HYBE hits record revenue of $465 million in Q2 despite BTS break

HYBE posted all-time high of 640.5 billion won in revenue for the second quarter, but expenditures resulted in a 37.4 percent plunge in operating profit.

Seventeen's ″'Follow Again' in Seoul″ encore concert held at the Seoul World Cup Stadium in Mapo District, western Seoul on Saturday [PLEDIS ENTERTAINMENt]

HYBE posted an all-time high for revenue of 640.5 billion won ($465 million) for the second quarter, owing primarily to robust sales generated by its artists including NewJeans and Seventeen.

Despite the record, however, operating profit plunged by 37.4 percent to 50.9 billion won from over a year ago as the company incurred significant expenditures for new businesses and marketing to promote rookie groups.

Artist direct-involvement revenue, which includes album sales, concert revenues and advertisement earnings, accounted for 66 percent of the total revenue at 423.9 billion won, while artist indirect-involvement revenue, including merchandise, content and fan club sales, came to 216.6 billion won.

“Given the declining album sales trend in Korea […] and the absence of BTS group activities due to military service, the result shows the growth of other HYBE artists,” said Lee Jae-sang, the agency's newly appointed CEO.

The company highlighted solo album releases by BTS members along with the success of NewJeans, Seventeen and other HYBE artists.

Girl group NewJeans performs its songs during the quintet's first meet and greet in Japan, the ″Bunnies Camp 2024 Tokyo Dome,″ which took place on June 26 and 27 at the Tokyo Dome, Japan. [ADOR]

"Despite [NewJeans' 'How Sweet' and 'Supernatural'] released back-to-back, the albums have both sold 1 million copies so far," the CEO said, talking about the girl group's success in the first half of 2024. NewJeans dropped the Korean album "How Sweet" in May followed by the Japanese debut single "Supernatural" in June.

HYBE also explained that the girl group's recent fan meeting at the Tokyo Dome — which brought a total of 90,000 fans to the venue — was a contributing factor in the revenue.

Seventeen, which celebrated its 10-year anniversary this year, became the top-selling K-pop artist for albums in the first half of 2024, contributing to the high album sales of HYBE artists.

The agency’s total revenue, however, is lower than the market consensus of 683 billion won compiled by market tracker FnGuide.

“The artists [of HYBE] are yet to reach a size that provides us the economies of scale, resulting in a slight decrease in profitability,” HYBE’s chief financial officer, Lee Kyung-jun, said, explaining the reason behind the decline in operating profit.

“Looking at the planned schedules of our artists in the second half of this year, we expect revenue to grow and improve profitability at the same time.”

HYBE also pointed out that its new tech-based ventures and business costs affected the operating profit.

“The early marketing costs of the HYBE-published game Knights of Veda, which launched on April 2, were all included in the second-quarter costs,” the CFO said.

The launch and the early operating costs of Theus, a creator fandom platform HYBE co-developed with Sandbox Network, alongside Supertone Shift, real-time voice changing technology, also affected the numbers.

“We expect an improvement in earnings following the launch of Weverse’s new subscription service later this year and BTS’s full seven-member comeback in 2025 on top of our new businesses that will contribute more to the bottom line.”

HYBE first announced Weverse’s new subscription service on Aug. 1, which will “work alongside” existing fan club memberships. The upcoming service will give each artist the option to divide the tiers into “multiple classes” to offer different perks, which may include an ad-free experience on Weverse, offline video playback, exclusive content and early access to fan events. HYBE also left open the possibility of a private messaging service, Weverse DM, as a feature of the new subscription service.

The company also announced plans for an upcoming solo album from BTS's Jin, slated for release in 2024, in a separate press release on Wednesday.

The management agency's shares closed at 181,500 won on Wednesday, a 5.89 percent increase from the previous day.

SM Entertainment, meanwhile, reported a 30.7 percent year-on-year decrease in operating profit at 24.7 billion won, with 253.9 billion won in sales, an increase of 5.9 percent on year.

The company cited the increased sales of newly released albums from the likes of aespa, Riize and NCT wish on top of higher concert and merchandise sales. SM will debut a new girl group before the end of this year, produced by Prism Production, followed by a boy band debut in 2025.

BY CHO YONG-JUN, YONHAP [cho.yongjun1@joongang.co.kr]