JYP Leisure’s boy group Stray Children attends the 2024 SBS Music Awards Summer season in Seoul. The group’s actions has given its guardian firm a “dramatic rebound to profitability”
The Chosunilbo Jns | Imazins | Getty Photographs
Okay-pop companies principally continued to battle within the third quarter of the 12 months, with three of South Korea’s 4 largest businesses posting poorer monetary outcomes in comparison with final 12 months.
The Okay-pop business has been seeing a slowdown because of declining album gross sales and the inactivity of record-breaking teams corresponding to Blackpink and BTS. Members of BTS have been serving their obligatory navy service, whereas Blackpink solely introduced to reunite as a bunch in 2025.
Streaming income, at the very least throughout the first half of this 12 months, has been unable to cowl the loss from album gross sales.
Shares of SM Leisure, JYP Leisure and YG Leisure, listed on the small-cap Kosdaq have misplaced 16%, 43% and 10.41%, respectively to this point this 12 months, whereas Hybe, listed on the blue-chip Kospi, has seen its inventory drop over 11% 12 months so far.
This is how the “Huge 4” Okay-pop firms fared within the third quarter:
Hybe, the biggest Okay-pop firm by market cap, didn’t element the explanations for its downbeat earnings, however a Nov. 6 observe issued by Yuanta Securities analyst Hwan-wook Lee stated gross sales shrank because of restricted artists and actions throughout the 2024 Olympics, whereas profitability was additionally damage by increased prices owed to the launch of KATSEYE, a localized group within the U.S.
SM Leisure CFO Jang Jeong Min stated throughout the firm’s earnings name that income decreased because of a decline in album gross sales, whereas working revenue was additionally weighed down by manufacturing prices of a debut program and weaker earnings from subsidiaries.
Samsung Securities analysts Minha Choi and Yeonghoon Kang stated in a Nov. 11 observe that YG Leisure’s working loss was “not stunning,” as the corporate’s artists had been comparatively “inactive.” For the third quarter, simply Babymonster — a rookie group — and solo artist Lee Seunghoon launched materials.
JYP Leisure was the lone brilliant spot within the business, because it noticed a “dramatic rebound to profitability” and threw an “earnings shock,” in keeping with a Nov. 14 observe issued by NH Securities. The observe stated this was because of “full-fledged” actions by boy group Stray Children, which kicked off its world tour within the second half of 2024.
Restoration in sight?
Whereas Okay-pop traders would possibly need to put 2024 behind them, given dismal year-to-date inventory returns and largely poor monetary outcomes, they’ll sit up for 2025, analysis agency Citi Analysis suggests.
Citi analysts John Yu and Alicia Yap stated in a observe earlier this month that they’re “turning constructive” on the sector, as its income was set to speed up.
On a year-on-year foundation, Citi expects that the combination income of the Huge 4 businesses to develop by over 21% in 2025 and practically 15% in 2026.
Return of high teams BTS and Blackpink and improved monetization of fandom platforms will assist shore up revenues, in keeping with Citi.
For instance, DearU, an SM subsidiary and through which JYP has an 18.1% stake, has tied up with Tencent Music to supply its direct messaging service to customers of Chinese language music-streaming platform QQ Music.
DearU is a fan communication platform recognized for its Bubble messaging service, the place followers pay a month-to-month subscription price to obtain unique messages from artists.
Hybe’s Weverse platform, which makes a speciality of internet hosting artists’ content material, can also be launching a brand new subscription membership mannequin in December.
Citi analysts state that the return of common teams “will do extra than simply drive album and live performance revenues — it also needs to enhance ROI throughout a number of companies. Fandom platforms, as an example, will see a rise of person site visitors, and youthful artists beneath [the] identical labels can showcase opening acts at high artists’ live shows.”
A international alternate tailwind can also be anticipated as a result of weakening of the Japanese yen, with Citi anticipating JYP to profit most because of its comparatively increased income publicity to Japan.
The agency is extra optimistic on Hybe and SM, though the analysts say they like Hybe for its balanced IP portfolio, versus SM, which is extra dependent to China momentum as a result of nationality of its artist line up.
As for YG, they name it a “excessive delta play” — which suggests the inventory can see massive swings — with the return of Blackpink.
The analysts, nevertheless, are downbeat on JYP, and say that the corporate will face a problem in sustaining long-term progress as newer artists battle to search out success.
Citi’s optimism additionally echoes reviews issued earlier this 12 months.
In March, Goldman Sachs stated that the Okay-pop sector is “misunderstood.” On the time, Goldman argued Okay-pop firms ought to be evaluated not by album gross sales, however as a substitute by offline live performance audiences, and forecasts a “excessive potential for valuation re-rating.”
Goldman stated there was a considerable fanbase progress alternative for Okay-pop firms within the near-term in Japan, however can also be bullish concerning the progress of the worldwide fanbase, particularly within the U.S.
The agency stated that Okay-pop is changing into mainstream globally, with artists performing in main U.S. festivals just like the Coachella Pageant and Lollapalooza — there’s “a protracted runway of progress forward” for the sector.
Morgan Stanley additionally wrote in a observe earlier this 12 months that Okay-pop was “on the verge of increasing its international fan base.”
“After greater than 20 years of cultivating a loyal following in Asia, the South Korean pop music phenomenon is poised to take a leap into the mainstream, producing funding alternatives within the course of.”
