HYPER, the management company behind popular boy band BTS, will become SM Entertainment’s largest stakeholder. While aiming to grow internationally, the move solidifies HYBE’s leadership in the South Korean music industry, where it is already the dominant player.
The transaction was unveiled Friday by the two major South Korean entertainment companies, with HYBE expected to pay 422.8 billion Korean won ($334.5 million) to acquire a 14.8% stake in SM Entertainment.
Legendary music producer Lee Soo-man, who is considered “the godfather of K-pop” in South Korea, founded SM. The company is known for representing popular artists such as Girls’ Generation, EXO, BoA, and NCT 127.
Investors were energized by the news that the two companies were joining forces. On Friday, SM Entertainment shares rose 16% in Seoul. The price of HYBE shares initially rose 3%, lost ground and closed 1.5%.
HYBE represents BTS and well-known bands such as NewJeans, Tomorrow x Together and Seventeen. However, the main act is now on hiatus.
BTS members in South Korea began their military service late last year, and the entire group is expected to reunite around 2025. HYBE is now focusing on something else.
“This acquisition represents a major step for HYBE to integrate the global expertise of both companies to become a game changer in the global music industry,” the company said. said in a statement.
To increase its global presence, HYBE has taken action. It revealed made another major purchase on Thursday, saying it would buy the owner of Quality Control, a hip-hop label featuring well-known artists such as Migos and Lil Yachty.
According to Sunhwa Lee, an internet and entertainment analyst at KB Securities, the transaction will help HYBE gain a larger foothold in the US music business.
She stated that the company’s bigger goals were “to cross the boundaries of K-pop and produce new global artists in other genres” in a report released Thursday.
According to HYBE Chairman Bang Si-Hyuk, “This partnership is an essential part of our growth plan to innovate the entertainment industry through a diversified portfolio.” “We will work together to continue to bring hip-hop depth to the global music industry.”
HYBE shocks the music industry with historic deals
The two deals announced, according to Bernie Cho, a music industry entrepreneur based in Seoul, were unlike anything he had ever seen. In the history of the K-pop industry, this “might be the biggest one-two power punch I’ve ever seen or heard,” said Cho, president of DFSB Kollective, a music artist and label service company.
He said the agreements could align HYBE with the “big three” major record companies, Sony (SNE), Universal and Warner Music. “HYBE, in their post-BTS phase, has stunned and surprised fans and financial analysts with really smart, really smart big deals,” he added.
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In 2019, BTS was responsible for up to 90% of the revenue of the management company, which was formerly known as Big Hit Entertainment. Analysts were concerned that the company, later known as HYBE, was becoming too dependent on the band as a result.
But since then, HYBE’s customer base has grown. Other international stars have joined the roster in recent years, such as Justin Bieber, Ariana Grande and Demi Lovato, all of whom are handled by a team under HYBE’s US division.
The Big Machine Label Group, a subsidiary that manages some of the biggest names in country music, including Sheryl Crowe, Rascal Flatts and Tim McGrawalso has a partnership with the South Korean company.
“HYBE is no longer a K-pop juggernaut. The K has now become silent,” said Cho. “They’ve evolved into a pop music titan.”
