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HYBE: “Sales from BTS take up 65%”, LE SSERAFIM and New Jeans’ growth is the key

HYBE recorded its biggest sales in the third quarter ever. However, it is predicted that profits will deteriorate next year due to the aftermath of BTS’s enlistment. 

HYBE recorded its biggest sales in the third quarter ever. However, it is predicted that profits will deteriorate next year due to the aftermath of BTS’s enlistment. Nevertheless, HYBE believed that it will be able to recover in the next year due to the good performance of its rookies and other artists.

HYBE announced on Nov 3rd that its sales in the 3rd quarter of 2022 were 445.5 billion won, up 30.6% from the same period last year. This includes the sales from performances, goods sales, and games.

BTS

By sector, performance-related sales were low due to the aftermath of the pandemic in the third quarter of last year, but recorded 47.2 billion won in the third quarter of this year.

Indirect participatory sales, including MD (goods products), licensing, content, and fan club sales, increased 34.7% to 239.3 billion won. HYBE artists’ world tours have resumed, reflected in the increased MD sales.

On the other hand, album sales fell 0.4% year-on-year to 129.2 billion won. Advertising, performance fees, and management sales also fell 11.7% to 29.8 billion won.

Operating profit in the third quarter fell 7.6% comparing to the same period last year to 60.6 billion won. HYBE explained that this is because it reflects the production cost of an audition program for a rookie group and the cost of offline performances.

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Many are also focusing on the aftermath of BTS’s enlistment issue. Due to the absolute proportion of BTS in HYBE’s profits, there are concerns that HYBE’s growth may be dampened by the BTS members’ enlistment.

In fact, according to HYBE CEO Park Ji Won, BTS accounted for 60 to 65% of its sales this year, and the rest of the artists accounted for 35 to 40%.

Jin, the oldest member of BTS, plans to fulfill his military duty as early as the end of this year. Other members will reportedly join the military sequentially according to their military service schedules. The resumption of BTS’ team activities is expected to be around 2025.

HYBE’s strategy is to prevent that fall by pushing the growth of other artists, including its existing intellectual property rights (IP) such as Seventeen, and rookies such as LE SSERAFIM and New Jeans.

CEO Park said, “New Jeans and LE SSERAFIM are aiming for more than 100% growth compared to this year. We also expect the rest of the artists to grow at a high level of 30-50%,” he said.

“If you look at the gross margin of sales by artist, there is no big difference between BTS, Seventeen, TXT, and ENHYPEN except for the sales in performances. We will be under margin pressure next year, but we will be able to show the margin (mid-10% operating profit) that we have shown from next year.”

HYBE also shared its plan to produce new rookie artists. In December this year, HYBE will release it Japanese rookie boy group &TEAM before joining hands with Universal Music to prepare for a global girl group.

CEO Park said, “With a diversified artist portfolio, we can avoid focusing on specific countries and flexibly respond to changing trends to reduce risks.”

“In order to expand multi-labels, we are also considering expanding our IP (through acquisition and equity investment) to labels and management companies overseas such as the U.S. and Japan. We will create the synergy with our proud solution capabilities such as performances, MD (goods products), and contents,” he stressed.

Source: Daum

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