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SEOUL — The bitter battle for control of K-pop’s fabled agency SM Entertainment has spilled out publicly like an episode of HBO’s Succession. K-pop’s largest agency, HYBE — home to boy band BTS — is pitted against the management of SM, which for years was South Korea’s dominant K-pop company. But as SM’s Lee Soo-man sided with HYBE against the company he founded, a corporate shakeup has turned into a battle royale.
SM sought to maintain its independence through a partnership with Kakao, a South Korean internet giant that has acquired several entertainment agencies. In February, Kakao said it would buy a 9.05% stake in SM against the wishes of Lee, SM’s charismatic founder and rock singer-turned-mogul, whose equity in SM allowed him to challenge the purchase in court.
About a week later, Lee — a controversial figure who helped build the K-pop business over the last three decades but has been convicted of embezzlement in the past — privately approached HYBE founder and chairman Bang Si-hyuk, offering to sell about 80% of his SM shares to HYBE, with an option to sell the remaining chunk at a later date, according to a person with direct knowledge of the matter. As a result, HYBE now has a 15.8% stake in SM, making it the company’s largest shareholder.
Since then, the companies have traded almost daily salvos.
After a March 3 provisionary injunction upheld Lee’s court challenge to the Kakao acquisition, Kakao announced it had canceled its investment in SM and launched a tender offer seeking to buy 35% of SM from minority shareholders. HYBE is now appealing to SM shareholders to back its board nominees and vision for the company. SM sees the move as a hostile takeover and is asking shareholders to appoint independent directors. The clock is ticking before a March 31 annual shareholder meeting.
Both HYBE and SM have grand ambitions to expand K-pop and take on the major labels globally. HYBE increased its revenue 125% to 1.78 billion won ($1.41 billion) from 2020 to 2022, largely by acquiring Ithaca Holdings in 2021 for $1.05 billion and giving its founder, Scooter Braun, the reins to its U.S. operations, HYBE America. In February, HYBE America made its first major move, purchasing Atlanta-based hip-hop company Quality Control Music for $300 million.
SM hopes to more than double its 2022 revenue of 850 billion won ($644 million) to 1.8 trillion won ($1.36 billion) by 2025 through a mix of partnerships and acquisitions, which include acquiring a U.S. management company and, by the second half of 2024, launching its first U.S.-based artist. “Our plan is not limited to local activities of Korean artists,” co-CEO Tak Young-jun said in a Feb. 23 video.
The company plans to spend 350 billion won ($266 million) on a music publishing company and 300 billion won ($228 million) to acquire record labels, with two-thirds of that amount ($152 million) targeting U.S. companies “with a solid local network that can support Korean artists’ global expansion and have global production capabilities in genres complementary to SM,” Lee Sung-soo, SM’s chief creative officer and co-CEO, said in the same video.
But minus its powerful founder, SM doesn’t intend to take the world stage with HYBE’s help. It had envisioned Kakao as its preferred partner in a mission — dubbed “SM 3.0” — it has said it will still push forward with in order to expand outside of Korea and build outposts in Japan, Southeast Asia and the Americas.
A HYBE acquisition of a controlling interest in SM could potentially face regulatory scrutiny from South Korea’s Fair Trade Commission since it exceeds 15% of SM’s stock ownership. In 2022, HYBE was behind 26.8% of albums sold in Korea, while SM was behind 19.1%, according to Korea chart company Circle Chart.
As Lee Dominated, SM’s Luster Was Fading
Though few had predicted such a dramatic unraveling, SM was overdue for a transformation. Once the leading K-pop innovator, SM has debuted just one completely new act, Aespa, in the last five years. It continues to operate through a single pipeline with Lee at the helm of artist management and production, while rivals like HYBE and JYP Entertainment have diversified their portfolios, relying on multiple teams that produce more acts with more independence.
SM’s shares have been chronically undervalued, industry observers say, due to an arrangement where the company paid producing fees to a separate entity owned by Lee. SM paid Lee 24 billion won ($18.1 million) in 2021, equivalent to more than a quarter of SM’s operating profit that year. Even in years when SM produced a loss, Lee took home a sizable paycheck.
The board of directors, packed with Lee allies, allowed the practice to continue for years, until Align Partners Capital Management, a private equity firm, led a shareholder revolt last year. Lee, who now holds about 3% of SM shares, appears headed out the door. HYBE and SM say his role will be reduced if not completely phased out.
