K-Pop agencies are trying to move beyond the BTS era, moving towards digital K-Sélection
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K-Pop agencies are trying to move beyond the BTS era by moving towards digital

The fall in album sales has caused K-pop music agencies to lose $8 billion in shares, which need a new lease of life. Following stocks' decline of nearly 50% from 2023 highs, Hybe Co, SM Entertainment Co, JYP Entertainment Corp and YG Entertainment Inc, are looking to new groups, distribution deals and earnings on streaming sites to relaunch their activities.

In a context where popular groups BTS and Blackpink are on hiatus and album sales are declining in China, K-pop companies are having to adopt a new recovery strategy.

The plans of these music agencies to engage fans in concerts and expand their scope in the United States and Japan can only be beneficial, say analysts Goldman Sachs Group Inc. and HSBC Holdings Plc. For Junhyun Kim, analyst at HSBC, “Current concerns about the prospects of K-pop seem excessive. Even if physical album sales were to decline in 2024, there would still be other ways to make K-pop fans profitable" , he added.

K-Pop agencies are trying to move beyond the BTS era, moving towards digital K-Sélection

While digital streaming increasingly dominates the music industry, K-pop agencies rely on sales of physical albums, which can come with lucrative exclusive merchandise. Falling album sales in the second half of 2023, however, led Hybe to report its weakest quarterly growth for the three months through December.

According to Yuanta Securities Co., a 5,3% decline in album sales by the top four K-pop agencies is forecast in 2024 to 82,7 million copies year-on-year. Sales growth has remained above 40% over the past four years.

K-Pop agencies are trying to move beyond the BTS era, moving towards digital K-Sélection

The largest of the four companies in terms of market value, Hybe, is now at the forefront thanks to its strategic pivot of signing a distribution agreement with Universal Music Group NA, the largest music company to the world, which will allow it to expand its digital and geographic reach. Her consistent presence on global streaming sites also helped ILLIT, a new girl group under her leadership, break the record for most first-week streams for a K-pop debut album on Spotify.

Not remaining idle, competing companies are also putting forward new talents to compensate for the difficulties encountered in China. According to Morgan Stanley, Riize's success is expected to boost SM's revenue growth, while the busy schedules of key artists including Stray Kids and Twice will allow JYP to maintain its revenue base. The return of Blackpink, YG's group, is also awaited by fans.

Shares of JYP and HYBE see meteoric rise thanks to Stray Kids, TWICE, Seventeen, and more

Goldman Sachs analysts say the end of pandemic restrictions should make offline concert audiences the most important metric for measuring K-pop growth, compared to physical album sales alone . In a note dated March 14, Goldman Sachs analysts including Eric Cha reported that K-pop's fan base is expected to grow 26% annually over three years, with audience growth in Japan leading the way. main driver of growth in the short term.

Such a turnaround follows concerns over key artist contract renewals, drug investigations and a decline in group album purchases in China last year.

K-Pop agencies are trying to move beyond the BTS era, moving towards digital K-Sélection

Only time will tell if new generations of artists will be able to maintain their trajectory. Established artists such as Blackpink – the most popular girl band in the world – and BTS from Hybe have caused a real global craze for South Korean artists. However, valuations have become attractive again after a sharp devaluation over the past six months as data compiled by Bloomberg shows that shares of Hybe, JYP and SM are now trading around one standard deviation below their average. forecast profits over five years.

Morgan Stanley analysts, including Seyon Park, said in a note last month that the “K-pop is poised to become a dominant genre in the global music industry and they believe the risk/reward ratio for the sector is attractive”  while adding that for investors, the recent share price recovery has been an opportunity to exploit the long-term theme.

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Seagull

Frankly, I don't worry about HYBE...the BTS "break" is very well organized...even if there was a drop in 2023...all the releases planned for 2024 will be a hit with ARMYs...the rewards continue to come raining on BTS and the solos…the streaming of the solos is exploding on the platforms…The release of the JHOPE album reaches the heights…the Jungkook album too…and the ARMYs are ready for the release of Jin’s military service…. Other agencies have more to worry about!!

leyna

I agree with you

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