K-pop industry prepares for comeback after $8B equity dip: Report
The K-pop industry is preparing for a revival following a significant $8B equity dip, primarily attributed to declining album sales. Major South Korean industry players such as HYBE, SM Entertainment, JYP Entertainment, and YG Entertainment have seen nearly a 50% drop in shares since their peak in 2023. These companies are now refocusing on new talent, distribution partnerships, and enhancing their presence on streaming platforms to bounce back financially.
Innovative strategies to counter declining album sales
The hiatus of BTS (due to mandatory military enlistment), coupled with reduced album sales in China, has prompted K-pop agencies to develop innovative growth strategies. Market experts from Goldman Sachs and HSBC Holdings expressed optimism about these strategies, which involve engaging fans through concerts and expanding into the US and Japanese markets. "Current concerns about the K-pop outlook do appear excessive," said HSBC analyst Kim Jun-hyun, emphasizing the potential for "other ways to monetize K-pop," reported CNBC.
Decline in physical album sales challenges K-pop industry
Despite the dominance of digital streaming in today's music scene, K-pop agencies have traditionally depended on physical album sales, often bundled with exclusive merchandise. However, a slump in album sales towards the end of 2023 resulted in HYBE witnessing its slowest quarterly growth for the three months ending December. Yuanta Securities predicts a 5.3% year-on-year decrease in album sales in 2024 by the four major K-pop agencies to 82.7M copies.
HYBE leads strategic shift with Universal Music partnership
HBYE—the label behind popular groups like BTS and SEVENTEEN—is leading the industry's strategic shift by partnering with Universal Music Group for distribution, thereby expanding its digital and geographical reach. This move, along with its presence on global streaming platforms, enabled ILLIT, a girl group under HYBE's management, to make waves by recording the highest first-week streams for a K-pop debut album on Spotify.
New talent spotlighted to offset downturn in China
Meanwhile, other labels are also highlighting new talents to counteract the downturn in China. SM is expected to see a surge in earnings growth due to the rising popularity of its boy band Riize, while JYP is maintaining its revenue base through busy schedules for key artists like Stray Kids and TWICE, according to Morgan Stanley. Fans are also eagerly awaiting the return of YGE's globe-trotting girl group BLACKPINK.
Offline concert audiences: A new metric for K-pop growth
With the easing of COVID-19-related restrictions, Goldman Sachs analysts reportedly suggest that offline concert audiences should be a more significant metric for measuring K-pop's growth compared to physical album sales. They predict a 26% annual expansion of K-pop's fan base over three years, with audience growth in Japan being a significant driver. This shift in focus toward live performances could potentially redefine success metrics within the industry.
