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Big Hit Entertainment‘s earnings

Big Hit Entertainment, the entertainment company managing South Korean boy band BTS, is worth as much as 2.3 trillion won (US$1.95 billion), analysts say. That would make the company a unicorn, referring to an unlisted startup with a corporate value in excess of US$1 billion.

BTS, also known as the Bangtan Boys, has been called the Beatles of the 21st century.

A report called “Analysis of BTS’ Success Factors and Utilization Methods,” published by the Hyundai Research Institute on June 6, stated that Big Hit Entertainment’s corporate value was between 1.28 trillion won (US$1.16 billion) and 2.28 trillion won (US$2.07 billion) in 2018. Those figures value the company much higher than the top three entertainment companies that are listed on the South Korean stock exchange — namely, SM (1.6 trillion won, US$1.36 billion)), JYP (929.6 billion won, or US$787.79 million), and YG (580.5 billion won, or US$491.95 million) — as of their stock value at the close of trading on June 5.

The report explained that it calculated Big Hit’s relative corporate value based on those three entertainment companies’ performance, price-to-earnings ratio (PER), and net liabilities last year. Big Hit brought in 214.2 billion won (US$181.51 million) in total revenue last year, with its operating profit and net income seeing a six-fold increase from 2016 to 64.1 billion won (US$54.28 million) and 50.2 billion won (US$42.51 million), respectively. In effect, BTS has been such a “big hit” that its management company’s performance and corporate value has shot into the stratosphere.

The report said that the primary factor behind BTS’ success was its management company’s clear business strategy. According to the report, Big Hit settled on an effective strategy of maximizing the group’s creativity by respecting the autonomy of its members and of leading global trends in the music industry. The report also noted that Big Hit had pursued a definite goal of being a content-focused “corporate platform.”

Other helpful factors were the emergence of the millennial generation and the growth of the overseas music industry, which broadened BTS’ fan base. BTS has communicated with millennials, who are adept at using the Internet, by sharing content directly on social media. Another effective move was making inroads in other countries, like the US and Japan, with large album markets.

The group’s success was reinforced by the development of related industries, including Hallyu (the Korean Wave) and digital content. By 2021, the global digital content industry is projected to reach US$2.1 trillion by 2012, an increase of about 70% from 2016. Competitive music content and a robust base of fans are serving as a solid driver for continuing growth in the global market.

Fans have been drawn not only to K-pop’s distinctive choreography but also to hip hop-influenced rhythms and electronic grooves, and their expectations have been met by a series of albums dealing with social issues and young people’s concerns. Even though the fan base is distributed over various regions, including North America and Asia, it has been consolidated into the “Army” fan club.

The report predicted that BTS’ success also creates business opportunities for South Korean companies, including the chance to improve their brand value and to develop cultural content. Analysts said there will be a spillover effect on the service sector, including broadcasting, videos, movies, culture, and travel, and the consumer goods sector, including food and beverages, cosmetics, apparel, automobiles, home appliances, and wired and wireless telecommunications devices.

By Han Gwang-deok, finance correspondent

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