“It’s hard to put up a resistance in Korean culture,” Lee Changhwan, CEO of Align Partners, says about the difficulty in over-riding a founder and company’s biggest shareholder. “The governance structure has to go through fundamental changes.”
South Korean stocks are often undervalued, analysts say, since some companies can seem to be managed for the benefit of founders and families to the detriment of general shareholders. Still, in the HYBE-SM power struggle, SM shareholders appear to have won either way: The March 7 share price of 149,700 won ($113.84) is up over 116% since SM announced it would terminate Lee’s contract on Oct. 14.
A K-Pop Pioneer With A Criminal Past
The 70-year-old Lee, who founded SM in 1995, has been credited with making K-pop what it is today. Inspired by early MTV music videos and New Kids on the Block, which he watched during his master’s degree studies in California in the 1980s, he paved the way for K-pop to win overseas fans with a signature formula of visually striking performance and dance pop.
Lee crafted BoA, the female singer who SM scouted in 1998 when she was 11 years old, into the first K-pop artist to break through in the Japanese market; she went on to sell millions of singles and albums. Groups from TVXQ and Girls’ Generation to EXO and NCT have followed suit with international stardom. In 2000, SM became the first K-pop agency to list its shares publicly.
Even before PSY and BTS became global household names, Lee was lecturing publicly about K-pop conquering the world — and about a future when non-Korean singers would join the fray and be trained and managed by K-pop production teams.
Lee’s artistic vision and drive didn’t make up for the company’s corporate governance problems, however. Shareholders have in recent years slammed SM for losses from non-music businesses such as a winery and restaurants while Lee was still getting his producer’s fees. Several SM acts have seen members leave acrimoniously over what they called harsh training and “slave contracts,” resulting in government intervention, including shorter contracts for K-pop trainees and stars.
In 2002, Lee made headlines when he fled the country to escape prosecution while facing embezzlement allegations. After a brief stay on Interpol’s wanted list, he surrendered to Korean authorities and was convicted for siphoning off 1.15 billion won ($892,000 at the time) in company funds during a recapitalization round, which he used to buy shares in SM. (He served three years of probation, and in 2007 he received a presidential pardon — and then returned to the company.) SM has also paid fines for tax evasion, most recently in 2021.
In recent weeks, Lee Sung-soo, the co-CEO who is also nephew to founder Lee’s late wife, leveled a series of accusations at his uncle, which range from previously undisclosed tax evasion through a shell company based in Hong Kong to making “arbitrary” changes to SM bands’ musical direction to advance his own business interests.
While the elder Lee has not directly addressed the allegations, HYBE has responded that it was unaware of such an arrangement during the deal’s signing. In a statement to Billboard, HYBE says its SM acquisition was made “following research on the corporate fundamentals, including publicly disclosed information about SM.”
SM Entertainment shareholders have until the end of the month to weigh two competing visions for the South Korean music company’s future before its annual general meeting on March 31 — one from SM and Korean tech company Kakao and another from K-pop rival HYBE.
Despite SM Entertainment’s announcement Monday that it had canceled plans due to a court injunction to issue new shares and give Kakao a 9.05% stake in the company, making it the leading shareholder, SM and Kakao are pushing forward with their strategy to maintain control. On Tuesday (March 7), Kakao launched a tender offer to buy a 35% stake from SM’s minority shareholders by March 26 and, if successful, could soon own nearly 40% of SM and hold significant voting power.
SM — home to such K-pop acts as NCT 127 and Aespa — has nominated a slate of independent directors and laid out a plan for adding 260 billion won ($200 million) of revenue by 2025 by setting up operations in the U.S., Japan and Southeast Asia, and making acquisitions — including a publishing company — in the coming years, according to a company presentation to shareholders. If the roadmap is successful, SM believes it can double its annual sales from an estimated 770 billion won ($690 billion) in 2023 to 1.5 trillion won ($1.14 billion) in 2025.
Much of SM’s road map stems from its battle with founder Lee Soo-man. In late 2022, an activist investor, Align Partners Capital, convinced SM’s board to appoint a new auditor and terminate a contract with Lee’s production company, Like Planning. Now, SM is attempting to remake itself under revamped corporate governance and a more decentralized organization than Lee’s hierarchical control of artist development.
