Ok-pop music companies are in want of a second act after an $8 billion fairness rout sparked by issues over falling album gross sales.
Hybe Co., SM Leisure Co., JYP Leisure Corp. and YG Leisure Inc., whose shares are down as a lot as practically 50% from a 2023 excessive, want to new acts, distribution offers and beneficial properties on streaming websites to revive their fortunes.
With the favored BTS and Blackpink teams occurring hiatus and a decline in album gross sales in China, Ok-pop corporations want a brand new development technique.Goldman Sachs Group Inc. and HSBC Holdings Plc. are among the many analysts arguing that the plan by these music companies to interact followers by live shows and broaden their attain to the US and Japan can pay dividends.
“Present issues concerning the Ok-pop outlook do look like extreme,” mentioned Junhyun Kim, an analyst at HSBC. Even when bodily album gross sales have been to lower in 2024, there are “varied different methods to monetize Ok-pop followers,” he mentioned.
Whereas digital streaming is turning into dominant within the music trade, Ok-pop companies have relied on bodily album gross sales as these might be bundled with profitable unique merchandise. Nonetheless, falling album gross sales within the second half of 2023 led to Hybe reporting its slowest quarterly development for the three-months by December.
Yuanta Securities Co. expects album gross sales in 2024 by the 4 main Ok-pop companies to drop 5.3% on-year to 82.7 million copies. Over the previous 4 years, gross sales development has stayed above 40%.
Hybe, the largest by market worth among the many 4, is now main the best way with its strategic pivot. It signed a distribution cope with Common Music Group NA, the world’s largest music firm, that may widen its digital and geographical attain. Ongoing penetration on international streaming websites additionally helped ILLIT, a brand new woman group beneath its administration, to interrupt data for the very best first-week streams for a Ok-pop debut album on Spotify.
Friends are additionally selling newer abilities to offset China headwinds. Growing reputation for Riize is predicted to spice up earnings development for SM, whereas packed schedules for key artists, together with Stray Children and Twice, will allow JYP to keep up its income base, in accordance with Morgan Stanley. Followers are additionally anticipating the resumption of exercise from YG’s Blackpink.
With pandemic-related restrictions over, off-line live performance viewers needs to be the extra vital metric to measure Ok-pop’s development versus simply bodily album gross sales, mentioned analysts at Goldman Sachs.
Ok-pop’s fan base is predicted to broaden by 26% yearly over three years, with viewers development in Japan as the important thing driver within the close to time period, Goldman Sachs analysts together with Eric Cha wrote in a observe dated March 14.
This restoration comes after the trade grappled with issues over the re-contracting of key artists, drug probes and a decline in group shopping for of albums in China final yr.
It stays to be seen if the brand new technology of artists will be capable of maintain their trajectory. Established acts akin to Blackpink — the world’s hottest woman band — and Hybe’s BTS have fueled a worldwide craze for South Korean entertainers.
Nonetheless, valuations have turn out to be engaging after a big de-rating over the previous six months. Shares of Hybe, JYP and SM at the moment are buying and selling at about one normal deviation beneath their five-year common ahead earnings, in accordance with Bloomberg-compiled knowledge.
“We see Ok-pop on the cusp of being a mainstream style within the international music trade and assume the risk-reward for the sector is engaging,” Morgan Stanley analysts together with Seyon Park wrote in a observe final month. The current share worth correction has supplied “a chance for traders to experience the longer-term theme.”
Hybe Co., SM Leisure Co., JYP Leisure Corp. and YG Leisure Inc., whose shares are down as a lot as practically 50% from a 2023 excessive, want to new acts, distribution offers and beneficial properties on streaming websites to revive their fortunes.
With the favored BTS and Blackpink teams occurring hiatus and a decline in album gross sales in China, Ok-pop corporations want a brand new development technique.Goldman Sachs Group Inc. and HSBC Holdings Plc. are among the many analysts arguing that the plan by these music companies to interact followers by live shows and broaden their attain to the US and Japan can pay dividends.
“Present issues concerning the Ok-pop outlook do look like extreme,” mentioned Junhyun Kim, an analyst at HSBC. Even when bodily album gross sales have been to lower in 2024, there are “varied different methods to monetize Ok-pop followers,” he mentioned.
Whereas digital streaming is turning into dominant within the music trade, Ok-pop companies have relied on bodily album gross sales as these might be bundled with profitable unique merchandise. Nonetheless, falling album gross sales within the second half of 2023 led to Hybe reporting its slowest quarterly development for the three-months by December.
Yuanta Securities Co. expects album gross sales in 2024 by the 4 main Ok-pop companies to drop 5.3% on-year to 82.7 million copies. Over the previous 4 years, gross sales development has stayed above 40%.
Hybe, the largest by market worth among the many 4, is now main the best way with its strategic pivot. It signed a distribution cope with Common Music Group NA, the world’s largest music firm, that may widen its digital and geographical attain. Ongoing penetration on international streaming websites additionally helped ILLIT, a brand new woman group beneath its administration, to interrupt data for the very best first-week streams for a Ok-pop debut album on Spotify.
Friends are additionally selling newer abilities to offset China headwinds. Growing reputation for Riize is predicted to spice up earnings development for SM, whereas packed schedules for key artists, together with Stray Children and Twice, will allow JYP to keep up its income base, in accordance with Morgan Stanley. Followers are additionally anticipating the resumption of exercise from YG’s Blackpink.
With pandemic-related restrictions over, off-line live performance viewers needs to be the extra vital metric to measure Ok-pop’s development versus simply bodily album gross sales, mentioned analysts at Goldman Sachs.
Ok-pop’s fan base is predicted to broaden by 26% yearly over three years, with viewers development in Japan as the important thing driver within the close to time period, Goldman Sachs analysts together with Eric Cha wrote in a observe dated March 14.
This restoration comes after the trade grappled with issues over the re-contracting of key artists, drug probes and a decline in group shopping for of albums in China final yr.
It stays to be seen if the brand new technology of artists will be capable of maintain their trajectory. Established acts akin to Blackpink — the world’s hottest woman band — and Hybe’s BTS have fueled a worldwide craze for South Korean entertainers.
Nonetheless, valuations have turn out to be engaging after a big de-rating over the previous six months. Shares of Hybe, JYP and SM at the moment are buying and selling at about one normal deviation beneath their five-year common ahead earnings, in accordance with Bloomberg-compiled knowledge.
“We see Ok-pop on the cusp of being a mainstream style within the international music trade and assume the risk-reward for the sector is engaging,” Morgan Stanley analysts together with Seyon Park wrote in a observe final month. The current share worth correction has supplied “a chance for traders to experience the longer-term theme.”
