June 15, 2022, was a pivotal day for BTS and their record company HYBE.
It was the day that HYBE confirmed that its flagship act and then-biggest earner would be taking a break from music until 2025, due to compulsory military service in their home country of South Korea.
The shock announcement rattled investors, and the company’s shares fell by around 25% that day, wiping around $1.5 billion from HYBE’s market cap value in the process.
BTS weren’t only HYBE’s top revenue generator at the time. According to IFPI, they were also the world’s biggest recorded music artists in 2021 and 2020.
HYBE is evidently still feeling the ripple effect of BTS’s absence.
The K-pop giant posted its FY 2024 financial results today (February 25), reporting that it generated a record $1.65 billion in annual revenues last year. However, operating profit dropped 37.5% YoY to KRW 184.82 billion ($135.55 million), which was pinned on, among other factors, “BTS‘ temporary break”.
Speaking with analysts on the company’s earnings call, HYBE’s Chief Financial Officer Kyung-Jun Lee explained [translated to English] that “there are two main reasons why the [operating profit] margin declined despite posting a record high revenue” for FY 2024.
First, Kyung-Jun Lee said, HYBE’s “revenue mix by artists has changed with the absence of BTS and [the] debut of new groups”.
Furthermore, according to HYBE’s CFO, “investments related to the debut of Katseye in the US, lack of activities by artists under the management of HYBE America and expenses to establish human resources and infrastructure for HYBE Latin America pulled down the bottom line”.
HYBE’s CFO sought to reassure investors, however, explaining that BTS’ comeback is in sight.
The company expects its “margin to improve starting from this year, driven by the comeback of BTS [and] economies of scale from the growth of HYBE Music Group artists,” added HYBE’s CFO.
The BTS machine is slowly warming up before it kicks into gear on an unspecified date in the near future.
As HYBE CEO Jason Jaesang Lee pointed out in his opening statement on the company’s earnings call that BTS members Jin and J-Hope completed their military service in June and October, respectively, and “resumed [commercial] activities” for their solo projects last year.
Meanwhile, the other five members, Suga, Jimin, RM, V, and Jung Kook, are expected to complete their military service by the end of 2025.
On the company’s earnings call on Tuesday (February 25), HYBE’s leadership team was asked to explain BTS’s “revenue contribution in the past versus [the company’s] outlook for [the group’s] contribution to [HYBE’s] total revenue going forward after 2025.”
Responding to the question, HYBE’s CEO said: “When it comes to the revenue contribution from BTS and our music business, as you may know, we do not disclose any specific artist-by-artist breakdown of the revenue.
“However, BTS was how HYBE started and HYBE has been growing together with BTS. So ever since the IPO of 2020, I’m sure you have some ballpark figures as to how much revenue contribution has been made by BTS.”
Lee then explained that while he couldn’t share “any specific number at this point,” he did confirm that BTS’s contribution as a percentage of the company’s total revenue “is slightly below 20% as of 2024”.
That percentage, according to HYBE’s CEO, “has been going down from, let’s say, 95%, especially as members of the BTS started their military service”.
He added: “There were some solo activities [in 2024], but the percentage [of] their revenue contribution has been lower because there [were] no concerts.”
“I’m sure you have some ballpark figures as to how much revenue contribution has been made by BTS. what I can say is that the percentage has been going down from, let’s say, 95%, especially as members of BTS started their military service.”
Jason Jaesang Lee, hYBE
Lee then echoed comments made by HYBE’s CFO regarding the completion of the BTS members military service and comeback, when they will “resume concerts and other activities”.
“Their revenue contribution is expected to increase going forward,” said Lee.
“But at the same time, our other artists have been growing as well in their popularity and activities, so we will be able to have more balance in our artist portfolio going forward.”
He added: “And secondly, even though the revenue contribution or percentage by BTS may go down, we recognize that BTS has a lot of symbolic significance for HYBE because BTS was there from the very beginning of this company.
“So regardless of how much contribution they make to the total revenue, we believe that BTS is a representative artist group for HYBE. And so we will continue to provide the best kind of support and assistance, so that they can continue to perform [on] excellent stages and produce global results going forward.”
