HYBE
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Universal Music Group, Hipgnosis Songs Fund and other music stocks got a much-needed boost on Tuesday (Oct. 25) following news of Apple Music’s price hike, as investors bet it would trigger a wave of streaming subscription cost increases.
Universal Music Group’s stock closed 11.6% higher, Hipgnosis Songs Fund Ltd ended up 7.8% and Korean music companies SM Entertainment and HYBE finished the trading day 4.8% and 4.4% higher, respectfully, on Tuesday. On Monday, Apple announced that it was raising the standard U.S. and U.K. individual plan price to $10.99 from $9.99.
This 10% price hike — Apple’s first — comes amid high inflation and a darkening economic environment in many global markets. If Apple can raise prices at a time like this, that is a sign the music industry can charge more without turning off consumers, Wall Street analysts said.
“We see this as a further signal of the stickiness of music streaming subscriptions even in a weaker macro environment and believe the major markets will be able to absorb higher prices without leading to meaningfully higher churn,” Lisa Yang, Goldman Sachs’s head of European media & internet technology equity research, wrote in a note to investors on Tuesday.
“We believe that other major DSPs will likely follow suit with similar price increases in the near future, implying further potential upside to our music industry forecasts.”
Competitors Spotify and Amazon Music have already raised prices in some markets. Amazon Music raised the price of its unlimited individual plan for Prime members to $8.99 from $7.99 earlier this year.
Spotify, which will report earnings later Tuesday, raised the cost of its individual plans in the Nordics in 2021, although its standard plan for U.S. subscribers remains at $9.99.
“Despite positive management commentary around churn (with regards to recent price increases on certain plans/regions) as well as management’s views on pricing power over the long term, Spotify has highlighted the broader macro environment as a key consideration in terms of implementing price increases in the near term,” Yang wrote.
Apple’s price increase could also have positive impacts on the majors because companies like UMG and Warner Music Group typically get 65% of music-related revenues from streaming companies with a “high incremental margin,” Goldman estimates.
Music stocks have suffered in 2022 as the major U.S. market indices have fallen around 20% so far this year.
UMG’s share price of 21.10 EUR ($21.01 US) is down nearly 14% year to date, Hipngosis Songs Fund Ltd traded at 91.06 penny sterling ($1.03 US) and is down 28% so far this year. Meanwhile, Warner Music Group’s stock traded at $27.16 US, off almost 37% year to date.
For months, South Korean politicians have been scrambling to find a solution to the forced breakup of BTS, the biggest cultural export their country has known over the last several decades.
On Monday (Oct. 17), the boy band’s label Big Hit Music, a subsidiary of HYBE, appeared to put an end to the handwringing, saying that each of the BTS members would, in fact, serve their mandatory military service. That means, before long — Jin turns 30 in December — the group will not be able to perform with its full seven-member lineup until 2025.
While the timing will vary for the members — Jin, RM, J-Hope, Suga, Jimin, V and Jungkook — based on their age, the departures will create yet another challenge for Seoul-based HYBE. The company, which went public on the South Korean Stock Exchange in October of 2020, has been working to diversify its roster and silence financial analysts who said the company had the look of a one-hit wonder with BTS, the act that has landed six No. 1 songs on the Billboard Hot 100.
HYBE had already been dealing with the stress put on the company by the act’s joint announcement in June that it was taking an undetermined break from group activities to pursue solo projects. But no amount of lobbying by politicians or HYBE itself has helped BTS avoid the responsibilities that all able-bodied South Korean males from 18 to 28 have to serve at least 18 months in the military, though the length of service may vary. In December of 2020, the South Korean National Assembly passed the so-called “BTS law” to allow K-pop entertainers to postpone required service until the age of 30 with a recommendation from the culture minister.
For now, the market seems to have priced in the reality that either through military service or their own desire to work on their solo careers, this version of BTS would not be able to stay together for much longer.
HYBE’s stock, traded on South Korea’s stock exchange, fell 2.54% to 115,000 won ($80.40) on Monday, with other K-pop companies’ stocks staying within 1% of their Friday closing price.
Mandatory military service issue has been a divisive issue in South Korea in recent years as K-pop’s popularity has grown worldwide. While many, including some lawmakers, say the musicians’ contribution to the country’s global recognition should qualify them for an exemption, others that include the defense ministry have opposed the move.
In a country that has superpower neighbors such as China and Russia, as well as a saber-rattling North Korea, many South Koreans believe that the military requirement serves as a social equalizer. And attempts to avoid mandatory service have suspended or derailed the careers of several entertainers and other public figures. Boy bands such as 2 PM and Bigbang have significantly limited their public appearances or paused group activities after its members entered the military.
Jin, the group’s eldest member, turns 30 in December and is expected to start his military service by the end of the year if no sudden amendments are made to the country’s compulsory draft legislation. Jungkook, the youngest member, is 25 years old.
For HYBE, the big question remains: Has the company done enough to diversify its artist roster to account for a potential drop in revenues from a less-active BTS. Since acquiring Scooter Braun’s Ithaca Holdings in April 2021, the share of HYBE’s revenue BTS accounts for, which was 85% in 2020, has fallen to about 60% in 2021, according to one analyst estimate.
