Credit: White House Photo / AlamyMay 31, 2022: U.S. President Joe Biden records a video message with members of the K-Pop band BTS on hate crimes against Asian Americans in the Oval Office of the White House
HYBE CEO Jiwon Park wrote to the company’s investors on Monday (October 17) with a breakdown of its business strategy in the absence of one of its key revenue earners, BTS.
On Monday, HYBE confirmed that BTS will carry out compulsory military service in their home country of South Korea, following months of speculation about whether or not the K-Pop superstars might get an exemption from the draft.
According to the official announcement, the group will reconvene in “around 2025”.
In the letter issued by HYBE’s CEO to the publicly-traded company’s shareholders, he said that Monday’s announcement “cleared the uncertainties surrounding BTS”, and, seeking to reassure investors, added that, “we have long predicted and prepared for their military service in advance”.
He noted further that the company will “continue to resolve the concerns of our shareholders by carrying out the plans that we have already prepared”.
According to Jiwon Park, some of those plans include a multi-label strategy to “ensure that a wide variety of music and content are created”.
He added that “in the short term, individual activities for several of the members are planned into the first half of 2023,” and that HYBE has “secured content in advance, which will enable BTS to continue their engagement with fans for the foreseeable future”.
On June 15, when BTS announced a break to pursue solo projects, HYBE’s shares fell by nearly 25%, wiping around $1.5 billion from its market cap value.
As HYBE’s flagship group, the K-Pop stars are a key revenue driver at the company, although the band’s share of HYBE’s revenues has been lessening in recent years.
HYBE’s CEO noted in his letter that its “average annual artist revenues excluding BTS have almost tripled from 2020 and 2022”. Back in the first half of 2020, nearly 90% of HYBE’s (then Big Hit’s) revenues were BTS-related.
The group was responsible for nearly a third of the company’s album sales (and AES streams) in the US market last year, according to HYBE’s FY 2021 results. That, of course, was the same year it acquired Scooter Braun’s Ithaca Holdings (in a billion-dollar deal), including SB Projects and Big Machine Label Group.
BTS were also the world’s biggest recorded music artist in 2021 and 2020, according to the IFPI.
Other than BTS, HYBE’s artist lineup includes the likes of SEVENTEEN, TOMORROW X TOGETHER, ENHYPEN, LE SSERAFIM, NewJeans, Zico and Fromis_9.
That artist line-up, also includes, according to HYBE, “top global artists including Justin Bieber and Ariana Grande” (following the company’s acquisition last year of Ithaca Holdings).
In addition, HYBE’s CEO told investors that the firm will also introduce “at least four new” groups in 2023.
Jiwon Park also used the letter to outline various efforts to expand HYBE’s business by leveraging new technologies.
“HYBE plans to unveil new content and services to our fans by combining our content-creation capabilities with Supertone’s AI-based speaking and singing vocal synthesis technology.”
Jiwon Park, HYBE
He confirmed HYBE’s recent acquisition of South Korea-based AI voice startup Supertone, and said that the AI company will “serve as a key piece of the technology sphere we aim to create”.
He added: “HYBE plans to unveil new content and services to our fans by combining our content-creation capabilities with Supertone’s AI-based speaking and singing vocal synthesis technology.”
As reported earlier this month, Supertone claims to be able to create “a hyper-realistic and expressive voice that [is not] distinguishable from real humans”.
The startup generated global media attention in January 2021 with its so-called Singing Voice Synthesis (SVS) technology.
The company, which was founded in 2020, used this tech to “resurrect” the voice of South Korean folk superstar Kim Kwang-seok, with the subsequent AI-generated voice debuted on Korean television show Competition of the Century: AI vs Human.
Other areas of focus for HYBE in the tech space include its fan engagement platform Weverse, with plans for new “subscription-based services that will enable fans and artists to engage in new ways”.
HYBE says that it is also planning “for international artists including artists from Japan and the U.S. to enter Weverse”.
Elsewhere, HYBE’s CEO also said that the company will outline “ambitious future business plans” for its gaming business in November.
You can read his letter to shareholders in full below:
To all HYBE shareholders,
Hello. I am Park Jiwon, CEO of HYBE.
Today we’re proud to announce that the members of BTS are currently moving forward with plans to fulfill their military service. After the phenomenal concert to support Busan’s bid for the World Expo 2030, and as each individual embarks on solo endeavors, it’s the perfect time and the members of BTS are honored to serve.
