HYBE
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K-pop giant HYBE purchased 868,948 shares of SM Entertainment, the company behind such acts as aespa and NCT 127, for approximately 104.3 billion won ($78 million) after SM founder Lee Soo-man exercised an option to sell the shares, HYBE announced in a Feb. 28 regulatory filing. The purchase concludes a transaction that briefly created a […]
Strong album sales by K-pop groups Seventeen, Tomorrow X Together and New Jeans helped Korean music company HYBE enjoy record revenue of 2.18 trillion won ($1.67 billion), up 22.6%, in 2023, according to the company’s latest earnings report.
HYBE’s album sales from its Korean artists nearly doubled to 43.6 million last year from 22.2 million in 2022, while album sales accounted for 44.6% of total revenue, up from 31.1% the prior year. In Korea, Seventeen led the way with 15.9 million album sales (HYBE’s earnings release cited numbers from Circle Chart, which tracks sales only in Korea). Tomorrow X Together sold 6.5 million albums and NewJeans sold 4.3 million albums.
Streaming revenue got a boost from the company’s acquisition of Atlanta-based hip-hop label Quality Control in February 2023. Revenue from HYBE’s U.S. record labels — Quality Control as well as Big Machine Label Group — grew 70% to 150 billion won ($114.9 million) and accounted for nearly half of HYBE’s streaming revenue growth for the year. Streaming revenue from the company’s Korean labels outside Korea also performed well last year, increasing 102% to 107 billion won ($81.9 million). Within Korea, streaming revenue from those labels increased only 64%, however, to 41 billion won ($31.4 million).
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Concert revenue increased 39.1% to 359.1 billion won ($275 million) and accounted for 16.5% of total revenue, up from 14.5% in 2022. Much of that was due to volume, as HYBE had 125 concerts from seven touring artists in 2023 compared to 78 concerts from four touring artists in 2022.
Most other revenue sources declined year-over-year. Ads and appearances fell 12.3% to 141.9 billion won ($109 million). Merchandise and licensing dropped 17.7% to 325.6 billion won ($249 million). Content sank 15.1% to 289.9 billion won ($222 million). One bright spot was fan clubs, which increased 35.9% to 91.2 billion won ($70 billion).
Company-wide gross profit improved 19.7% to 1 trillion won ($773 million), lower than revenue’s 22.6% growth rate because cost of sales rose 25.2% (gross profit is sales minus cost of sales). Sales, general and administrative expenses increased only 17.7%, however, which helped operating profit improve 24.9% to 295.8 billion won ($227 million). Net profit soared 288% to 186.5 billion won ($143 million).
Korea’s share of HYBE’s revenue increased from 33% in 2022 to 36% in 2023. Japan’s share of revenue also increased, from 28% to 31%. North America fell from 32% to 26% despite the addition of Quality Control.
The Weverse social media platform ended the year with 10.1 million monthly active users (MAUs) in the fourth quarter, down from an all-time high of 10.6 million MAUs in the third quarter but well above the 8.5 million MAUs in the fourth quarter of 2022. Weverse finished the year with 122 artist communities, up from 71 at the end of 2022.
Weverse seems to fly under most of the music industry’s radar despite its strategic importance to its owner, HYBE, the K-pop juggernaut that has successfully leveraged BTS’s success to build an increasingly global, technologically advanced music company.
The social media company’s 10 million monthly active users — 90% of which come from outside South Korea — are few by some standards. TikTok, Instagram and Facebook boast more than 1 billion apiece. But it’s the home turf for artists with some of the most loyal fanbases on the planet. And HYBE is leveraging those acts’ popularity to build a must-visit destination for fans of K-pop and, eventually, other genres, too.
When Jimin, a member of BTS, performed a solo show at Lollapalooza in 2023, it was livestreamed on Weverse. When Jung Kook, another BTS member, hosted an at-home livestream in February, Weverse drew 16 million real-time views. When HYBE group ENHYPEN performed a showcase for its Dark Blood EP, it brought 2.4 million real-time views to the platform.
Artists use Weverse to host live chats with fans to promote new albums and its e-commerce platform to sell merchandise. Last year, Weverse Shop sold over 18 million branded light sticks from K-pop group Seventeen, a handheld device used at the band’s concerts that carries a $64 price tag in the United States.
