JYP Entertainment's lad radical Stray Kids attends the 2024 SBS Music Awards Summer successful Seoul. The group's activities has fixed its genitor institution a "dramatic rebound to profitability"
The Chosunilbo Jns | Imazins | Getty Images
K-pop businesses mostly continued to conflict successful the 3rd 4th of the year, with 3 of South Korea's 4 largest agencies posting poorer fiscal results compared to past year.
The K-pop manufacture has been seeing a slowdown owed to declining medium income and the inactivity of record-breaking groups specified arsenic Blackpink and BTS. Members of BTS person been serving their mandatory subject service, portion Blackpink lone announced to reunite arsenic a radical successful 2025.
Streaming revenue, at slightest during the archetypal fractional of this year, has been incapable to screen the nonaccomplishment from medium sales.
Shares of SM Entertainment, JYP Entertainment and YG Entertainment, listed connected the small-cap Kosdaq person mislaid 16%, 43% and 10.41%, respectively truthful acold this year, portion Hybe, listed connected the blue-chip Kospi, has seen its banal driblet implicit 11% twelvemonth to date.
Here's however the "Big Four" K-pop companies fared successful the 3rd quarter:
Hybe, the largest K-pop institution by marketplace cap, did not item the reasons for its downbeat earnings, but a Nov. 6 enactment issued by Yuanta Securities expert Hwan-wook Lee said income shrank owed to constricted artists and activities during the 2024 Olympics, portion profitability was besides wounded by higher costs owed to the motorboat of KATSEYE, a localized radical successful the U.S.
SM Entertainment CFO Jang Jeong Min said during the company's net telephone that gross decreased owed to a diminution successful medium sales, portion operating nett was besides weighed down by accumulation costs of a debut programme and weaker net from subsidiaries.
Samsung Securities analysts Minha Choi and Yeonghoon Kang said successful a Nov. 11 enactment that YG Entertainment's operating nonaccomplishment was "not surprising," arsenic the company's artists were comparatively "inactive." For the 3rd quarter, conscionable Babymonster — a rookie radical — and solo creator Lee Seunghoon released material.
JYP Entertainment was the lone agleam spot successful the industry, arsenic it saw a "dramatic rebound to profitability" and threw an "earnings surprise," according to a Nov. 14 enactment issued by NH Securities. The enactment said this was owed to "full-fledged" activities by lad radical Stray Kids, which kicked disconnected its satellite circuit successful the 2nd fractional of 2024.
Recovery successful sight?
While K-pop investors mightiness privation to enactment 2024 down them, fixed dismal year-to-date banal returns and mostly mediocre fiscal results, they tin look guardant to 2025, probe steadfast Citi Research suggests.
Citi analysts John Yu and Alicia Yap said successful a enactment earlier this period that they are "turning constructive" connected the sector, arsenic its gross was acceptable to accelerate.
On a year-on-year basis, Citi expects that the aggregate gross of the Big Four agencies to turn by implicit 21% successful 2025 and astir 15% successful 2026.
Return of apical groups BTS and Blackpink and improved monetization of fandom platforms volition assistance enactment up revenues, according to Citi.
For example, DearU, an SM subsidiary and successful which JYP has an 18.1% stake, has tied up with Tencent Music to supply its nonstop messaging work to users of Chinese music-streaming level QQ Music.
DearU is simply a instrumentality connection level known for its Bubble messaging service, wherever fans wage a monthly subscription interest to person exclusive messages from artists.
Hybe's Weverse platform, which specializes successful hosting artists' content, is besides launching a caller subscription rank exemplary successful December.
Citi analysts authorities that the instrumentality of fashionable groups "will bash much than conscionable thrust medium and performance revenues — it should besides boost ROI crossed aggregate businesses. Fandom platforms, for instance, volition spot an summation of idiosyncratic traffic, and younger artists nether [the] aforesaid labels tin showcase opening acts astatine apical artists' concerts."
A overseas speech tailwind is besides expected owed to the weakening of the Japanese yen, with Citi expecting JYP to payment astir owed to its comparatively higher gross vulnerability to Japan.
The steadfast is much optimistic connected Hybe and SM, though the analysts accidental they similar Hybe for its balanced IP portfolio, arsenic opposed to SM, which is much babelike to China momentum owed to the nationality of its creator enactment up.
As for YG, they telephone it a "high delta play" — which means the banal tin spot ample swings — with the instrumentality of Blackpink.
The analysts, however, are downbeat connected JYP, and accidental that the institution volition look a situation successful maintaining semipermanent maturation arsenic newer artists conflict to find success.
Citi's optimism besides echoes reports issued earlier this year.
In March, Goldman Sachs said that the K-pop assemblage is "misunderstood." At the time, Goldman argued K-pop companies should beryllium evaluated not by medium sales, but alternatively by offline performance audiences, and forecasts a "high imaginable for valuation re-rating."
Goldman said determination was a important fanbase maturation accidental for K-pop companies successful the near-term successful Japan, but is besides bullish astir the maturation of the planetary fanbase, particularly successful the U.S.
The steadfast said that K-pop is becoming mainstream globally, with artists performing successful large U.S. festivals similar the Coachella Festival and Lollapalooza — there's "a agelong runway of maturation ahead" for the sector.
Morgan Stanley besides wrote successful a enactment earlier this twelvemonth that K-pop was "on the verge of expanding its planetary instrumentality base."
"After much than 20 years of cultivating a devoted pursuing successful Asia, the South Korean popular euphony improvement is poised to instrumentality a leap into the mainstream, generating concern opportunities successful the process."
English (US)