Seeing 60,000 fans from Korea and from around the world join together to support BTS, and with millions more streaming the event in real-time around the globe, 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. Group member Jin will initiate the process as soon as his schedule for his solo release is concluded at the end of October. He will then follow the enlistment procedure of the Korean government. Other members of the group plan to carry out their military service based on their own individual plans. Both the company and the members of BTS are looking forward to reconvening as a group again around 2025 following their service commitment.
When BTS was formed over ten years ago, the need for these artists to be of service to their country was very clear. They have risen to international success, broken records, and catapulted K-Pop into the global stratosphere, they’ve given something to not only their country, but to fans worldwide. HYBE is proud to nurture, guide and support talent. Building opportunities and creating value for each. With BTS we continue to lead by these principles, now more than ever, and we’re so honored to have them in the HYBE family. As a result, our company was able to achieve meteoric growth of nearly 90% in CAGR over the past five years by revenue.
We have always been aware of the eventuality of mandatory military service, and we have long been making preparations to be ready for this moment. In the short term, individual activities for several of the members are planned into the first half of 2023, and we have secured content in advance, which will enable BTS to continue their engagement with fans for the foreseeable future. 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. I will explain in more detail about our medium-and long-term plans that will enable HYBE to continue to drive towards growth.
First, let me review the achievements of our multi-label strategy and outline our future plans.
Currently, there are nine independent labels under HYBE. By giving autonomy to each label, we ensure that a wide variety of music and content are created; we look forward to their growth through mutual cooperation and, at times, even healthy competition.
As a result, HYBE in 2022 maintains an artist lineup that not only includes SEVENTEEN, TOMORROW X TOGETHER, ENHYPEN, LE SSERAFIM, NewJeans Zico and Fromis_9 but top global artists including Justin Bieber and Ariana Grande.
Thanks to these strategies, average annual artist revenues excluding BTS have almost tripled from 2020 and 2022, and we look forward to more opportunities for even greater growth now that the uncertainties placed on performances by the COVID-19 pandemic have been lifted.
Not content to rest on our achievements, HYBE will unveil at least four new teams to the world in 2023. In Japan and the United States, we will focus on impacting those markets with teams that will debut there following the K-pop process. These pioneering attempts to localize our expertise in these significant markets, when successful, will create an even larger impact in the mainstream music market.
In addition, I would like to outline our efforts to leverage new technologies to expand the existing boundaries of the entertainment business.
First, Weverse launched its live streaming service via its merger with Naver V LIVE in July. Artists and fans can now engage in real-time video communication, and the platform can stream concerts and other large-scale events. The BTS concert last weekend set records with over 49 millions of online live streaming viewing through Weverse.
We are preparing subscription-based services that will enable fans and artists to engage in new ways, with plans for international artists including artists from Japan and the U.S. to enter Weverse. You will be able to witness the results of these initiatives in 2023.
In the gaming business, “In The Seom with BTS”, which launched to great fanfare in Q2 will continue to receive new updates; our lineup will be further expanded through publishing deals. We will outline our ambitious future business plans in November.
We expect the recently-acquired Supertone to serve as a key piece of the technology sphere we aim to create. HYBE plans to unveil new content and services to our fans by combining our content-creation capabilities with Supertone’s AI-based speaking and singing vocal synthesis technology.
Through these pioneering efforts, we are getting ready through a variety of approaches to enable our fans who love our artists and music to enjoy new experiences not just online but in the virtual world as well.
As I have mentioned above,
HYBE is continuing its dynamic growth through a multi-label strategy.
HYBE will lead the innovation of our industry through technology convergence, and achieve continuous and explosive growth by expanding the boundaries of our business.
Today’s announcement cleared the uncertainties surrounding BTS as we have long predicted and prepared for their military service in advance. We will continue to resolve the concerns of our shareholders by carrying out the plans that we have already prepared.
“Change” has always served as a driving force to create better results for the past 17 years at HYBE. We have continuously grown building on that change. As always, we will not rest on our achievements. We will not compromise on mediocrity. And we will create the future of HYBE by marching forward without hesitation. Of course, Traveling on a path untrodden will inevitably lead to some trials and errors. However, HYBE is ready to leap forward with amazing plans for our next great step forward, and we are ready to put those plans into action. Please allow me to once again express my deep appreciation to our investors who have, and will continue to, cheer for HYBE along this journey.