All of this feels like it’s just the beginning. As K-pop surges in popularity globally, Weverse’s traffic is on the rise. Last year, its average user spent 250 minutes on the platform and visited 10.2 days per month, up from 171 minutes and 9.2 days in 2022. Traffic was up 47% in Africa and 25% in the Middle East. It now has 117 artist communities, including 13 SM Entertainment artists — including Super Junior, Riize and NCT Wish — who joined in September. And as Weverse president Joon Choi explained in an interview with Billboard, the company’s next target is the United States.
Do artists bring their fans to Weverse, or do they tap into the passionate user base you have?
That happens in both ways. Existing Weverse users contributed a lot to the new community of the SM Entertainment artists. But, at the same time, we could clearly see the new user registration spike right after SM artists joined Weverse. So, we’re very happy with this kind of migration. It happened with no hassle.
What about adding artists from the United States to Weverse? Many artists under the HYBE umbrella could be potentially added to the platform to reach new fans.
That’s still in discussion. I think we can come up with more exciting news in the near future.
Weverse has an office in Los Angeles [in Santa Monica]. What are you doing to build Weverse and build the brand in the United States?
The first thing is we are aggressively hiring people who would serve the basic functions including commerce functions, as well as artist support. In terms of raising and improving market awareness, I think that’s something we will be more aggressively working on in 2024. So, as we gain the momentum from new artists and North American artists joining and creating communities on Weverse in America, we will aggressively work on raising the market awareness this year.
Fandom is a word that has become more commonplace as K-pop has grown more popular. I think it’s also a tough word to define properly. How do you define fandom?
I think there are multiple segments — or I would say cohorts — among users of our services. Starting from light listeners, and then we would have more active listeners, we would probably consider them being monthly subscribers to Spotify or Apple, they will be probably the more active listener. And then on top of that there must be a cohort that is more engaged. And those will be probably concertgoers or those people who actively purchase albums of these particular artists. From that particular cohort or user segment, we will probably call them fans. As their engagement level goes up, and they become more active in their fan activities, they will be considered the most dedicated or enthusiastic fans. When you think about any business, you think about the framework of the user acquisition funnel from the very top to the bottom. When it goes to the very bottom, the core of the users, there are users or fans who are ready to purchase whatever the artist is offering. So, from the very bottom to the top, Weverse climbs up to the light users.
What specifically does Weverse do to help serve artists’ superfans better than other social platforms or a streaming platform like Spotify?
Before Weverse, the superfan experience was scattered here and there. You buy merch here, you go to the concert, and you get together in some places. Those experiences were all scattered around. But I think Weverse was the first service to get everything together in the best, [most] convenient way. Number two would be global. To go global, we really value the importance of translation. So, we provide real-time translation in 15 languages.
How does how does Weverse make money? Is it advertising? Is it taking a percentage of sales?
When it comes to advertising, we don’t have it yet, but we are working on it. So, we’re going to launch our advertising service this year. And before that, basically we get a revenue share from album sales, merch sales or any kind of digital value provided to the fans.
I’ve noticed a lot of merchandise for sale. How do you fulfill those orders? Do you have partners in different countries to help?
When it comes to a commerce system, we built everything in-house except for the fulfillment side. Obviously, we have international fulfillment partners. We have warehouses in Korea, Japan and the U.S. — in Carson, south of L.A. So, we get orders from more than 200 countries around the world. We ship everywhere.
You sell CDs, correct, and digital downloads?
Correct.
Do fans in Korea still buy CDs and download albums and tracks in high numbers?
They do both, obviously. Physical albums still do very high volume. And on top of that, Weverse also tries to provide digital/physical experiences together. That’s the reason why we launched Weverse Album last year, which is basically an album without a CD. The album comes with the QR code, then users can download the original high-quality music source and enjoy within Weverse.
What’s more popular in Korea, CDs or vinyl?
CDs. Vinyl is not as popular as in the U.S.
You launched Weverse by Fans, which allows users to customize merchandise. Can you tell me how many artists are using that and what the early results have been?
Currently, Weverse by Fans is in the beta phase. As of now, we have eight Korean artists who are using the Weverse by Fans: TOMORROW X TOGETHER, ENHYPEN, Le Sserafim, NewJeans, BOYNEXTDOOR, XIA, Hwang Min Hyun and Baekho.
Weverse does live streaming, whether it’s live performance or chats with artists. How important is that to Weverse?