The current inside directors — including Lee’s nephew, Lee Sung-soo — will resign their positions “in order to take responsibility for the problems of the [Lee Soo-man] system,” the company stated. In their place, SM is recommending its own slate of three executives: CFO Jang Chul-Hyuk; Kim Ji-Won, head of marketing center; and Choi Jung-Min, head of global business center.
To ensure an independent board of directors, SM has proposed the chairperson be one of its outside directors, not one of its own executives. Among the company’s picks for outside directors are Kim Kyu-Shik, president of the Korean Governance Forum; Moon Jungbien, a professor at Korea University that specializes in environmental, social and corporate governance matters; and Sung M. Cho, CEO of music analytics company Chartmetric. For part-time directors, SM recommends Lee Changhwan, the CEO of Align Partners, and Jang Yoon-Joong, Kakao’s global strategy officer.
Lee Chang-hwan
Courtesy of Align Partners
HYBE, home to the wildly popular boy band BTS, has different ambitions for SM’s future. HYBE acquired a 14.8% stake in SM from Lee, the SM founder, on Feb. 22, and an additional 1% through a tender offer, according to a March 6 regulatory filing. It has blasted “the bias and irrationality” of the SM management that approved the Kakao partnership.
“HYBE has been considering the acquisition of SM for a long time and gave much thought into how the two companies could work together,” Jung Jinsoo, HYBE’s chief legal officer, wrote in a letter to SM shareholders on Thursday.
In the letter, Jung argues HYBE solved two problems when it acquired Lee’s equity. First, HYBE acquired Lee’s shares in two SM subsidiaries: SM Brand Marketing and Dream Maker Entertainment Limited. That solves what Jung called “leakage in SM’s profits” to Lee. Second, HYBE alleges SM still owes Lee fees for three years even though it terminated the Like Planning contract as of Dec. 31.
Jung says HYBE structured the stock purchase agreement so payments to Lee stop “upon the execution of the agreement.” HYBE also added a clause to terminate any transactions from SM to Lee that HYBE did not know about.
While SM sees Kakao as the partner for its transformation into a larger, more global entity, HYBE calls it an “unfair partnership” that would give Kakao permanent and exclusive rights to distribute SM’s music, protect SM’s equity at the expense of other shareholders and create conflict of interests that favor Kakao’s interests. “We believe that these details demonstrate the bias and irrationality of the current SM management who approved such arrangements,” Jung writes.
Beyond SM’s relationship with Kakao, HYBE is concerned with SM’s roadmap to increase the number of artists on its roster by expanding production in Korea and building overseas outposts. Jung is questioning SM leadership’s understanding of the time and resources required to develop and break successful artists.
“It goes without saying but you cannot generate profit in K-pop just by having a longer artist roster,” Jung writes. “What’s important is to nurture artists who are loved by fans and provide a creative environment.”
HYBE has submitted a competing slate of inside director recommendations featuring a handful of HYBE executives: Jung; Lee Jaesang, president of HYBE America; and Lee Jin Hwa, HYBE’s chief of management and planning.
For outside directors, HYBE has recommended Kang Namkyu, managing partner at GAON Law Group; Hong Sounman, professor of public administration at Yonsei University; and Lim Dae Woong, a representative of the United Nations Environment Program Finance Initiative. HYBE’s recommendation for part-time director is Park Byungmoo, managing partner at buyout firm VIG Partners; and Choi Kyu Dam, a former NCSOFT finance executive, for part-time auditor.
SM portrays the battle with HYBE as a fight for its independence from a large company. A HYBE takeover would put its interests over SM’s artists, SM says, and could force SM to downsize or divest assets to meet regulatory approval. What’s more, HYBE might not receive a warm welcome: 85% of SM employees who voted on the workplace app Blind oppose HYBE’s “hostile takeover” and want to “protect the culture diversity of K-pop and the unique identity of SM,” according to SM’s investor presentation.
Ultimately, the two sides have competing visions for a board of directors that will best serve SM shareholders and lead the company. To SM, HYBE’s recommended directors are either tied to Lee, employed by HYBE or hurt shareholder value in their previous corporate tenures. To HYBE, SM’s proposals could result in a board controlled by Align Partners that lacks the experience to expand SM and reach the company’s lofty targets.
“[I]t is questionable whether the current management has a sufficient understanding on these circumstances,” writes HYBE’s Jung.
