HYBE credits its success to a formula that combines management, platform, and system.
HYBE, Korea’s leading entertainment company, recorded over 1.2 trillion won in overseas sales last year alone. In comparison, the total export amount for the Korean ramen industry, which leads the K-food culture, is approximately 950 billion won in 2022.
The government has set a target for the content industry’s export value in 2027 at 25 billion dollars (about 32.5 trillion won), twice that of last year. The power of Korean cultural content has already been recognized worldwide. Where does the strength of content companies come from? The Asian Economy is starting a series on dissecting the source of competitiveness of Korean cultural content companies.
HYBE is a leader in K-content. HYBE has been hitting the jackpot successively with BTS, SEVENTEEN, TXT, NewJeans, and more. In 2021, HYBE was listed among Time Magazine’s “World’s 100 Most Influential Companies,” along with Samsung Electronics. Time Magazine included HYBE and Pinkfong Company on the same list in 2022.
HYBE was born in 2005 as Big Hit Entertainment. Its sales last year were 1.778 trillion won, with an operating profit of 237.6 billion won. Even if we add the sales of SM, YG, and JYP, the “BIG 3” companies, the total (1.5853 trillion won) is still smaller than that of HYBE.
In 18 years, HYBE has grown into a company with 600 employees. It chased down the game industry’s “3N” (Nexon, NCSoft, Netmarble), the representative player of the K-content industry. How did HYBE become the overwhelming leader by overtaking its “seniors”? HYBE has a formula for success that combines management, platform, and system that other companies do not have.
Aggressive M&A Led by Professional Managers
HYBE is different from general companies, starting with its management. Except for Chairman Bang Si Hyuk, the founder, all eight directors, both inside and outside the company, are not from the entertainment industry.
Among the nine members of the board, including Chairman Bang Si Hyuk (major in aesthetics at Seoul National University), four are graduates of Seoul National University. Also, many executives, such as CCO Lee Jin Hyung (former executive at WeMakePrice) and CEO Shin Young Jae (former executive at Nexon), are from other industries, such as IT, rather than entertainment.
If we look at other companies, Yang Min Suk, the CEO of YG, has only worked at YG since 2001. JYP’s CEO, Jung Wook has walked a similar path. Lee Sung Soo, CEO of SM, is the brother-in-law of founder Lee Soo Man, and co-CEO Tak Young Joon is also a “SM man” who has grown up with SM.
With professional managers at the forefront, HYBE has grown through aggressive M&As (mergers and acquisitions). Ithaca Holdings, a US label (record agency) that includes Justin Bieber and Ariana Grande, is a prime example. HYBE has also acquired other agencies in Korea, such as Pledis, Source Music, and KOZ Entertainment.
Maximizing IP Synergy through In-House Platform
Looking at HYBE’s sales structure last year, “direct participation” such as albums, concerts, and advertising accounted for 97.38 billion won (54%), while “indirect participation” such as MD and licensing, contents, and fan clubs accounted for 80.41 billion won (46%).
The direct and indirect participation were almost equal in level. In general, planning agencies mainly rely on the primary revenue source, which is direct participation, where artists earn money through their own activities. In addition, HYBE’s overseas sales (67%) are twice that of domestic sales (33%).
Fans can enjoy artists’ content, such as real-time live broadcasts, through Weverse. The IP (intellectual property) power of Weverse has grown even more since the integration with the V LIVE service. Not only HYBE-affiliated artists, but also prominent K-pop singers like BLACKPINK have joined Weverse. It seems that artists from Ithaca Holdings, such as Justin Bieber and Ariana Grande, will soon be available on Weverse as well. As of the moment, the number of monthly active users (MAU) has reached 8.4 million. Regarding this growth, Park Da Gyeom, a researcher at Hi Investment & Securities, said, “HYBE’s IP power and Weverse are creating a synergistic effect with each other.”
A Multi Label System that Constantly Hit Jackpots
Another success factor for HYBE is its multi-label system. It guarantees autonomous and independent operation rights to multiple labels, where HYBE essentially acts as their holding company. For example, their flagship artist, BTS, is under Big Hit Music. In addition to this, HYBE operates a total of 10 labels, including Pledis (SEVENTEEN, etc.), Source Music (LE SSERAFIM, etc), ADOR (NewJeans) and KOZ (Zico, etc.).
The advantage of the multi-label system is that it can maximize an artist’s potential through tailored support. Unlike the traditional system where a single company takes responsibility for all its artists, each label separately handles production for their respective artists. Producers are also separate for each label. This allows multiple artists to be active simultaneously. Each label can approach fans with specialized strategies and satisfy diverse tastes. As HYBE achieved success, other major agencies began to adopt the multi-label system as well.
HYBE is not the first company to attempt the multi-label system. However, it is the only company that has a subsidiary responsible for creating secondary and tertiary business products, such as content based on music and other materials produced by the labels, as well as distribution (Weverse). Thanks to this organically connected three-tier system, HYBE is not only successful with BTS, but also with other acts like TOMORROW X TOGETHER (TXT), SEVENTEEN, and ENHYPEN, leading to a series of IP hits.
HYBE Chairman Bang Si Hyuk recently said at the KWANHUN Forum, “We are considering acquiring a top-tier label in the Latin market that shares our philosophy and interest in future innovations. Our strategy is to connect top-tier labels and management companies by genre to maximize the network effect.”