Weverse Live is highly important to us. Weverse Live offers many different layers that I would say are different types of livestreaming. With the first one, we might have some special arrangement celebrating or marking an album’s release or album showcase. So, Weverse Live can be used for that. And there can be more instant or casual livestreaming, using the Weverse Live as well. The Lollapalooza performance that BTS member Jimin did last year, that was on Weverse Live as well. Weverse Live offers many different types of livestreaming starting from very large-scale concert streaming to a very casual or instant livestreaming done by individual artists.
I would like to add the three reasons why Weverse Live is of great value and importance to Weverse. First, after we release the service, Weverse Live, the users’ duration [of visit] and also their likelihood of revisiting Weverse have all gone up. So, the retention rate has significantly improved thanks to Weverse Live. And the second reason is that users are very satisfied with the quality of livestreaming services that we offer. They often give us feedback that compared to other major livestreaming services they are highly satisfied with the quality of livestreams that we provide. And the third reason is that Weverse Live has been integrated with live commerce, Weverse Commerce. When an artist or a label decides to do so, we can also turn on Weverse Commerce. That has really helped boost sales.
What might somebody sell with Weverse Commerce? A new album release?
Yes, our albums have been the most frequently sold items using the live commerce feature. Artists and labels prefer selling albums. That was the main item that was sold on live commerce. But, as I mentioned earlier, artists want to add the Weverse by Fans feature as part of the live commerce. So that’s something that we’re working on right now.
Since HYBE owns Weverse, it also owns a lot of data about its fans. How does HYBE leverage that data for either insights or marketing?
As you know, HYBE is a multi-label system. Underneath the multi-label system, each label is actively leveraging the fandom data coming from each community. However, what you need to understand is that within Weverse, there are many artists that are not HYBE artists, right? So, each label is working like a silo — they have access and they leverage the data only within their own community. So that’s what I want to clarify first.
As you know, Weverse is a platform and the neutrality of data and our service’s neutrality has been emphasized from the very beginning. From the early days of Weverse, that was something that we always have emphasized. Maybe because we have emphasized that importance, more than 90% of artists that have joined Weverse are not HYBE artists.
Could you give me insight into the size of the company, where your employees are, where you have offices? How could you describe the size of your footprint?
When we first started Weverse, we started with 50 to 60 people. But as I mentioned earlier, we went through a very compact, rapid growth within the last three or four years. So now we have about 370 people in Korea. So, in total around the world in three headquarters in Pangyo [South Korea], here where I am in Tokyo and Santa Monica, we have a total of about 450 employees. More than half of them are engineering people. I think it’s very hard to find any music company that has this many engineering people in-house. So, I think that was the biggest challenge we’ve been going through and also it has been very successful so far.
Do you expect to grow in 2024?
Yes. I’m very sure. Because, I mean, it has been [an] investment in advance because Weverse has massive traffic and a global scale. That requires a lot of work under the hood, way more than the surface features you can see from the web or app. There are a lot of things underneath that. So, it has been a very heavy lift, and that requires a lot of technological investment and investment.
This interview has been edited for clarity and brevity.
Music stocks mirrored the poor start to 2024 seen in markets around the world, but K-pop giant HYBE bucked the trend with a 7.9% gain to 252,000 won ($191.67) this week. HYBE made the news multiple times during a relatively slow, holiday-shortened week — though none of it was the type of financial news that […]
The Billboard Global Music Index — a diverse collection of 20 publicly traded music companies — finished 2023 up 31.3% as Spotify’s share price alone climbed 138% thanks to cost-cutting and focus on margins. Spotify is the single-largest component of the float-adjusted index and has one of the largest market capitalizations of any music company.
The music index was outperformed by the tech-heavy Nasdaq composite, which gained 43.4% with the help of triple-digit gains from chipmaker Nvidia Corp (+239%) and Meta Platforms (+194%). But the Billboard Global Music Index exceeded some other major indexes: the S&P 500 gained 24.2%, South Korea’s KOSPI composite index grew 18.7% and the FTSE 100 improved 3.8%.
Other than Spotify, a handful of major companies had double-digit gains in 2023 that drove the index’s improvement. Universal Music Group finished the year up 14.7%. Concert promoter Live Nation rode a string of record-setting quarters to a 34.2% gain. HYBE, the increasingly diversified K-pop company, rose 34.6%. SM Entertainment, in which HYBE acquired a minority stake in March, gained 20.1%.
A handful of smaller companies also finished the year with big gains. LiveOne gained 117.4%. Reservoir Media improved 19.4%. Chinese music streamer Cloud Music improved 15.8%.
