Massive Hit IPO: BTS made its music label an enormous success. However enterprise is dangerous

Massive Hit IPO: BTS made its music label an enormous success. However enterprise is dangerous

However Massive Hit Leisure’s excessive reliance on BTS might transform simply as a lot a legal responsibility as it’s an asset.

The corporate raised almost 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, effectively above the IPO value of 135,000 received ($118) every. They have been final buying and selling at 301,000 received ($263).

Earlier than buying and selling started, Massive Hit was price 4.8 trillion received ($4.1 billion), making it extra worthwhile than the nation’s three largest listed document labels mixed. And that is virtually totally due to the meteoric rise of BTS. The group accounted for 97% of Massive Hit’s gross sales final yr.

Whereas BTS has damaged out in a means that no different South Korean act has earlier than, there are some obvious dangers.

Counting on the inventive 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 Massive Hit’s rise

Earlier than their rise, South Korea’s music trade was dominated by three music labels — JYP Leisure, SM Leisure and YG Leisure — that turned out Okay-pop’s largest acts, together with Women’ Technology, SHINee, GOT7, Massive Bang and PSY.

However BTS, an acronym for Past the Scene, was created by the a lot smaller Massive Hit. The label was based in 2005 by producer Bang Si-hyuk, also referred to as “Hitman” Bang.

Within the seven years since their debut, BTS has damaged data and grow to be an unstoppable power within the trade. They’ve bought extra bodily albums in america this yr than Harry Types, Billie Eilish or Justin Bieber, and have been the primary group from South Korea to promote out US arenas and win a Billboard Music Award.
And their race to the highest of the Billboard Sizzling 100 charts — they have been the primary all-South Korean act to take action — helped contribute an estimated 1.7 trillion received ($1.5 billion) to the South Korean financial system by boosting tourism and rising demand for South Korean merchandise corresponding to cosmetics and meals, in response to the Ministry of Tradition and Korea Tourism Analysis Institute.

The group’s success has remodeled Massive Hit’s fortunes. Final yr, Massive Hit reported 587 billion received ($512 million) in gross sales — almost double the earlier yr’s whole.

Nevertheless it additionally highlights the necessity for Massive Hit to diversify.

“Ninety p.c of Massive Hit Leisure’s income is from BTS, so the danger is there,” mentioned Park Ju-gun, a enterprise analyst from company evaluation agency CEO Rating. “Nevertheless 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 might carry extra acts into the fold and debuted the boyband TXT, or Tomorrow X Collectively. Massive 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.

How a boy band from South Korea became the biggest in the world

The modifications have not been revolutionary. BTS nonetheless made up almost 88% of gross sales by means of the primary half of this yr, in response to the corporate’s IPO prospectus revealed in September. And there isn’t any 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’ stage of recognition,” mentioned Indiana College Bloomington professor and Okay-pop professional CedarBough Saeji.

Imminent army service and different dangers

BTS, in the meantime, could quickly face an enormous disruption: obligatory army service.

In South Korea, virtually all wholesome males are required to register for the military and serve 18 months. Folks can delay their service for causes together with larger training 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 identify is Min Yoon-gi, turns 28 in March.

Massive Hit has acknowledged that army obligation is a threat for traders. However the firm additionally steered that the band nonetheless has a while: Massive Hit instructed CNN Enterprise that Jin has enrolled in a graduate college program. That might permit him to delay his service till simply earlier than his twenty ninth birthday in 2021, in response to South Korean regulation.

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. Not like different artists, classical musicians and sports activities gamers, high Okay-pop stars cannot obtain exemptions from full army service.

Why the past decade saw the rise and rise of East Asian pop culture

“The worth of their contribution to Korea Wave and our nation can’t be fathomed,” Noh Woong-rae, a lawmaker from the ruling Democratic Social gathering mentioned at a Nationwide Meeting assembly earlier this month. “Now’s the time we should talk about how these proud younger males might higher serve our nation.” The nation’s parliament is contemplating a invoice that may permit Okay-pop teams to delay army service for 2 years past the present deadline.

The foundations as written, although, might disrupt the group for years.

That doubtless means extra solo initiatives — 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 initiatives, combine tapes and tv appearances.

Korean Okay-pop followers are used to their idols disappearing for army service, however this might be uncharted territory for worldwide followers who have been launched to the style by means of BTS. Saeji, the Indiana College professor, mentioned that might imply an “uncomfortable transition interval,” though she was optimistic that followers would keep loyal to BTS by means of their absence.

Massive Hit additionally famous the group’s status as a possible threat in its submitting.

Different labels have struggled with scandal. Final yr, YG Leisure’s inventory plunged after a member of certainly one of its acts, Massive Bang, was investigated for a variety of allegations, together with allegedly violating South Korea’s prostitution regulation. The member, Seungri, stop the trade and was indicted on prostitution and routine playing expenses in January this yr. Seungri claims he’s harmless apart from one violation of overseas foreign money buying and selling regulation, in response to his former lawyer Son Byoung-ho.

“There are issues that may occur which may deeply harm an organization, and we noticed that with YG Leisure,” mentioned 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.”

The members themselves even have an incentive to keep away from doing something to jeopardize the group. They every acquired shares of Massive Hit in August that at the moment are price hundreds of thousands of {dollars} due to the IPO.

“The easiest way to protect the shares could be to maintain working and keep as a seven-member group,” Saeji mentioned.

What does the longer term maintain?

Regardless of the dangers, Massive Hit has plenty of cause to be pleased with its superstars.

Though the coronavirus pandemic compelled BTS to cancel a world tour this yr, the group appears to have managed to grow to be much more widespread.

In June, the band dwell streamed a live performance referred to as Bang Bang Con which drew greater than 750,000 followers from around the globe. The occasion nabbed them a brand new Guinness World File title for many viewers of a dwell streamed music live performance.

“What they’re providing when it comes to positivity has been so completely attuned to the second that we’re dwelling in,” Saeji mentioned.

The continued reputation of BTS has salvaged Massive Hit’s backside line in the course of the pandemic. Live performance income plunged almost 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 very valued now within the midst of a pandemic, will probably be a chance to achieve much more momentum subsequent yr post-pandemic,” mentioned Park, the CEO Rating analyst.

— Joh Yunji, Yoonjung Search engine marketing and Gawon Bae contributed reporting from Seoul.

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