K-pop/BTS: boy band is not bulletproof — nor is its talent agency

What is the value of Korean pop band BTS singing together as one group? The market says $1.7bn. That is the value shed by shares in the agency that manages BTS on Wednesday. The band shocked fans by announcing they would spend more time apart.

Joking references to any big pop act as a “military industrial complex” are curiously apt for BTS. The super group was instrumental in taking K-pop to a global audience with catchy melodies and slick dance routines. But compulsory military service in South Korea continues to threaten BTS’s business proposition, despite attempts to wangle exemptions for members.

Shares of Hybe fell a record 28 per cent on Wednesday morning, before making a modest recovery. That means the stock fell nearly 60 per cent this year, and is now below the levels it listed at in 2020.

The sell-off is not overdone. BTS have said they will focus on solo projects. Group concerts are one of the biggest chunks of Hybe’s revenue streams. BTS is estimated to account for about 70 per cent of Hybe’s total operating profit. Operating profit estimates, which have included a rebound in concert revenue, could fall by at least a third for the full year.

Military service is another drag on expectations. Under current law, two of the seven members — including potential breakout star Jin — need to sign up in the coming months. It would take at least seven years for all members to complete their service, which takes about two years. Hybe’s current contract with BTS expires in 2027.

Some members may apply earlier than their official enlistment deadline. Hybe would then lose out on earnings from solo albums.

Hybe has had nine years since the debut of BTS to reduce its dependence. It has made aggressive acquisitions of rival agencies and big bets on new artists. None of these moves has made much difference. Investing in this overpriced stock remains a bet on thirtysomething BTS members remaining popular in a business where attention spans are short.

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