South Korea’s four major entertainment companies, HYBE, JYP, SM, and YG, are facing declining profitability even as K-pop continues to gain popularity globally.
According to the entertainment industry on Aug. 13, HYBE reported record-high sales of 640.5 billion won for the second quarter of this year. However, its operating profit decreased by 37% to 50.9 billion won compared to the same period last year.
During the same period, SM Entertainment saw a 6% increase in sales to 253.9 billion won, but its operating profit fell by 31% to 24.7 billion won.
YG Entertainment’s situation is even worse. Its second-quarter sales dropped by 43% to 90 billion won, resulting in an operating loss of 11 billion won. This contrasts sharply with an operating profit of 28.9 billion won in the same period last year.
JYP Entertainment, which will release its earnings this afternoon, is expected to face similar challenges as the other big three. NH Investment & Securities estimates JYP’s sales for April to June at 92.5 billion won and operating profit at 21.6 billion won, a 39% drop in sales and a 53% decline in operating profit year-on-year.
The decline in profitability for these companies is largely attributed to the absence of their core artists. BTS, which has been a significant growth driver for HYBE, is scheduled to resume full activities next year following the members’ mandatory military service, which began in 2022. However, recent issues, such as member Suga’s alleged electric scooter DUI incident and internal conflicts with Min Hee-jin, CEO of the subsidiary ADOR, are seen as negative factors for BTS’s comeback and the development of new artists.
YG Entertainment’s Blackpink, a leading force in global K-pop, is expected to return next year. The girl group, which renewed its exclusive contract with YG for group activities only in December last year, has been less active following their world tour finale in Seoul last September and an eighth-anniversary event this month. YG is highly dependent on Blackpink, with some industry experts suggesting that the group’s full activities are crucial for YG to match the performance of the other big three agencies.
Another factor affecting profitability is the increased investment costs for new artists. The expenses for discovering new faces to replace existing stars and for overseas marketing are significantly higher than before. While the past focus was on domestic activities, the current emphasis is on global stages for artists.
SM Entertainment is preparing for the local debut of the British boy group Dear Alice this month, and NCT Dream plans to release a new full-length album and embark on a world tour covering North America, South America, and Europe within the year. This global expansion strategy is similar across HYBE, YG, and others.
As the profitability of the “Big Four” declines, concerns about a crisis in the Korean entertainment industry are rising. There is worry that if a few key artists continue to dominate the performance of these companies, it could halt the global expansion of the Korean entertainment industry.
Pop culture critic Jung Duk-hyun said, “BTS and Blackpink led the globalization of K-pop with explosive popularity overseas. Although the Big Four are working to develop new artists and engage in international marketing, they are not yet matching the success of these two artists.”
Jung added, “The continuous effort to discover new artists and venture into foreign markets is a very positive aspect,” highlighting that “K-pop is transitioning from a niche audience to mainstream popularity. This current phase will determine whether K-pop experiences growth or stagnation.”
