, Kang said YLAB has yet to deliver the monetization results it promised shareholders after its listing, adding that his mission is to find ways to turn strong IPs into sustainable revenue.

“The global webtoon market is estimated at about 7 trillion won, with Korea accounting for roughly 2.5 trillion won, but the secondary businesses derived from webtoons are estimated at around 110 trillion won, which is 15 times greater than the original works themselves,” he said.

“What we have to do is build a structure that can generate revenue from an IP over a long period through various forms: spin-offs of hit titles, transmedia adaptations including live-action and animated productions and licensing for games, toys and other products. These efforts can also help attract new fans, strengthen existing fandoms and expand the value of webtoon IPs into secondary creations.”

As part of this strategy, YLAB acquired IP-based fandom business company Details in January, building a value chain that extends from webtoons to dramas, merchandise and fandom events.

Kang said that rather than seeking immediate monetization through Details, the company’s priority is establishing a profitable structure for transmedia adaptation.

Though Kang declined to elaborate about gains from “Teach You a Lesson,” most original content produced for global streaming platforms is known to follow a model in which production companies receive a predetermined production fee equivalent to a certain percentage of the production budget, called “cost-plus.”

Under this model, producers receive a fixed fee upfront. This means that even if a title becomes a major hit, the production company does not receive additional funds, limiting the risks but at the same time capping potential returns. Producers have instead benefit indirectly through opportunities for additional seasons and an improved reputation.

Kang said he sees a monetization opportunity in this area and plans for YLAB to participate directly from the investment stage in future adaptation projects, including a potential second season of “Teach You a Lesson,” to capture more of the upside potential.

“What I believe is the most desirable approach is to create a structure in which producers of films, animation and other media content can share in the success when a title performs well,” Kang said.

“To achieve that, we will shift from our existing model of licensing out our IPs for production to one that we make equity investments and participate directly in projects.”

Kang said the consecutive success of YLAB’s video projects over the past three years with “Friendly Rivalry,” “Study Group” and “Teach You a Lesson” has helped establish the company’s production capabilities, bringing new business opportunities and opening the door to additional monetization.

Globalization

YLAB’s major shareholders include domestic content titans such as Naver Webtoon and CJ ENM, as well as global content giant Bandai Namco of Japan.

Bandai Namco holds a 4.97 percent stake in YLAB, making them the fourth-largest stakeholder, and 35.9 percent in the company’s Japanese subsidiary YLAB Studios through a 1.5 billion-yen ($9.44 million) investment made in 2023.

According to Kang, YLAB is now preparing a number of major projects with Bandai Namco. One of them is an upcoming live-action Gundam film project, which involved “a top-tier” Korean story writer from YLAB.

The company is also preparing a live-action project, based on a YLAB IP, which will be directed by Keishi Otomo, known for the live-action Rurouni Kenshin films. An animated adaptation of YLAB’s webtoon “Jungle Juice” is also in development, and the company is also developing webtoons based on Bandai Namco IPs.

YLAB is in discussions with a China-based global artificial intelligence (AI) solutions provider for AI-based video production using stories developed by the company. Kang said AI could also create more opportunities to broaden the scope of secondary content derived from the company's IP.

Along with its Japanese subsidiary, YLAB operates YLAB Vina in Vietnam, which has been handling the coloring of webtoons produced in Korea since earlier this year. Kang said the company aims to have about 90 percent of the coloring work done in Vietnam.

“In the past, we would have simply licensed out our IPs and received fees, but now we need approaches such as profit sharing and participation in production,” Kang said. “We are looking at the projects we are starting now from that perspective and plan to take a different approach.”

He said YLAB aims to transform itself into a growing and profitable company by increasing the value of its IP in line with its promises to investors when it listed in 2023. This year, the company will focus on narrowing its losses while expecting revenue growth next year.

“Our fundamental mission is creating strong IPs,” Kang said. “Since joining YLAB, what I have focused on is optimizing our roles to make compelling stories,” he said. “At the same time, from a corporate perspective, it is important to build a profitable structure by improving our monetization model. In doing so, we will also look for opportunities that can be created through AI.”