Korean tech company Kakao will launch a tender offer to acquire up to 35% of SM Entertainment’s outstanding shares. The move came a day after a court injunction forced Kakao to cancel its plan to acquire a 9.05% stake directly from SM, whose roster includes NCT 127 and Red Velvet; a court injunction scuttled SM’s plan to issue new shares and give Kakao the stake, according to reports by Bloomberg and Reuters.
Kakao and its subsidiary Kakao Entertainment are seeking to become SM’s largest shareholder and partner, to help rebuild the company after SM’s board of directors terminated a production contract with the company’s legendary founder, Lee Soo-man, on Dec. 31. Lee sold most of his SM shares to HYBE, the home of BTS, on Feb. 22 and won a court injunction Friday that prevented SM from issuing new shares to Kakao. As a result, Kakao has been forced to seek shares from existing SM shareholders instead.
HYBE had sought an additional 25% stake in SM through a tender offer but was able to purchase slightly less than 1% of outstanding shares, the company revealed in a regulatory filing Monday (March 6). That increased HYBE’s ownership stake in SM to 15.8%. With Lee’s 3.65% stake, HYBE has voting power of 19.4% of outstanding shares. The next-largest shareholder, Korea’s National Pension Service, owns 6.2% of SM’s shares.
Kakao and HYBE are locked in a battle for control of SM’s board of directors ahead of the company’s annual general meeting on March 31. “Kakao has strong trust in the excellent competitiveness of SM Entertainment’s current management, employees, and artists, and the current management’s efforts to resolve the factors that hinder SM Entertainment’s growth,” the company said in a statement.
HYBE sees itself as the more skilled, experienced company to guide SM’s global ambitions and has criticized its competitor’s “utterly irresponsible contract” with Kakao.
Kakao and its subsidiary Kakao Entertainment, which raised $966 million from the sovereign wealth funds of Saudi Arabia and Singapore in January, will offer 150,000 won ($115.46) per share — a 25% premium over the 120,000 won ($92.36) per share HYBE offered.
SM’s share price rose 13.8% to 148,100 won ($114.09) on Tuesday morning in Seoul following news of Kakao’s tender offer.
Additional reporting by Jeyup S. Kwaak.
HYBE’s plan to control competing K-pop company SM Entertainment and thwart a partnership with tech company Kakao took another step forward on Monday when Kakao, responding to a court injunction, announced it had canceled its stock purchase agreement to acquire a 9.05% stake in SM Entertainment.
Last week, the Seoul Eastern District Court granted a provisionary injunction against SM’s plan to issue new shares and convertible bonds. The judge ruled that SM had made its decision without shareholders’ consent. It was a remarkable win for SM’s controversial founder, Lee Soo-man, and for HYBE, the reigning K-pop company and home to boyband BTS.
For weeks, SM’s management has been trying to wrest control of the company from Lee, who has been found guilty of embezzlement and exercised iron-fisted control over the company he founded in 1995. After SM made a deal with Kakao, Lee turned to HYBE, which became SM’s largest shareholder on Feb. 22 after it acquired a 14.8% stake from Lee, whose production contract with SM was canceled as of Dec. 31.
On Monday, HYBE sent a letter to SM demanding that “the current [SM] Board of Directors should fulfill its duty of care and duty of loyalty towards SM and actively exercise the right to terminate the business cooperation agreement, which contains clauses that are disadvantageous to SM and advantageous to Kakao,” according to a statement that described the letter.
With the injunction in place, HYBE also called for SM to exercise its right to withdraw the recommendation of the director candidate nominated by Kakao. SM had put forward Jang Yoon-Joong, Kakao’s global strategy officer, as a part-time director.
SM and HYBE are pushing competing visions for SM’s future before shareholders vote on a new board of directors at SM’s annual general meeting on March 31. SM wants to partner with Kakao – owner of the Melon music streaming service and KakaoTalk messaging service – to better monetize its intellectual property and launch a joint venture in the U.S.
Called “SM 3.0,” the road map calls for SM to break from the single-producer system maintained by Lee until his removal. Instead, SM wants to develop artists through multiple labels and production centers in Korea, Japan, Southeast and the U.S.
HYBE calls an SM-Kakao tie-up an “unfair partnership” that would give Kakao permanent and exclusive rights to distribute SM’s music, protect SM’s equity at the expense of other shareholders and create conflict of interests that favor Kakao. “We believe that these details demonstrate the bias and irrationality of the current SM management who approved such arrangements,” Jung Jinsoo, HYBE’s chief legal officer, wrote in a letter to SM shareholders on Thursday (March 2).
