However Huge Hit Leisure’s excessive reliance on BTS may grow to be simply as a lot a legal responsibility as it’s an asset.
The corporate raised practically 963 billion received ($840 million) by promoting shares in its preliminary public providing, making it South Korea’s largest IPO since July 2017, in response to knowledge compiled by Dealogic.
Early reception was very optimistic: Shares opened Thursday at 270,000 received ($236) every, properly above the IPO worth of 135,000 received ($118) every. They have been final buying and selling at 301,000 received ($263).
Earlier than buying and selling started, Huge Hit was value 4.Eight trillion received ($4.1 billion), making it extra priceless than the nation’s three largest listed file labels mixed. And that is nearly completely because of the meteoric rise of BTS. The group accounted for 97% of Huge Hit’s gross sales final yr.
Whereas BTS has damaged out in a method that no different South Korean act has earlier than, there are some obtrusive dangers.
Counting on the artistic output of any movie star expertise comes with a variety of potential issues, from scandal to unexpected tragedy. However BTS has a singular complication that might threaten the enterprise: South Korea mandates greater than a yr of army service, and the group’s members are quick approaching the deadline to enlist.
The group that fueled Huge Hit’s rise
Earlier than their rise, South Korea’s music business was dominated by three music labels — JYP Leisure, SM Leisure and YG Leisure — that turned out Okay-pop’s largest acts, together with Women’ Era, SHINee, GOT7, Huge Bang and PSY.
However BTS, an acronym for Past the Scene, was created by the a lot smaller Huge Hit. The label was based in 2005 by producer Bang Si-hyuk, also referred to as “Hitman” Bang.
The group’s success has reworked Huge Hit’s fortunes. Final yr, Huge Hit reported 587 billion received ($512 million) in gross sales — practically double the earlier yr’s whole.
However it additionally highlights the necessity for Huge Hit to diversify.
“Ninety p.c of Huge Hit Leisure’s income is from BTS, so the danger is there,” stated Park Ju-gun, a enterprise analyst from company evaluation agency CEO Rating. “However it has began to shift its income construction to a multifaceted portfolio.”
Over the previous yr or so, the corporate has acquired different music labels so it may deliver extra acts into the fold and debuted the boyband TXT, or Tomorrow X Collectively. Huge Hit additionally launched a platform referred to as Weverse the place followers can see unique content material and message their favourite artists — a service that units the corporate aside from the opposite main labels, in response to Ji In-hae, an analyst from Hanwha securities agency.
The adjustments have not been revolutionary. BTS nonetheless made up practically 88% of gross sales via the primary half of this yr, in response to the corporate’s IPO prospectus revealed in September. And there is no assure that new teams will repeat the success of BTS.
“We do not know if there’ll ever be one other group that may obtain BTS’ degree of recognition,” stated Indiana College Bloomington professor and Okay-pop professional CedarBough Saeji.
Imminent army service and different dangers
BTS, in the meantime, might quickly face a large disruption: obligatory army service.
In South Korea, nearly all wholesome males are required to register for the military and serve 18 months. Individuals can delay their service for causes together with greater schooling or particular coaching till they’re 28 years previous.
BTS’ oldest member, Kim Seok-jin — also referred to as Jin — turns 28 in December, whereas rapper Suga whose actual title is Min Yoon-gi, turns 28 in March.
Huge Hit has acknowledged that army obligation is a threat for traders. However the firm additionally instructed that the band nonetheless has a while: Huge Hit informed CNN Enterprise that Jin has enrolled in a graduate faculty program. That might enable him to delay his service till simply earlier than his 29th birthday in 2021, in response to South Korean legislation.
Whether or not BTS and different pop teams ought to should serve their whole time period has grow to be a subject of nationwide debate. In contrast to different artists, classical musicians and sports activities gamers, high Okay-pop stars cannot obtain exemptions from full army service.
“The worth of their contribution to Korea Wave and our nation can’t be fathomed,” Noh Woong-rae, a lawmaker from the ruling Democratic Occasion stated at a Nationwide Meeting assembly earlier this month. “Now could be the time we should talk about how these proud younger males may higher serve our nation.” The nation’s parliament is contemplating a invoice that will enable Okay-pop teams to delay army service for 2 years past the present deadline.
The foundations as written, although, may disrupt the group for years.
That doubtless means extra solo tasks — although the group tends to do higher as a unit.
BTS is extremely prolific, releasing eight studio albums in seven years together with elaborate music movies, candid vlogs, behind-the-scenes movies, mini-series, solo tasks, combine tapes and tv appearances.
Korean Okay-pop followers are used to their idols disappearing for army service, however this will probably be uncharted territory for worldwide followers who have been launched to the style via BTS. Saeji, the Indiana College professor, stated that might imply an “uncomfortable transition interval,” though she was optimistic that followers would keep loyal to BTS via their absence.
Huge Hit additionally famous the group’s fame as a possible threat in its submitting.
“There are issues that may occur which may deeply harm an organization, and we noticed that with YG Leisure,” stated Saeji.
“Nobody ought to be investing within the creativity of artists and their reference to followers with out understanding that there are issues that may occur,” Saeji added. “This isn’t a get wealthy scheme.”
“One of the best ways to protect the shares can be to maintain working and keep as a seven-member group,” Saeji stated.
What does the long run maintain?
Regardless of the dangers, Huge Hit has a whole lot of cause to be pleased with its superstars.
Despite the fact that the coronavirus pandemic compelled BTS to cancel a world tour this yr, the group appears to have managed to grow to be much more fashionable.
“What they’re providing by way of positivity has been so completely attuned to the second that we’re dwelling in,” Saeji stated.
The continued recognition of BTS has salvaged Huge Hit’s backside line throughout the pandemic. Live performance income plunged practically 99% within the first half of 2020 in comparison with the identical time a yr in the past. However album gross sales shot up 80%. General income fell simply 8% in comparison with final yr.
“If the corporate is extremely valued now within the midst of a pandemic, will probably be a chance to realize much more momentum subsequent yr post-pandemic,” stated Park, the CEO Rating analyst.
— Joh Yunji, Yoonjung Search engine optimization and Gawon Bae contributed reporting from Seoul.
