Korea’s music industry has more than a BTS problem

JYP Entertainment

31/05/2024 12:00

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
    By Hudson Lockett
       HONG KONG, May 31 (Reuters Breakingviews) - K-pop may
seem to be belting out winning financial tunes, judging purely
by some key headline numbers. South Korean pop had a banner year
in 2023, with its four largest agencies recording aggregate
album sales and streaming revenues of $1.3 billion, per an
estimate from Citigroup, a record high. But those same
companies, including Hybe  352820.KS  and SM Entertainment
 041510.KQ , have shed a collective 8.6 trillion won ($6.2
billion) in market value since a peak last June. 
    The most obvious cause would appear to be the long absence
from stage and recording studio of BTS, the global face of
K-pop, whose members are currently on mandatory military service
for at least 18 months. Their hiatus corresponds with another
reason for the share price slump: sales of compact discs started
to fall mid-year.
    For most of the world, the fate of an obsolete, low-fidelity
format might prompt a collective shrug. But in South Korea,
they're huge: last year 80% of recorded music sales at label JYP
Entertainment  035900.KQ , for example, came from physical
media, per HSBC. That's because K-pop fans rush to buy the
latest CD from their favourite idol group to boost first-week
sales, the main metric of a band’s success. 
    On top of that, there has been an unwelcome drop-off in
album exports to China. Shipments evaporated in June last year
and have yet to fully recover, Korean customs figures show.
    BTS is not the only cause, though - their label, industry
leader Hybe, had members of the band record solo work to be
released during and after their absence. Analysts at HSBC argue
the main drag is from inflation, which has forced fans to cut
back and is likely to mean the contraction in physical sales in
the second half of last year will last to the end of 2024.  
    Hybe, meanwhile, is hitting some wrong notes elsewhere. Its
breakout girl group, NewJeans, is at the centre of an ownership
row between the company and its sub-label, Ador.
    BTS's reunion next year won't fix these issues. That will
require embracing music streaming more, smoothing out release
schedules disrupted by conscription, and further cultivating
overseas markets like the U.S. and Japan. Only then can the
industry make itself more bulletproof.
    Follow @KangHexin on X
    
    CONTEXT NEWS
Shares in South Korean entertainment firms HYBE, JYP
Entertainment, SM Entertainment and YG Entertainment have
dropped between 19% and 55% since June 2023 amid a slump in
sales of compact discs.
    HYBE, which is home to global K-pop sensation BTS, has
dropped more than 8% since a battle over control of sub-label
Ador spilled out into the open on April 22.

($1 = 1,381.2700 won)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic: K-pop stocks slump as CD sales drop    https://reut.rs/3yIEIBb
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Antony Currie and Aditya Sriwatsav)
 ((For previous columns by the author, Reuters customers can
click on  LOCKETT/  
hudson.lockett@thomsonreuters.com; Reuters Messaging:
hudson.lockett.thomsonreuters.com@reuters.net))