Reviving Glory: SM Entertainment’s Struggles with Member and Performance Management

Despite its historic prominence, SM Entertainment’s once-stellar reputation is currently in jeopardy due to inadequate member management and dwindling performance. This situation has contributed to a negative perception of SM, resulting in a significant decline in market valuation and stock prices.

At its pinnacle, SM Entertainment revolutionized the industry by introducing iconic groups like H.O.T and S.E.S, laying the groundwork for the first-generation idol market. The company has continued to launch influential artists such as BoA, TVXQ, Super Junior, Girls’ Generation, SHINee, and f(x), cementing its status as a cornerstone of K-pop history. These legendary artists have profoundly shaped the industry.

Currently, SM has successfully debuted major acts such as NCT, aespa, and RIIZE, while Red Velvet has securely established its prominence over the past decade. The substantial fanbase of SM further illustrates the company’s exceptional production expertise.

However, SM faces significant challenges, including governance disputes involving founder Lee Soo-man and complications arising from acquisition attempts by HYBE and Kakao. Internal issues such as contract renewal uncertainties with EXO members Chen, Baekhyun, and Xiumin are also concerning, especially with rising production costs and ongoing operational deficits in some subsidiaries that restrict SM’s growth. Recently, NCT’s main vocalist Moon Taeil was investigated for sexual assault, resulting in his departure from the group and emphasizing management deficiencies. This incident exposes critical flaws in artist management.

These challenges have adversely affected SM’s stock value, which has plummeted by 58% over the past year—almost double the 32% decline experienced by HYBE during the same tumultuous period. Other companies like JYP Entertainment and YG Entertainment also recorded similar drops, although the underlying issues vary. SM’s price-to-earnings ratio (PER) has halved from 23.8 times last year to 12.4 times now, indicating a diminished growth outlook. In contrast, YG and JYP’s PERs hover around 14 times, reflecting lower growth expectations for SM among key entertainment companies.

In light of these setbacks, SM is actively seeking to innovate and create new markets to boost profitability. They recently introduced the AI virtual idol nævis and are poised for the debut of the UK-based group Dear Alice. These initiatives are aimed at fostering growth through market expansion. Additionally, SM is pursuing internal financial restructuring by divesting several subsidiaries including SM C&C and KeyEast. Typically, the next phase of corporate reorganization includes enhancements in human resources, prompting industry experts to speculate that SM may implement a substantial personnel overhaul by the first half of next year.

Source: Naver

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