The last months have been eventful, to say the least, for K-pop giant HYBE which has acquired companies ranging from AI start-ups to an established hip-hop label.
Many have become familiar with HYBE given the worldwide success of BTS, the most famous South Korean boy band under HYBE’s management. The rise of K-pop boy and girl bands has propelled HYBE and other South Korean labels into the global spotlight and fueled their plans to expand geographically. In addition, new technological advancements such as improved AI tools, have been playing a significant role in guiding the company’s next steps.
Hybe is making many changes and taking many risks to become one of the world’s key entertainment companies, including venturing to new regions, musical genres, and technology.
HYBE and AI
In February 2022, HYBE made its first stake purchase of Supertone, an AI audio company, with an investment of USD $3.6 million. In October of the same year, HYBE increased its investment in Supertone by purchasing the entire company for approximately USD $31.75 million, which left them with an 82% stake. But why is HYBE so interested in Supertone, whose AI tools are capable of creating world-renowned voice synthesis and real-time voice enhancement technology. According to Music Business Worldwide, Supertone claims to be able to create “a hyper-realistic and expressive voice that [is not] distinguishable from real humans”.
With its Singing Voice Synthesis (SVS) technology, Supertone brought back to life the late South Korean folk singer Kim Kwang-seok, in the Korean television show “Competition of the Century: AI vs Human”, as you can watch in the video below.
This technology can be extremely useful, for example, to release artists’ music when they are unable to perform and record, as was the case with BTS this year when they were forced to pause due to mandatory military service. Moreover, Music Business Worldwide also pointed out its importance, given that the pandemic caused a pause in live performances, leaving labels and artists to find revenue alternatives. HYBE has its “Indirect Artist Involvement” projects, which consist of projects that generate revenue using only artists’ personal brand and popularity without the need for their physical involvement. These projects represented 60% of the company’s revenues in 2021 and around USD $640 million in 2022.
Expansion: Venturing Through New Genres
This February, less than a month after Scooter Braun took over HYBE America as its sole CEO, they announced they would be purchasing Quality Control Music. QC is a hip hop record label based in Atlanta, Georgia, and has signed successful artists like Cardi B, Migos, Lil Baby, Lil Yachty, among others. Even though the value of the deal was not announced, MBW speculates it was around USD $320 million.
This acquisition is a clear statement from HYBE, letting everyone know their intention of broadening their scope of music genres and becoming much more than a K-pop label. “Based on hip-hop, QC has been making a strong presence in the American music scene. With our shared vision, I have high hopes for what we can operate and achieve together,” says Jiwon Park, CEO of HYBE.
The timing of these efforts seem to be in sync with the BTS break, and they can be seen as a way to reassure shareholders that HYBE is prepared to thrive even with this blow. MBW writes that it is in HYBE’s plans to expand to at least 4 new markets this year.
Consolidation: Becoming the Greatest in K-Pop
In the same week HYBE America acquired Quality Control Music, HYBE also purchased a 14.8% stake in SM Entertainment, from its founder Lee Soo Man for approximately USD $334.5 million. In that week alone, HYBE had spent over USD $600 million just on acquisitions. SM Entertainment is one of the largest South Korean entertainment companies with many signed K-pop artists such as Aespa, Girls’ Generation, and TVXQ. The company also announced in May 2021 that they were looking forward to building an US based male K-pop group.
SM had a public adverse reaction to HYBE’s moves, stating that they “oppose all aggressive outside mergers and acquisitions, including HYBE”. HYBE, on the other hand, said that it agrees with SM’s founder’s vision, which includes initiatives regarding the metaverse and SM Culture Universe. However, according to All K-pop, HYBE has plans to increase its stake in SM up to an additional 20%, which is around a USD $900 million investment, by purchasing minority shareholder shares. In total, HYBE would hold 35% of the company. The purchasing process is on hold given the current assessment of the Korean Fair Trade Commission.
On 21st February, HYBE’s 2022 financial report came out showing the company’s annual revenues had surpassed the one billion mark for the second consecutive year. Its main source of revenue was its “Artist Direct Involvement” business segment making USD $753.8 million, followed by the previously mentioned “Artist Indirect Involvement” segment, making a total of USD $622 million in 2022. In third place came album sales, while concert revenues grew 470.1% given the return of live performances.
Most interestingly, in the image below we can see the result of their expansion efforts, with, for example, North America representing around 9% of the total revenues collected in 2017, while in 2022 that same region was 32%.
Overall, HYBE’s recent acquisitions and expansion efforts demonstrate the company’s ambitious plans to become a major player in the global music market. By diversifying its portfolio of music genres and investing heavily in technology and content creation, HYBE aims to strengthen its position as a leading entertainment company. Despite the challenges posed by the pandemic and the temporary hiatus of its superstar group BTS, HYBE has managed to continue growing its revenues and expanding into new markets. As the music industry continues to evolve and adapt to new technologies and consumer trends, HYBE’s strategic moves will undoubtedly shape the future of K-pop and global music in the years to come.