K-pop giant HYBE has recorded a larger-than-expected drop in revenue and profit for Q1, which the company attributed to the ongoing hiatus of its top boy group, BTS.
HYBE’s revenue for Q1 2024 came in at KRW 360.92 billion (USD $271.57 million at the average exchange rate for Q1), a 12.1 YoY drop, according to the company’s latest earnings report, released on Thursday (May 2).
The “artist direct-involvement” segment, which includes recorded music, concerts, ads, and appearances, saw revenues drop 7.5% YoY, to KRW 216.98 billion ($163.27 million).
The “artist indirect-involvement” segment, which includes merchandising and licensing, content and the Weverse fan platform, saw an 18.3% YoY drop, to KRW 143.94 billion ($108.31 million).
HYBE’s operating profit took a nosedive, falling to KRW 14.34 billion ($10.79 million), a 72.6% YoY drop.
Although it’s common for HYBE’s earnings to decline in the winter months of Q1, the size of this drop surprised analysts. The company’s operating profit missed the KRW 15.1 billion forecast from Yonhap Infomax, the financial data firm of Korean news agency Yonhap.
It also missed a consensus estimate of KRW 17.2 billion compiled by market tracker FnGuide, according to Korea JoongAng Daily.
Net profit dropped to KRW 2.88 billion ($2.17 million), an 87.5% YoY drop and far from FnGuide’s consensus estimate of KRW 25.4 billion.
Even the company’s industry-leading superfan monetization play – the Weverse fan platform – saw its monthly active users (MAUs) fall to 9.2 million, erasing more than a year’s worth of gains.
Average revenue per paying user (ARPPU) on the platform also showed a steep decline compared to 2022 and 2023 (see below).
Universal Music Group recently invested in Weverse, as part of an extended partnership between the company and HYBE that gave UMG distribution rights for HYBE’s music for 10 years.
The revenue and profit slump comes as all members of BTS, HYBE’s biggest act and arguably the largest K-pop group in the world, continue their mandatory military service.
HYBE said some of the drag from BTS’ absence was offset by the launch of two new K-pop acts, TWS and ILLIT.
The company said ILLIT ranked second in all-time first-week record sales for a K-pop girl group, with 380,000 copies sold. TWS recorded the all-time sixth-highest first-week sales for a debuting boy band, at 260,000 copies sold.
“This success helped mitigate some of the financial impacts from the hiatus taken by senior artists,” the company said, as quoted by the Korea Times.
“While there were fewer releases of new albums in the first quarter, the company laid the foundation for a stable performance thanks to digital music sales that generate consistent revenue. As a result, the proportion of digital music sales in HYBE’s overall music and album sales for the first quarter rose to around 50%,” HYBE added.
The company also noted that it managed to stay in the black during the quarter thanks to “improved fundamental earnings strength.”
HYBE said it expects earnings to improve in the next quarter, as a number of its biggest acts resume activities. Boy bands Seventeen, Tomorrow X Together and BoyNextDoor released EPs in April, while boy group Enhypen and girl group NewJeans have releases scheduled for May, per JoongAng Daily.
Additionally, the seven members of BTS will be wrapping up their military service in the coming months, with Jin, the first member to return, being discharged in June.
“While there were fewer releases of new albums in the first quarter, the company laid the foundation for a stable performance thanks to digital music sales that generate consistent revenue.”
HYBE
“We expect the company’s new album releases to increase by more than 30% from the previous year, thanks to the returns of existing artists and debuts of new ones,” HYBE said, as quoted by the Korea Times.
HYBE also has a US-targeted rookie group, Katseye, scheduled for a June debut.
The group was formed through a joint venture with Universal Music Group‘s Geffen, via a global competition that was televised on YouTube.
HYBE’s stock price closed down 1% following the earnings release, trading at KRW 200,000.
However, the company’s stock price had already been under pressure for some time, due to the eruption of a controversy surrounding Min Hee-jin, the CEO of HYBE sub-label ADOR.
Following an emergency audit of Min and other senior execs at ADOR last week, HYBE said it had found evidence that Min had been plotting with people inside and outside ADOR to wrest control of the label away from HYBE, along with its artist management contracts.
HYBE said it has notified the authorities of what it calls a breach of trust. In a tearful press conference last week, Min denied the allegations.Music Business Worldwide
