BTS was interviewed by host Jimmy Fallon on September 25, 2018.
NBC | NBCUniversal | Getty Images
K-pop stars continue to break records, perform at top Western music festivals and top the charts, but this outsized success isn’t reflected in their management agencies’ stock performance.
South Korea’s “big four” Hallyu agencies have all been publicly listed. Hybe Corporation is the largest company, listed on the blue-chip Kospi, while SM Entertainment, JYP Entertainment and YG Entertainment are listed on the small-cap Kosdaq. So far this year, Hybe shares have plunged 29%, SM has fallen 36%, and YG has plunged 37%. The biggest decliner was JYP Entertainment, whose stock price has fallen by more than half since the beginning of the year, a drop of 56%.
The decline is puzzling as K-pop artists solidify the industry’s place on the global music stage and break records in the recording industry. Youtube, Spotify even Advertising billboard chart.
Statistics provided by Spotify to CNBC show that since 2018, as of September 3, K-pop streaming on the platform has surged more than 180% in the United States, more than 420% in Southeast Asia, and more than 360% globally. .
The music streaming service also said that in 2023 alone, Korean artists were discovered nearly 2.2 billion times by first-time listeners on Spotify.
South Korean President Yoon Seok-yeol said: “Even if you don’t know my name, you probably know BTS and Blackpink.” told a joint session of Congress April 2023.
CHICAGO, IL – AUGUST 3: (L-R) Danielle, Hyein, Hanni, Minji and Haerin of NewJeans perform during the Lollapalooza concert in Grant Park on August 3, 2023 in Chicago, IL.
Gary Miller | Movie Magic | Getty Images
Boy group BTS is the best-selling band in South Korea’s history, while girl group Blackpink became the first K-pop group to perform at the 2019 Coachella music festival. , performing at the 2023 London BST Hyde Park Festival.
‘Complex’ headwinds
There’s no single reason that explains the disparity between fans’ enthusiasm and pessimistic investors. Kim Gyuyeon, a financial analyst at Mirae Asset Securities, said complex governance issues and declining profits have been plaguing the Big Four companies.
While BTS and Blackpink have broken records, she said there are currently few new bands that can replicate this success in the West. From an investor’s perspective, this dampens sentiment as it suggests the market has not expanded since 2020-2021.
Additionally, these pioneering groups experienced their own turmoil. BTS members are currently completing their military service and will not reunite as a group until 2025.
INDIO, CA – APRIL 22: (LR) BLACKPINK’s Jisoo, Lisa, Jennie and Rosé in Coachella during the 2023 Coachella Valley Music and Arts Festival on April 22, 2023 in Indio, CA Perform on stage. (Photo by Emma McIntyre/Getty Images for Coachella)
Emma McIntyre | Getty Images Entertainment | Getty Images
At the same time, the profits of the four major giants all declined, and all reported year-on-year operating losses in the second quarter. YG’s Operating profit plunges 94.5%while JYP plummeted 79.6%. SM and Hybe fell less, 30.7% and 37.4% respectively.
Profits plummet Korean media reports Album export sales fell in the first half of 2024 for the first time in nine years. Seoul Economic Daily reported in July The Big Four’s album shipments in the first half of the year dropped from 53.45 million in the first half of 2023 to 44.74 million.
Physical sales have historically accounted for the largest share of the brand’s revenue and are also the most profitable, Kim said. She explained that high physical sales represent the number of fans, which in turn quantifies the company’s addressable market.
A unique element of the Korean entertainment industry is “fan signings,” where fans can enter a lottery to meet artists and get their albums signed. The lottery assigns a higher chance of winning to fans who purchase more physical albums within a specific window, increasing their chances of attending a book signing and meeting the artist..
Simply put, the more albums purchased, the more entries there will be for the book signing. So, even in the age of streaming, these events motivate fans to buy more albums.
The decline in physical album sales not only affects profits, but also calls into question whether the investment thesis of “sustained high growth” has collapsed.
Is Streaming Killing CD Stars?
Despite the dominance of streaming media and CD players quickly going the way of cassette tapes, investors continue to use physical album sales as a key metric.
Mirae’s Kim explains: “A physical album is useless and even a burden because it takes up space.[This means that]despite these shortcomings, the people who buy it are true fans of the artist and they[also]spend money on it.” A lot of money.
Spotify revealed to CNBC that as of September 3, Korean artists generated more than 180 billion won ($138 million) in royalties, a threefold increase from 2019 and a staggering 780% increase since 2017.
Kim noted that the high base in 2023 supported the argument that these companies would “continue to grow at a rapid pace,” but “it (has) collapsed.”
King said that while it’s difficult to distinguish profits from digital and physical media, streaming revenue accounts for only a small portion of these organizations’ revenue.
She said that by 2023, Hybe’s digital streaming revenue will only account for 13% of its revenue base, while SM and JYP’s proportions will be smaller at 10% each. Kim pointed out that Hybe’s physical sales revenue is 2.5 times that of streaming media, and JYP’s revenue is four times that of streaming media.
Still, analysts remain largely positive on these four stocks.
Recent analytical reports from Samsung Securities, NH Securities and Mirae Asset Securities have maintained their “buy” ratings on the four major securities, but some institutions have lowered their target prices.
Most of them predict that artist activity, including comebacks and concerts, will pick up in the second half of 2024 and 2025, supporting company revenue and profits.
About The Author