J-Hope and J. Cole‘s collaboration “On the Street” has topped this week’s new music poll.
Music fans voted in a poll published Friday (March 3) on Billboard, choosing the BTS member’s meaningful team-up with the rap star as their favorite new music release of the past week.
“On the Street” brought in 80% of the vote, beating out new music from Nicki Minaj (“Red Ruby Da Sleeze”), Morgan Wallen (One Thing at a Time), Kali Uchis (Red Moon in Venus), Marshmello and Manuel Turizo (“El Merengue”), and others.
The pair’s hip-hop collab follow J-Hope’s many accomplishments as a solo artist in 2022, including his bold Jack in the Box project and his prominent Lollapalooza set. The BTS member uses the new single to express his gratitude toward the fans who helped make it all happen. Cole effortlessly slides on the beat, charismatic and confident alongside the K-pop star as he speaks of his own unique come-up story.
“On the Street” is particularly meaningful to J-Hope. While BTS has long shared their admiration for the North Carolina-raised rapper –revealing in 2013 their reinterpreted take on J. Cole’s “Born Sinner” with “Born Singer,” which was only officially released last year on Proof — J-Hope has always shared how Cole is one of his ultimate favorite singers.
“On the Street” is J-Hope’s first new solo song since hopping on “Rush Hour” with Korean R&B singer “Crush.” J. Cole dropped a surprise song in mid-January with “Procrastination (Broke),” acting as a thank you to producer Bvtman and “every producer out there cooking up and sharing their work with the world.”
Trailing behind Hope and Cole’s track on the fan-voted poll was Minaj’s latest track “Red Ruby Da Sleeze,” with nearly 12% of the vote. The new single follows her hit single “Super Freaky Girl,” which earned the Queen of Rap her first No. 1 on the Billboard Hot 100 in August 2022.
See the final results of this week’s new music release poll below.
BLACKPINK‘S Jisoo is gearing up for her long-awaited debut solo music project.
The K-pop star announced through social media on Sunday (March 4) that her first solo music release will arrive on March 31. The teaser included a mysterious “Coming Soon” poster featuring a bright red piece of cloth in the middle a beautiful green field.
“See you soon,” Jisoo captioned the image on Instagram. The teaser poster was also shared through BLACKPINK’s official Instagram account.
At the start of the year, reports surfaced that Jisoo’s much-anticipated solo debut was finally in the works, making her the fourth and final member of the group to branch out with her own music. Jennie‘s “SOLO” arrived in 2018, and both Rosé’s -R- and Lisa’s Lalisa dropped in 2021.
In late February, Korean entertainment label YG Entertainment confirmed that Jisoo was preparing to release solo music in 2023.
“BLACKPINK’s Jisoo is currently working hard on recording her solo album,” YG said in a statement at the time, according to Smoopi. “While carrying out a busy world tour schedule since last year, she finished the album jacket photo shoot and worked on music production whenever she got the time in order to keep the promise with fans. She will greet [fans] soon with good news.”
Jisoo touched on going solo during an interview in May 2022. “I’m not sure how much I want to go solo yet,” she told Rolling Stone at the time. “The music I listen to, the music I can do, and the music I want to do — what should I choose? I love songs with lots of instruments. I love different bands and rock music. What do people want from me? There’s a chaos of conflicting questions. So I’m still tilting my head in confusion. I’m not sure what will happen with my solo plans this year.”
BLACKPINK’s second full-length studio album, Born Pink, debuted at No. 1 on the Billboard 200 in October 2022. The girl group previously debuted and peaked at No. 2 in October 2020 with its debut release, The Album.
BLACKPINK announced earlier last month that the Born Pink World tour will head to Australia and Mexico. The four-piece will make its epic return to headline this year’s Coachella Valley Music & Arts Festival, four years after making its debut at the festival in 2019.
Check out Jisoo’s solo music announcement on Twitter below.
TOKYO — A court ruling in South Korea on Friday added further confusion to K-pop’s biggest corporate shakeup in years: the rollercoaster battle for control over SM Entertainment, the once-industry leader bedeviled by corporate governance concerns, which rival HYBE is eager to take control of.
