Experts commented that big players in the industry like HYBE are struggling to find new sources of revenue, thus causing great fluctuations in the Kpop industry.
On May 17th, an article on Invest Chosun covered the business report for quarter one of HYBE Labels, which is BTS’s agency. According to this report, however, the corporation did not meet market’s demands, seeing that BTS’s possible enlistment severely impacted figures for the first quarter. This is due to BTS being HYBE’s biggest source of revenue as of the moment.
In addition, other Invest Chosun experts also pointed out that the Korean entertainment industry is entering its most turbulent era yet. According to them, HYBE and other companies need to seek out other ventures rather than just focusing on their artist.
HYBE is seeking for a solution in case BTS enlists
In an interview with Invest Chosun, HYBE’s representative shared that they have made preparations for BTS’s military service. These preparations are crucial for the firm, seeing that they need to make up for missing revenues for at least 2 years, while BTS finishes their mandatory military service.
Korea Times once stated that the Korean Parliament is considering an exemption for BTS members. However, this consideration has been a controversial topic with many mixed reactions. In response to this, HYBE shared via YTN Stars that all BTS members are having to bear with unclear decisions from the government. They asked for an official stance to be quickly released, so that BTS could organize their schedules accordingly.
Financial reports from SM Entertainment and JYP Entertainment also became a notable matter. For SM Entertainment, the founder Lee So Man recently sold his stocks, causing a great dynamic shift inside the company’s management.
After paying out their first-time dividend since establishment, on May 9th, SM Entertainment also started purchasing 10 billion won (7.8 million USD) worth of treasury stocks to boost their stock price and amp up profits for its stockholders.
The tech giant Kakao has also been in talks to buy a controlling stock of SM, even dropping potential merges of other content producers. It has also branched into the realm of cost control as a means to limit the pace of merger & acquisition activities.
Growing competition in the industry
To quickly adapt to their ever-changing business environment, entertainment companies are starting to diversify their business areas. With both external and internal factors quickly changing, relying solely on Kpop artists is simply not an optimal choice.
The more big players there are in entertainment, the stronger the competition gets. On May 10th, the CJ conglomerate announced their 22.4 billion won (17.5 million USD) investment on the startup B My Friends, and started a strategic collaboration to push their Kpop business.
Meanwhile, HYBE has separated from HYBE IM – their metaverse game department, to form an independent affiliation. It also recruited large numbers of personnel from game companies, including Jung Woo Young, the former CEO of Nexon. Seeing that HYBE’s CEO Park Ji Won used to hold the same position in Nexon, it’s likely that HYBE corporation may fully delve into the game industry.
SM Entertainment is no exception to this trend, having established a 50:50 joint venture called Fitness Candy with LG Electronics. This is a move to enter the realm of fitness content using idol songs and choreographies, and is catered to the recent rise of home fitness.
“This is a turbulent time where entertainment companies need to do away with their previous business model, which is heavily reliant on Kpop artists. They are adjusting to survive in newer environments like Web 3.0 and Metaverse. This is not the first time this happened, and some have previously branched into the game and investment industry. Therefore, they need to carefully consider if the new venture is worth it, and if it can become their new long-term source of revenue”, a business insider said.
Stock prices can only go up if competitiveness and growth prospects can be clearly proven, experts state. Therefore, entertainment companies prefer to shift their business elsewhere and form subsidiaries than to wait for the pandemic to end.
However, the entertainment industry has also been looking up, with risks of COVID-19 reducing and more and more nations removing their distancing policies. While the Washington Post reveals that the US Government is concerned over a new mutation of Omicron and predicts that it will cause 100 million new cases, Korean entertainment companies no longer fear the pandemic, and are already planning large-scale concerts starting this year.