The biggest loser on the Billboard Global Music Index in 2023 was radio broadcaster iHeartMedia, which fell 56.4%. Abu Dhabi-based music streamer Anghami finished 2023 down 34.8%. After a series of large fluctuations in recent months, Anghami ended the year 69% below its high mark for 2023. Hipgnosis Songs Fund, currently undergoing a strategic review after shareholders voted against continuation in October, finished the year down 16.6%.
Sphere Entertainment Co., which split from MSG Entertainment’s live entertainment business back in April, ended 2023 down 24.4%. Most of that decline came before the company opened its flagship venue, Sphere, in Las Vegas on September 29, however. Since U2 opened the venue to widespread acclaim and earned Sphere global media coverage, the stock dropped only 8.5%.
For the week, the index rose 1.1% to 1,534.07. Fourteen of the index’s 20 stocks posted gains this week, four dropped in price and one was unchanged.
LiveOne shares rose 15.7% to $1.40 after the company announced on Friday (Dec. 29) it added 63,000 new paid memberships in December and surpassed 3.5 million total memberships, an increase of 29% year over year. iHeartMedia shares climbed 14.6% to $2.67. Anghami continued its ping-pong trajectory by finishing the week up 16.9%.
12/29/2023
The year saw K-pop companies making mega moves on a global scale, while the catalog market remained hot.
12/29/2023
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In a stunning wrinkle in the fevered battle between Kakao Corp. and HYBE for a controlling stake in K-pop company SM Entertainment, Kakao’s chief investment officer was indicted Monday (Nov. 13) for allegedly manipulating the stock price to ward off HYBE’s rival bid.
Bae Jae-hyun, Kakao’s chief investment officer, will face a trial for violating South Korea’s Capital Markets Act, according to reports. He allegedly inflated the price of SM Entertainment shares by purchasing 240 billion won ($181.3 million) of shares while HYBE, home of K-pop group BTS, was attempting to buy a large stake in the company. Prosecutors also charged Kakao using a provision in the law that allows both a company and its employees to be punished.
The scheme to manipulate SM Entertainment’s share price stemmed from a heated competition between Kakao and HYBE to become the largest shareholder in SM Entertainment — home to such K-pop acts as NCT Dream and Red Velvet — to help rebuild the company after it terminated a production contract with its founder, Lee Soo-man. In February, HYBE acquired a 14.8% stake in the K-pop giant from Lee and attempted to acquire an additional 25% stake through a tender offer at 120,000 won ($92.36) per share. HYBE’s bid was too low, however, and the tender offer gave HYBE less than 1% of outstanding shares.
Bae allegedly acquired SM Entertainment shares to drive up the price above HYBE’s tender offer price, thus thwarting its efforts to obtain a larger stake. On March 6, Kakeo and Kakao Entertainment followed with a tender offer of 150,000 won ($115.46) per share — 25% above HYBE’s tender offer price — and ended up acquiring an additional 25% stake, bringing its ownership of SM Entertainment to 40%. HYBE abandoned its bid to control SM Entertainment on March 13 and announced on March 28 that it would sell nearly half of its stake in SM Entertainment to Kakao for 248.8 billion won ($191.8 million).
Kakao is a South Korean tech conglomerate that owns the country’s dominant chap app, KakaoTalk, and a popular taxi-hailing app, Kakao Mobility, among other products. A subsidiary, Kakao Entertainment, owns Starship Entertainment, home to such K-pop groups as Monsta X, as well as South Korea streaming app Melon. In August, Kakao Entertainment and SM Entertainment revealed their plans to create a North American joint venture by the end of 2023.
The investigation into stock manipulation started soon after Kakao and Kakao Entertainment beat out HYBE for the SM Entertainment stake. South Korean officials raided the offices of Kakao and Kakao Entertainment on April 6 and SM Entertainment’s headquarters on April 18. Bae was arrested for suspected stock manipulation on Oct. 19 before being indicted on Monday. Other executives were suspected of working with Bae to inflate SM Entertainment’s share price, according to a Reuters article at the time of his arrest, but to date no one else has been charged.
South Korean music company HYBE, home of K-pop giants BTS and Seventeen, has made its first entry into the Latin music sector with the acquisition of Exile Music, the music division of Spanish-language studio Exile Content. HYBE said HYBE Latin America will incorporate K-pop business methods and focus on artist management and talent discovery across […]
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