Investors in South Korea appeared to be unfazed by news of BTS taking a break from their career to embark on mandatory military service in their home country.
Shares of HYBE, the parent company of BTS’s management team BIGHIT MUSIC, rose 1.3% when the market opened on Tuesday (October 18) after falling 2.5% to a record low on Monday before BIGHIT officially announced that BTS members, starting with Jin, will enlist in the Korean military.
As of 10 am Seoul time on Tuesday, HYBE’s stock jumped nearly 7%.
On June 15, the company’s share price plummeted 24.9%, wiping around $1.5 billion in market cap, after HYBE announced that BTS would take some time off to pursue solo projects. Since the June announcement of BTS’s hiatus, HYBE’s share price has fallen below the 200,000 won ($140) level and has failed to recover to that level since then.
South Korean music label BIGHIT formed BTS in 2010, signing RM as the group’s first member and launching nationwide auditions to seek other members of the group. BTS made their debut in June 2013.
In response to concerns about the future of BIGHIT and HYBE now that BTS has officially taken a break, CEO Jiwon Park wrote to investors on Monday (October 17), seeking to reassure investors that the company will “continue to resolve the concerns of our shareholders by carrying out the plans that we have already prepared”.
“HYBE is confident in the structure that’s been put in place over the past 10 years with BTS and each individual member that this is the time to honor their duty to their country.”
Jiwon Park, Hybe (in a letter to shareholders)
“HYBE is confident in the structure that’s been put in place over the past 10 years with BTS and each individual member that this is the time to honor their duty to their country,” Park said.
As noted by Jiwon Park in his letter to shareholders, BTS helped HYBE achieve nearly 90% in compound annual growth rate in revenue over the past five years.
In Q2 2022, HYBE’s revenue surged 83.8% year over year, owing to increased album sales by the group’s artists such as BTS and SEVENTEEN.
“In the longer term, HYBE is perfecting its multi-label structure that can continue to create music and establish artists that can resonate with our fans.”
Jiwon Park, Hybe
Park, in his letter to investors, assured that HYBE still has other revenue and growth drivers despite the absence of BTS.
“In the longer term, HYBE is perfecting its multi-label structure that can continue to create music and establish artists that can resonate with our fans. We are forging ahead with new projects such as platforms and games that can leverage new technologies bringing experiences to fans which, to date, have yet to be realized in the entertainment industry,” Park said.
Park noted that HYBE has nine independent labels and has a wide roster of artists that includes SEVENTEEN, TOMORROW X TOGETHER, ENHYPEN, LE SSERAFIM, NewJeans, Zico and Fromis_9, as well as global artists including Justin Bieber and Ariana Grande following the company’s acquisition of Ithaca Holdings last year.
HYBE has more plans in the pipeline including setting up at least four new markets in 2023 including Japan and the US, where the company plans to focus on fostering artists the same way that K-pop artists are created.
The appetite for HYBE’s stock on Tuesday despite news of the BTS break underscores how investors remain bullish on the company.
The bullish appetite comes despite reports suggesting that South Korea could lose billions from BTS’s absence.
Forbes estimated that BTS had a net worth of $50 million by 2020, while Hyundai Research Institute suggested that BTS contributes about $3.6 billion to the South Korean economy each year.
In 2018, 800,000 tourists are estimated to have visited South Korea because of BTS, accounting for over 7% of foreign visitors that year.
Hyundai Research also estimated that BTS’s contribution to the South Korean economy from 2014 to 2023 could reach $29.1 trillion.
Music Business Worldwide