The Seoul Eastern District Court granted a provisionary injunction to block SM from issuing new shares, which Kakao, a Korean tech giant, had agreed to buy as part of a partnership deal between the two companies. The court ruled that SM’s decision was taken without shareholders’ consent, accepting the argument from SM founder Lee Soo Man, who has been battling SM’s management over the future of the company he created in 1995.
The ruling marks a win for HYBE, K-pop’s largest agency and home to boy band BTS, which in recent weeks acquired a 14.8% stake of SM shares from Lee – and announced plans to take control and overhaul SM’s management and board of directors. HYBE was offering shareholders a premium to boost its stake up to 40%, but the market price has since exceeded the offer price. SM’s management has slammed HYBE’s acquisition as a “hostile takeover.”
Following the ruling, HYBE, in a statement, thanked the court for the “appropriate” ruling. “With this result, everything should now fall back into place,” the company said.
In a statement from his lawyers, Lee said the decision “clearly confirmed that the resolution by SM’s current management to issue new shares and convertible bonds was made in an unlawful attempt to influence the company’s control and governance.” The attorneys added that “if SM’s current management further attempts to commit unlawful acts in the future, we will respond firmly by taking appropriate legal actions.”
A Kakao spokesperson said late Friday that the company didn’t immediately have a comment but “plans to issue a response after internal discussions.” A SM spokesperson couldn’t immediately be reached.
Lee and the company he founded are widely considered trailblazers, developing K-pop’s signature formula of visually driven performances and dance pop, and tirelessly knocking on overseas markets’ doors. But in recent years SM’s output has slowed, which its management has blamed on the founder-led single-pipeline structure.
SM’s co-CEO Lee Sung-su, a nephew of the founder’s late wife, has lashed out at the uncle with a litany of accusations, from using artists’ music for personal gains to tax evasion through a Hong Kong-based paper company. Shareholders in recent years have also objected to the founder’s ballooning producer fees, which he was receiving via a separate entity he owned.
Kakao in February agreed with SM’s management to buy 9.05% of SM shares, as part of a wider partnership agreement. The messenger-app-and-search-engine company, which has successfully expanded into e-finance and music, was going to distribute SM’s music and related content on its platforms. Kakao has also acquired several entertainment agencies in recent years, leading some, including HYBE, to argue Kakao was trying to gain managerial control over SM. Both SM executives and Kakao have rejected the claim.
With an annual shareholders meeting scheduled for March 31, SM and HYBE are expected to spend the coming weeks courting SM investors, which includes South Korea’s National Pension Service.
TOMORROW X TOGETHER aren’t so much the next big thing in K-pop. They’ve already arrived.
The five members wrote their names in the record books with The Name Chapter: TEMPTATION, which blasted to No. 1 on the Billboard 200 chart earlier this month, their first leader.
Spanning five tracks, the EP is the South Korean vocal group’s third top 10-charting effort, following Minisode 2: Thursday’s Child (No. 4 in 2022) and The Chaos Chapter: Freeze (No. 5 in 2021).
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Everything would appear to be headed in the right direction, and with their first chart crown, TXT was anointed the top musical act in the U.S. by leading the Billboard Artist 100 chart for the first time. With that feat, TXT joins some heady company. The other K-pop acts to top the Artist 100 are BTS, BLACKPINK, SuperM, TWICE and Stray Kids.
Late night TV viewers just caught the rush. On Monday night (Feb. 27), the lads stopped by The Late Late Show With James Corden for a performance of “Sugar Rush Ride,” lifted from TEMPTATION.
If proof was needed that TXT is hot, James Corden’s intro was drowned out by the wall of sound created by the studio audience. The screams didn’t stop there.
Watch TXT’s debut U.S. TV performance below.
Korean music company HYBE is more than getting by with its primary artist, BTS, on hiatus and its members pursuing solo projects and preparing for military duty. In 2022, HYBE’s revenue grew 41.6% to 1.78 trillion won ($1.41 billion at the Dec. 31, 2022 exchange rate), the company announced Tuesday (Feb. 21).
Adjusted earnings before interest, taxes, depreciation and amortization rose 23.9% to 328.8 billion won ($260.5 million). Margins were thinner that in previous years, however. Last year’s operating margin (as a percent of revenue) fell to 13.4% from 15.1% in 2021 and 18.3% in 2020. Adjusted EBITDA margin dropped to 18.5% from 21.1% in 2021 and 20.2% in 2020.
