The global popularity of K-pop is leading to the development of Exchange-Traded Funds (ETFs) that invest solely in major South Korean entertainment companies. However, the securities industry’s response to K-pop fandom platforms is more uncertain, in contrast to its response to entertainment companies.
This uncertainty arises from the slowdown in the growth rate of paid subscribers as more fandom platforms emerge, coupled with the absence of a clear revenue model, which is leading to expectations of poor performance.
A fandom platform is an application that enables fans to connect with their favorite artists, enjoy their content, and purchase official merchandise. It provides a space for fans to immerse themselves in their love for celebrities and interact with them personally. Therefore, for major entertainment companies, having a presence on this platform is crucial.
Several major securities firms in South Korea have all reduced their target prices for Dear U on Jan. 23.
Samsung Securities predicts that Dear U’s quarterly subscription numbers, which are expected to be similar to the previous quarter, along with the impact of exchange rates, will result in a fourth-quarter performance in 2023 that falls below consensus expectations. As a result, the target stock price has been lowered by 27.1 percent to 41,000 won ($30.63). Hanwha Investment & Securities has also reduced its target price for Dear U to 40,000 won, reflecting the expected slowdown in growth this year.
Dear U is a fandom platform that provides a space for artist-fan communication through the global fan communication platform ‘Bubble’ as a monthly subscription service. The expectations for Dear U in the securities market were high. On its listing day, Nov. 10, 2021, its stock price surged to 67,600 won, which was 15,600 won (30 percent) higher than its opening price, making it a ‘hot stock’ that doubled from its IPO price.
The closing price on Jan. 22, of Dear U’s stock was 32,450 won, which is only half of the highest price on the day of its listing.
Over the past year, the stock price of Dear U has fallen by approximately 16.79 percent and hit a record low of 30,450 won on Jan. 18. This is a significant difference compared to SM Entertainment, the major shareholder of SM Studio, which owns 100 percent of Dear U. The stock price of SM Entertainment had dropped by 3.61 percent during the same period. In contrast, JYP Entertainment, the second-largest shareholder, saw a 26.19 percent increase in its stock price.
Experts point out that fandom platforms are not growing as fast as expected. Hanwha Investment & Securities analyst Park Soo-young stated that the stagnation in Bubble subscription numbers for two consecutive quarters indicates that relying solely on K-pop artist-based services is not enough to improve profitability.
“The recent decline in album sales also suggests a trend shift from core fans to light fans. Additionally, the fandom economy is becoming increasingly diverse, and there are more spending options, even for dedicated fans, that cannot be ignored,” he added.
