The music industry can’t get enough of the concept of the “superfan.”
The idea that a particularly dedicated portion of the music-listening public might be tempted to pay more for a deeper digital subscription (versus a ‘standard’ streaming sub) has been a key talking point for Universal Music Group‘s management this year, including UMG CEO/Chairman, Sir Lucian Grainge.
Meanwhile, Goldman Sachs recently modelled a scenario where – assuming 20% of streaming subscribers are superfans of at least one act, and are willing to pay double the current standard amount for a subscription – extra income from superfans could generate an additional $4 billion per year for the record business by 2030.
Is K-pop giant HYBE – the company behind BTS and SEVENTEEN – already ahead of the curve on this matter?
HYBE’s Weverse fandom platform, which it launched in 2019, grew to 9.5 million monthly active users (MAUs) in Q2 2023 (the three months to end of June), per the company’s latest earnings report, released Tuesday (August 8).
That’s a jump of more than 58% compared to the 6 million MAUs the platform had in the same quarter a year earlier.
HYBE has further confirmed that MAUs of Weverse then exceeded 10 million in July 2023, and that the app has over 100 million downloads to date.
Weverse brings together artist-related content such as music videos, teasers, movies and live streams. It also has a merch platform known as Weverse Shop.
Despite an acrimonious and failed attempt by HYBE to acquire a 40% stake in rival K-pop label SM Entertainment earlier this year, the two companies announced during Q2 that SM’s K-pop artists – such as EXO, Girls Generation and Red Velvet – will be moving onto the Weverse platform starting in September of this year.
That move will reportedly spell the end of SM Entertainment’s own rival/proprietary fan app.
SM Entertainment artists will join HYBE acts on the platform including BTs, NewJeans, and Seventeen, plus YG Entertainment acts BLACKPINK and Treasure.
In the second quarter, Weverse launched a number of new features for fans on its platform including:
- A payment method called Jelly, introduced in April, which enables users to purchase ‘premium VODs [video-on-demands]’ on the platform;
- Weverse DM, also introduced in April. A private messenging service, it enables fans to send and receive private messages to/from artists that they subscribe to on Weverse;
- Fan Letter, introduced in June, which enables fans to write and send “heartfelt letters” – i.e. digitally decorated messages – to their favorite artists.
According to Korea JoongAng Daily, HYBE is planning to launch a subscription-based paid membership service for Weverse by next year.
In other words, HYBE is moving quickly to accelerate the monetization of its artists’ superfans.
Even before the big push to monetize Weverse fans has begun, the platform has been seeing strong earnings growth, with HYBE’s “fan club” earnings, which include Weverse, growing by 29.4% YoY in Q2, to KRW 21.82 billion (USD $16.5 million).
Overall, across all of its business units, HYBE clocked revenues of KRW 620.99 billion ($470 million) in Q2 2023, up 21.2% YoY.
Net profit for all of H1 2023 (the six months to end of June) exceeded KRW 1 trillion ($757 million) for the first time, the company said.
Net profit jumped 18.7% YoY in Q2, to KRW 117.4 billion ($89 million), while operating profit fell 7.9% YoY to KRW 81.3 billion ($61.6 million).
This dip in operating profit was due to one-time expenses incurred by BTS’s 10-year anniversary event, Festa, according to company execs on the earnings call.
“BTS’s 10-year Festa was necessary as it is the group which made HYBE the company it is today, and [was also necessary] for ARMY [BTS fans],” HYBE CEO Park Ji-won said during the call Tuesday, as quoted by JoongAng Daily.
“We generously spent on the events’ technology and stages to fully immerse fans in the Festa experience.”
HYBE’s adjusted EBITDA fell by 1.2% YoY in the Q2 2023 quarter, to KRW 106.37 billion ($80.5 million).
“BTS’s 10-year Festa was necessary as it is the group which made HYBE the company it is today, and [was also necessary] for ARMY [BTS fans]. We generously spent on the events’ technology and stages to fully immerse fans in the Festa experience.”
Park Ji-won, HYBE
HYBE divides its revenue into two segments: “Artist Direct Involvement,” which includes digital and physical album sales, concerts, ads, appearances and management revenue; and “Artist Indirect Involvement,” which includes merchandising and licensing, content and Weverse.
Revenue from Artist Direct Involvement jumped by 33.9% YoY in Q2, thanks in large part to the reopening of concert venues following the wind-down of pandemic restrictions. It came in at KRW 436.45 billion ($330.5 million).
Revenue from Artist Indirect Involvement came in at KRW 184.5 billion ($139.7 million), down 1.0% YoY.
For the first half of 2023, digital and physical album sales came in at 22.7 million, already surpassing the 22.2 million sold in all of 2022, HYBE said in its earnings statement.
The labels’ biggest-selling artists in H1 were SEVENTEEN (8.87 million albums) and TOMORROW X TOGETHER (3.54 million).
BTS, HYBE’s traditional biggest sellers, were on hiatus during the quarter due to some members of the band fulfilling their mandatory military service.
The lack of new material and performances from BTS was a source of concern for some investors and analysts who wondered what the impact would be to HYBE’s revenue; the latest earnings numbers are likely to put those concerns to rest.
“The line which defines what is K-pop and what is not is merging… The concept of the K-pop genre in the global industry is ever-changing and infiltrating other music genres and in turn, I believe HYBE will not be merely defined as a K-pop agency in the future… We are open to acquiring new labels that will help HYBE expand its entertainment business.”
Lee Kyung-jun, HYBE
According to JoongAng Daily, the launch of a North America-targeted girl group from HYBE is “imminent.”
The group will be co-produced by HYBE and Universal Music Group’s Geffen Records. The two entered into a partnership to launch a group back in 2021.
The identities of the girl band’s members will be revealed in Q3, the company reportedly said on the earnings call.
The latest HYBE earnings report is the first to reflect revenue from QC Media Holdings, aka Quality Control, the Atlanta-headquartered hip-hop label that HYBE acquired in Q1 for around USD $300 million as part of its efforts to expand into global markets beyond K-pop.
The earnings report didn’t break down numbers for QC Holdings separately, but HYBE’s concert revenue is expected to get a boost in Q3 from QC-signed rapper Lil Baby’s North American tour, which launched in July.
“The line which defines what is K-pop and what is not is merging,” HYBE CFO Lee Kyung-jun said on the earnings call.
“The concept of the K-pop genre in the global industry is ever-changing and infiltrating other music genres and in turn, I believe HYBE will not be merely defined as a K-pop agency in the future.
“So yes, we are open to acquiring new labels that will help HYBE expand its entertainment business.”Music Business Worldwide