If K-pop is “in crisis,” as HYBE founder/chairman Bang Si-hyuk declared in March, it didn’t show in his company’s first quarter financial results released Tuesday (May 2). A nearly three-fold bump in album sales drove earnings for the South Korean music company in the first three months of the year, as it continued to demonstrate it can flourish without the BTS group activities that previously dominated its balance sheet.
HYBE recorded revenue of 410.64 billion won ($306.2 million), a jump of 44.1% from the previous year’s first quarter, with adjusted EBITDA (earnings before interest, taxes and depreciation) edging up 12.5% to 72.08 billion won ($53.8 million).
Company executives pointed to the combined strength of Tomorrow X Together’s The Name Chapter: Temptation, which sold 3.14 million copies in the quarter and reached No. 1 on the Billboard 200; and Seventeen’s FML, which sold 4.55 million copies in its first week (which the CEO called “an unprecedented record in K-pop history”), for generating overall album revenue of 184.29 billion won ($137.5 million) — or 45% of HYBE’s total for the quarter. Solo albums from BTS members Jimin (FACE, which sold 1.45 million units on its first day and reached No. 2 on the Billboard 200) and Suga’s D-Day also helped underpin the total.
Overall, HYBE recorded 234.49 billion won ($174.9 million) in artist-direct involvement revenue, up 53.9% year over year. Album sales helped offset a 58.8% drop in concert revenue to 25.23 billion won ($18.8 million), a dropoff that HYBE executives did not address in their earnings call.
In his March remarks, Bang warned that the K-pop company may only have a brief window in which to capitalize on its global success — and that K-pop as an industry could only grow “by targeting both domestic and international markets.”
Kyung-Jun Lee, HYBE’s CFO, said Tuesday that “2023 will prove to be a year when the strength of our multi-label strategy will translate into physical outcomes,” noting that more BTS members are planning solo projects, while Seventeen, Tomorrow X Together and Enhypen are all scheduled to launch world tours.
HYBE is also debuting a new boy band, BoyNextDoor, on May 30, which CEO Ji-Won Park said would feature “honest music about everyday life that peers in their age group will be able to relate to.” Park said that the company would announce more news about its U.S. girl group project being jointly developed by HYBE America and Universal Music Group, and “provide more directionality on HYBE America,” in its second-quarter earnings call.
The surge in album sales also positively impacted the Korean music company’s artists-indirect involvement category, which rose by 32.8% to 176.14 billion won ($131.4 million). HYBE said that the film BTS: Yet To Come in Cinemas, which chronicles the group’s October concert in Busan, South Korea, has performed well in theaters around the world since being released in February. Nonetheless, revenue in the company’s merchandising and licensing category fell slightly by 0.9% to 68.92 billion won ($51.4 million) for the quarter.
The Korean music company continued to tout the growth of its artists-to-fans engagement platform, Weverse, which debuted in 2019. Monthly average users (MAUs) rose by 46% to 9.36 million year-on-year, and the average time spent on Weverse has increased over the last three quarters. One analyst noted, however, that the average revenue per paying user (ARPPU), had fallen in the first quarter compared to the same period in 2022. In response, said Lee, “We looked at 2023 as a year where we really initiated more aggressive global expansion and launched a diverse new lineup of services and actually stabilized the services as part of our platform.”
Those new services include Weverse DM, a subscription private chat-with-artists service that launched on Tuesday; digital currency Weverse Jelly, launched in March; and Weverse by Fans, a service for fan-designed merchandise due to debut in June. Idol group AKB48 and other Japanese artists have been joining the platform, and some North American artists are expected to come on board in the second half of the year.
The platform’s Weverse Live, which has video-streamed everything from artists’ birthdays to large-scale festivals and concerts like BTS’ Busan show, is also growing rapidly. It recorded 460 million views in the first quarter — almost a three-fold increase from 160 million views in the third quarter of last year when HYBE launched the livestreaming service.
With all the new initiatives, Lee addressed investor concerns that the company’s continued spending on new artists and new businesses may potentially weaken its earnings fundamentals. “I am aware that there are concerns that in the absence of BTS as a group whether we will be able to manage the cost pressure amid declining revenue,” he said. But HYBE’s operating margin of 12.8% in the quarter, he noted, nearly equaled its 13% operating margin from a year ago, which he attributed to “the combined result of our multi-label production system, leveraging a diverse pipeline of artists, coupled with efficient application of our in-house solutions.”
Looking forward, Lee promised a continued push by the company to diversify its artist roster and geographical reach. “Although we are mostly focused on K-pop artists at the moment, three to five years from now, as we start expanding into the global markets, including the U.S., Europe and Japan, we will definitely have established greater balance in terms of our geographical coverage,” he said.