HYBE breaks revenue into two main categories: artist direct-involvement and artist indirect-involvement. Direct involvement revenues cover such things as recorded music, touring and management. Recorded music sales improved 47% to 553.9 billion won ($438.9 million) and was the largest single revenue source. Concert revenue jumped 470.1% to 258.2 billion won ($204.6 million) as artists returned to touring after scaling back performances during the pandemic.
BTS may be taking a break but it’s still HYBE’s sales leader in album-loving Korea. Four HYBE artists were in the top 10 of Korea’s year-end album tally: BTS was No. 1 with 5.75 million units, Seventeen was No. 3 with 5.56 million units, Tomorrow X Together was No. 5 with 2.78 million units and ENHYPEN was No. 8 with 2.64 million units. Le Sserafim was the No. 15 artist with 1.29 million units. As a point of comparison, the top album in the U.S. last year, Taylor Swift’s Midnights, sold the equivalent of 1.8 million units.
Artist indirect involvement revenue grew only 9.7% in the calendar year. Merchandising and licensing improved 24.8% to 395.6 billion won ($313.5 million) and fan club revenue grew 47.1% to 67.1 billion won ($53.2 million).
In the fourth quarter, HYBE’s revenue grew 16.9% to 535.3 billion won ($424.2 million) in the fourth quarter of 2022. Recorded music revenue jumped 76.4% to 149.1 billion won ($118.2 million) and was the largest single source of revenue.
BTS’s global success has allowed HYBE to diversify itself and rely less on the K-pop super group. In 2017, Korea accounted for 72% of HYBE’s revenues compared to 14% for Japan and 9% for North America. In 2022, HYBE had grown 19-fold from 2017 and had almost evenly balanced business between its three main markets: Korea (33% of revenue), North America (32%) and Japan (28%). The rest of the world contributed just 7% of HYBE’s 2022 revenue — but that could change if the company’s newest investment works as expected.
HYBE’s recent acquisition of a leading stake in competing K-pop company SM Entertainment is an opportunity to develop in markets where it currently has little presence. CEO Park Jiwon explained during Tuesday’s earnings call that HYBE artists can benefit from SM Entertainment’s strong network and infrastructure in China and Southeast Asia. Likewise, HYBE believes it can help SM Entertainment in the North American market.
HYBE latest acquisition didn’t impact 2022 results but will help expand its presence outside of Korea in 2023. On Feb. 8, HYBE purchased QC Media Holdings, the parent company of Atlanta-based hip-hop label Quality Control Music, the home of Migos and Lil Baby, for $300 million. Quality Control will sit under HYBE America and the leadership of CEO Scooter Braun, whose Ithaca Projects was acquired by HYBE in 2021.
Australian audiences will get a taste of BlackPink’s record-busting antics when the K-pop superstars drop by mid-year for an east-coast run.
The BlackPink [Born Pink] World Tour will set down at Melbourne’s Rod Laver Arena for a brace of dates (June 10 and 11), followed by a pair of shows at Sydney’s Qudos Bank Arena (June 16 and 17).
However, the ”originally announced Auckland show will no longer be feasible” due to “unforeseen logistical challenges,” reads a statement from promoters Frontier Touring.
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The Australian dates should sell like hotcakes – if recent chart performance is a good indicator.
Lisa, Jennie, Rosé, and Jisoo smashed chart records in these parts with Born Pink. Its lead single “Pink Venom” flew to No. 1 on the ARIA Singles Chart last August, making BlackPink the first K-pop group to do so, beating the No. 2 start for BTS’ 2020 hit “Dynamite.”
Born Pink went on to debut at No. 2 on the national albums survey.
BlackPink has a special connection with this country. Rosè (aka Roseanne Park) was born in Auckland, New Zealand, and raised in Melbourne. At age 15, the world of K-pop came calling when, at her father’s suggestion, she auditioned for South Korean music company YG Entertainment.
The rest is history – and a growing list of shattered records.
Just last week, Lisa nabbed a hattrick of Guinness World Records and, earlier in the month, they were announced as headliners for Coachella 2023 — a booking that would make the quartet the first Asian act to do so.
BlackPink is currently on an extensive tour through Asia.
General public tickets for the four Australia shows go on sale next Thursday (Feb. 9).
BlackPink Australia Tour June 2023:
June 10 — Rod Laver Arena, MelbourneJune 11 — Rod Laver Arena, MelbourneJune 16 — Qudos Bank Arena, SydneyJune 17 — Qudos Bank Arena, Sydney