SM Entertainment’s revenue slips 8.8% YoY in Q3 even as K-pop concerts boom – Music Business Worldwide

K-pop has become a booming global phenomenon, but the K-pop business is having something of a rough year.

Nowhere is that clearer than in the latest earnings numbers from SM Entertainment, generally considered to be South Korea’s second-largest K-pop agency, behind only HYBE.

SM’s Q3 revenue fell 9.0% YoY to 242.2 billion Korean won (USD $178.6 million at the average exchange rate for the quarter), which the company attributed to decreased album sales at the parent company and declining sales at its various subsidiaries.

The company reported a gross profit of KRW 73.4 billion ($54.1 million), down 30.9% YoY, while operating profit came in at KRW 13.3 billion ($9.8 million), down 73.6% YoY.

“Operating profit decreased year on year due to reduced album sales, weaker earnings of subsidiaries, and recognition of production cost related to the debut program of Dear Alice,” SM Entertainment CFO Jang Jeon Min said on the company’s earnings call.

Dear Alice is SM Entertainment’s experiment in bringing the K-pop model to the Western music business. The five-member UK-based boy group was created by SM and UK TV production company Moon&Back. In typical K-pop fashion, the band’s formation was filmed and turned into a reality show, Made In Korea: The K-pop Experience. The show ran on BBC One from August to September.

The parent company’s earnings were dragged down in particular by flagging album sales, which fell 35.7% YoY to KRW 72.9 billion ($53.8 million).

That steep drop was the result of “the high base effect of the previous year,” Jang said on the earnings call. New album sales fell to 3.6 million in Q3 2024, compared to 8.7 million in the year-ago quarter.

However, much of that decline was offset by a booming concert business, which saw revenues jump 55.9% YoY to KRW 38.2 billion ($28.2 million).

That was on the back of a growing number of concerts and an internationalizing concert business, Jang said.

As an example of that success, CEO Jang Cheol Hyuk pointed to SM’s increasingly popular girl group aespa, which sold out all of its shows in Seoul, Japan, Australia, and elsewhere in the Asia-Pacific region from June to September.

Jang announced that aespa’s tour will be hitting the US and Europe in Q1 of next year.

In all, aespa had 25 shows during the quarter, while NCT DREAM clocked 13, RIIZE Fan-con had 23, and Super Junior held 11 shows.

Merchandising and licensing was another bright spot in SM’s earnings, rising 31.1% YoY to KRW 37.9 billion ($27.9 million), thanks to growing concert-related sales.

SM’s subsidiaries pulled down the company’s overall earnings, though not to the same extent as the parent company’s own earnings. The subsidiaries division recorded a 0.4% YoY drop in revenue to KRW 121.8 billion ($89.8 million).

That included a 26.9% YoY decline in revenue from SM C&C (Culture & Contents), a talent agency, TV production, and travel company, to KRW 24.8 billion ($18.3 million), which SM attributed to a decline in ad revenue.

Offsetting some of this decline was a 39.2% YoY jump in revenue at KEYEAST, an artist management, merchandising/licensing and TV production company, to KRW 13.3 billion ($9.8 million), thanks to increases in sales of TV productions.

On the earnings call, CEO Jang said the company plans to release at least one new group per year going forward, including one to debut in Q1 of 2025. The as-yet-unveiled girl group is SM’s first since aespa debuted five years ago.

“We are building a solid artist IP lineup [across] all generations of K-pop, from existing artists that have been in the industry for a long time to newly debuted artists,” Jang said.

“We expect this new girl group to help [strengthen] our artist lineup even more.”

“We are building a solid artist IP lineup [across] all generations of K-pop, from existing artists that have been in the industry for a long time to newly debuted artists. We expect this new girl group to help [strengthen] our artist lineup even more.”

Jang Cheol Hyuk, SM Entertainment

SM’s earnings, released on Tuesday (November 5), came out the same day as Q3 earnings from K-pop giant HYBE, which reported a 1.9% YoY drop in revenue, to KRW 527.8 billion ($389.2 million).

HYBE attributed part of the decline to the Paris Olympics, which affected album release scheduling during the quarter.

Amid inconsistent financial performances this year, K-pop companies have seen their stock prices slide, with SM Entertainment’s shares down around 20.0% year-to-date, trading at KRW 74,600 as of market close on Monday, while HYBE stock is down around 17.2% year-to-date, trading at KRW 200,000 as of Monday.Music Business Worldwide