Despite a 3.1% increase in revenue to 640.5 billion won, HYBE experienced a significant decline in operating profit, with a decrease of 37.4% to 50.9 billion won compared to the previous year. Similarly, JYP Entertainment also reported a decrease in operating profit, dropping by 79.5% to 9.3 billion won despite a revenue of 95.7 billion won.
Despite a revenue of 90 billion won, YG Entertainment suffered an operating loss of 11 billion won. In contrast, SM Entertainment saw a 6% rise in revenue to 253.9 billion won, but its operating profit dropped by 31% to 24.7 billion won.
The decline in overseas performance is widely believed to be the main cause of this financial downturn. Despite a steady growth since 2015, K-Pop album exports saw a decrease of 2% in the first half of this year, amounting to 130.32 million USD. Furthermore, Circle Chart’s data showed a 14.9% drop in K-Pop album sales within the top 400 rankings during the same period.
There is a division among analysts regarding the causes of this downturn. Some argue that it is a natural correction following a period of rapid growth, while others attribute it to the temporary absence of major artists such as BTS and BLACKPINK. However, there is optimism that their return will help revive the market.
The industry’s dependence on a small number of popular artists raises concerns about its ability to sustain success in the long run. This is particularly concerning as there are currently no new mega IPs emerging to fill the void left by BTS and BLACKPINK. Critics argue that prioritizing short-term profit through exaggerated sales and aggressive marketing strategies could potentially alienate fans and jeopardize the future of the industry.
Despite additional complexities, HYBE has been plagued by scandals and controversies. These issues include a public dispute regarding its subsidiary ADOR, Chairman Bang Si Hyuk’s personal controversy, and BTS Suga’s DUI incident, all of which have had a significant impact on its stock price. Likewise, SM Entertainment is currently being investigated for potential price manipulation during its acquisition by Kakao.
As a reaction, the securities firms have decreased their target stock prices for the mentioned entertainment companies. The target price for HYBE has been adjusted to a range of 240,000-300,000 won, with reductions of 5-13%. Six firms have lowered their target prices for SM Entertainment, with the lowest now at 96,000 won. YG Entertainment’s target price now averages at 47,750 won, while JYP Entertainment’s target price has been downgraded to approximately 70,000 won.
In order to continue the success of BTS and BLACKPINK, industry experts emphasize the importance of the K-Pop market shifting its focus towards finding new mega IPs and reevaluating their marketing strategies. It is crucial for them to prioritize maintaining artistic integrity rather than solely seeking commercial success. As an insider pointed out, neglecting the core essence of marketing can ultimately result in rejection. In a constantly evolving market where fan loyalty is unpredictable, causing exhaustion and financial strain could potentially lead to the downfall of the K-Pop fanbase.
Despite achieving global success, major K-pop entertainment companies continue to face financial challenges and concerns within the industry, as reported by Allkpop.
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