Bernie Cho, owner of Seoul-based DFSB Kollective artists and label services agency, says HYBE “has silenced naysayers by rolling out a deep K-pop artists roster that goes beyond BTS,” including new acts Seventeen, TXT and ENHYPEN. Combined, the three groups, which debuted in 2021, accounted for 7.7 million album unit sales — more than half of HYBE’s 2021 total K-pop album sales worldwide, according to company filings. And this year, two girl bands – Le Sserafim and NewJeans – have joined their male labelmates as “some of the best-selling artists of the year,” Cho says.
Nevertheless, earlier this month, NH Investment & Securities, one of South Korea’s largest securities firms, lowered its target stock price for HYBE by 19% to 250,000 won ($177) citing a “delay in growth even after acquiring Ithaca Holdings.”
BTS fuels tremendous merchandise sales in Korea, along with physical CDs and is essentially the flagship act for a growing global K-pop industry. Attention around BTS helps generate some $3.54 billion in visits from foreigners and exports of consumer goods like clothes, makeup and food, according to the Hyundai Research Institute. One Korean politician, Sung-Il-jong of the ruling People Power Party, has estimated that a No. 1 song on the Billboard charts can create a halo effect that generates an economic boom of $1.38 billion for the South Korean economy.
Twelve full months of revenue from HYBE America — which houses artist management and Big Machine Label Group, which manages top international acts like Justin Bieber — are expected to further strengthen HYBE’s income statement.
The company also will try to cobble together BTS-like sales and streams from BTS solo projects. In July, J-Hope was the first to release solo material with the album Jack in the Box, which featured singles “MORE” and “Arson.”
The members, for their part, seem to want to try to stay together as BTS. At a special free concert on Saturday in Busan, South Korea, where 55,000 fans attended, Jin teased a solo project as the members pledged to carry on group activities well into their careers. “We will continue for 30 years,” Jimin said, “and even perform when we are 70 years old.”
But it was J-Hope, the first to open up about the group’s future, who seemed to signal that military service was looming — and that the group could be entering a challenging period. “I think we’re in a phase where we need your trust,” he said.
Additional reporting by Jeyup S. Kwaaak
SEOUL — South Korea’s Intellectual Property Office has thrown up a roadblock to HYBE’s efforts to trademark the iconic “I purple you” term BTS member V created during a fan meeting six years ago.
The KIPO says that HYBE’s trademark application for V’s “I purple you (Borahae) cannot be registered as its application has been filed against the principle of good faith,” according to a notice sent to the company.
The patent and trademark office essentially says that HYBE, the parent company of BTS label Big Hit, is not allowed to trademark the phrase that V uttered, even though he is signed to HYBE, because he used it first.
V, real name Kim Tae-hyung, first created the phrase “Borahae” during a Nov. 13, 2016 fan meeting, when he said, “Borahae, like the last color of the rainbow purple (bora), means we will to the end trust each other and love each other for a long time,” the KIPO said.
“I purple you” has become synonymous with BTS. So much so that McDonald’s, in its collaboration with the group, has used the term on the side of its purple-packaged BTS Meals, which have become yet another collectible for fans.
In 2018, after BTS launched its “LOVE MYSELF” campaign, Henrietta H. Fore, the executive director of UNICEF, used the term in a special video thanking the group for its work in helping raise money for a campaign to end violence against children. “We here at UNICEF purple you,” she said at the end of her speech.
In explaining its refusal to allow HYBE to secure a trademark, however, the KIPO sided with V as the creator: “We accept that the applicant has filed a trademark that is similar to or the same as a trademark used by a different person that has a contractual or working relationship such as partnership or employment.”
It cited article 34, paragraph 1, subparagraph 20 in Korean trademark law.
V, who is known to be among the quieter members of BTS, has been active on his Instagram since the notice to HYBE became public knowledge, but hasn’t commented on the case.
An official at the KIPO, who requested anonymity because they aren’t authorized to comment on an ongoing case, tells Billboard that its decision is not final. HYBE has been given two months to file an addendum that strengthens the company’s claim, and that period could be extended further, without an explicit limit, the official says. “Citation of the subparagraph 20 is very rare, and as far as I know there are no precedents involving BTS,” the person says.
The case follows an earlier unsuccessful application by LALALEES, a Korean cosmetics company specializing in nails, to trademark the “Borahae” term in 2020 under the classification of soaps, fragrances, essential oils, cosmetics, hair products, polishes, and other cleaning agents. After the rejection caused an uproar among fans, the cosmetics company issued an apology.
K-pop companies are known for trademarking names and phrases associated with their artists. When boybands leave their management companies they often cannot perform under their previous name because the companies have registered and own the rights to the boyband’s name.
In 2015, the idol group Shinhwa reclaimed the rights to their name after a 12-year battle with agency ShinCom Entertainment and June Media (formerly known as Open World Entertainment). In that case, Shinhwa’s original agency, SM Entertainment, gave the rights to “Shinhwa” to a new agency, Good Entertainment, and then trademarked the name in 2005, before handing trademark rights over to June Media completely, according to according to K-pop publication Soompi.
And in 2020 a Korean court stripped SM Entertainment director Kim Kyung Wook of trademark rights to the name and logo of first-generation boyband H.O.T. (Highfive of Teenagers), which he originally cast and produced in 1996. While planning a reunion tour, the group in 2018 was forced to remove its name and logo from promotional materials after failing to come to an agreement with Kim over trademark rights, Soompi reported.