South Korea’s domestic virtual asset exchange, Dunamu, and BTS’s agency, HYBE, jointly established the non-fungible token (NFT) company Levvels. However, since its inception, Levvels has been struggling with financial losses. The prolonged downturn in the NFT market over the past few years has made it difficult for the company to find a substantial revenue source.
According to the Financial Supervisory Service’s electronic disclosure data on May. 23, Levvels reported an operating loss of 3.5 billion won ($2.5 million) and a net loss of $2.1 million in the first quarter of this year. The company’s sales were only $66,287, indicating that most of their expenditures have been on marketing and corporate operations, with minimal income from their business activities.
Levvels was founded in 2022 in Santa Monica, near Los Angeles, by Dunamu and HYBE. Dunamu invested $36.5 millionfor a 75% stake, while HYBE invested $12.4 million for a 25% stake. The goal was to leverage the strong fan base of HYBE artists, such as BTS, in the U.S. market to generate revenue through issuing and selling NFTs.
However, contrary to expectations, Levvels has consistently posted losses since its launch. In its first year, 2022, the company recorded sales of $167,547 but incurred an operating loss of $7,2 million and a net loss of $7.1 million, primarily due to significant initial marketing and promotional expenses. The following year, sales increased slightly to $236,869 but operating and net losses surged to $10.5 million and $10.2 million, respectively.
This financial struggle is largely attributed to the prolonged slump in the NFT market, which has severely impacted the company’s profitability. Despite a rebound in major virtual asset prices like Bitcoin since the second half of last year, NFT trading volumes have not recovered.
The NFT market experienced a boom from 2021 to the first half of 2022 as virtual asset prices soared, attracting investor interest in NFTs. Monthly NFT trading volumes, which were under $500 million in Jan. 2021, skyrocketed to $5.5 billion by Aug. 2021, an 11-fold increase in just seven months.
However, the market rapidly shrunk after the collapse of Terra-Luna and the bankruptcy of FTX, the world’s third-largest cryptocurrency exchange, in 2022, leading to a withdrawal of funds from the NFT market. Although the virtual asset market has rebounded this year due to positive developments such as the approval of a U.S. Bitcoin spot ETF, the NFT market has remained in a slump for three years.
Many predict that the prolonged downturn in the NFT market will make it difficult for Levvels to improve its performance in the short term. Additionally, BTS’s hiatus due to members’ military enlistments lowers the prospects for Levvels’ performance improvement, given BTS’s strong fan base in the U.S. market.
To address these challenges and steer the company toward a more promising future, Levvels appointed a new CEO, Kim Ki-kang, in March as part of a recent management reshuffle. Kim had worked for 17 years at CJ E&M.
An investment banking industry official commented, “Levvels should emphasize its identity as an entertainment company rather than focusing solely on the new technology of NFTs. When all BTS members resume full activities next year, there is a possibility that the company’s performance could rebound.”
