Despite record revenue in 2023, a slump in physical sales (especially CDs) and stagnant streaming growth threaten their dominance. BTS’ hiatus is a factor, but inflation, reliance on China’s market, and internal conflicts add to the woes. The industry needs to adapt to streaming and cultivate new markets to stay relevant. Read to find out more.
BeatCurry Team
Despite its outward success, K-pop’s financial performance tells a more nuanced story. In 2023, South Korean pop music experienced a banner year, with the four largest agencies raking in a combined $1.3 billion in album sales and streaming revenue, marking a record high according to Citigroup estimates. However, this financial triumph is overshadowed by a significant decline in market value. Companies like Hybe (352820.KS) and SM Entertainment (041510.KQ) have seen their market value plummet by a total of 8.6 trillion won ($6.2 billion) since their peak last June.
The most obvious explanation for the industry’s struggles seems to be the extended absence of BTS, the global powerhouse of K-Pop. Currently fulfilling their mandatory military service, the group’s hiatus coincides with another factor contributing to the slumping stock prices: a sharp decline in compact disc sales that began in the middle of last year.
While the rest of the world might yawn at the decline of a clunky, low-quality format like CDs, South Korea clings to them with surprising fervor. Take JYP Entertainment, for example – a whopping 80% of their music sales in 2023 came from physical media, according to HSBC. Why? Because K-Pop fans see buying the latest CD as a crucial act of devotion, a way to inflate their favorite group’s all-important first-week sales – the ultimate measure of success in this industry.
Compounding the industry’s woes is a sharp decline in album exports to China. Shipments vanished last June according to Korean customs data, and haven’t shown significant signs of recovery. While BTS’ absence might seem like the sole culprit, their label, Hybe, isn’t sitting idle. Solo projects from band members are planned for release during and after their hiatus. However, analysts at HSBC believe the main culprit behind the slump is inflation. As fans tighten their belts, the physical sales decline that began in the latter half of 2023 is expected to linger until the end of this year.
Meanwhile, Hybe faces internal discord beyond the BTS hiatus. Their star rookie girl group, NewJeans, is entangled in an ownership dispute with its sub-label, Ador. While a BTS reunion next year might offer a temporary boost, it’s not a cure-all. The industry needs a multi-pronged approach: fully embracing music streaming, finding ways to maintain consistent release schedules despite mandatory military service, and aggressively cultivating new markets like the US and Japan. Only through these efforts can K-Pop truly become bulletproof.
All information sourced from various sources purely for factual reporting purpose only.
Image courtesy: Unsplash
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