While K-Pop idol groups continue to dominate the global music scene, concerns are rising around the financial stability of major K-Pop entertainment companies, which house many of these top idols.

The "Big 4" of the K-Pop industry—HYBE, SM Entertainment, YG Entertainment, and JYP Entertainment—reported disappointing second-quarter results. HYBE saw a 3.1% increase in revenue to 640.5 billion KRW, but operating profit plummeted by 37.4% to 50.9 billion KRW compared to the same period last year. JYP Entertainment recorded revenue of 95.7 billion KRW and an operating profit of 9.3 billion KRW, marking a year-on-year decrease of 36.9% and 79.5%, respectively.

Similarly, YG Entertainment posted a revenue of 90 billion KRW but turned to an operating loss of 11 billion KRW. SM Entertainment's revenue for the second quarter rose by 6% to 253.9 billion KRW, but operating profit fell by 31% to 24.7 billion KRW.

These results are largely attributed to declining overseas performance. For the first time in nine years, K-Pop album exports, which had been growing steadily since 2015, have seen a downturn. In the first half of this year, K-Pop album exports fell by 2% year-on-year to 130.32 million USD (approximately 177.4 billion KRW). Additionally, Circle Chart reported a 14.9% drop in K-Pop album sales within the top 400 rankings during the same period.

Some analysts argue that this downturn is a natural correction following years of over-exuberance and suggest that the market is cooling off after a prolonged period of growth. Others point to the absence of major K-Pop artists like BTS and BLACKPINK as a temporary factor, with hopes that their return to activity will reinvigorate the market.

However, the heavy reliance on a few major artists highlights the industry's underlying challenges. The absence of new mega IPs (intellectual properties) to succeed BTS and BLACKPINK raises concerns about the long-term sustainability of the K-Pop industry. This has led to criticism of the industry's focus on short-term gains through inflated sales figures and aggressive marketing tactics, which could ultimately alienate the fanbase.

Adding to these concerns are ongoing scandals and controversies surrounding the major entertainment companies. HYBE has faced setbacks, including a public dispute involving its subsidiary ADOR, Chairman Bang Si Hyuk's personal controversy, and BTS member Suga's electric scooter DUI incident, which have all impacted the company's stock price. SM Entertainment is currently under investigation for alleged price manipulation during its acquisition by Kakao.

In response, securities firms have adjusted their target prices for entertainment stocks downward. Firms such as Hana, Daishin, Samsung, and Hyundai Motor Securities have reduced HYBE's target stock price by 5-13%, setting it at 240,000-300,000 KRW. Six firms, including Samsung Securities, have lowered their target prices for SM Entertainment, and four firms have done the same for YG Entertainment, with the lowest target price for SM being 96,000 KRW and YG’s average target price at 47,750 KRW. JYP Entertainment also saw its target price downgraded to the 70,000 KRW range by six securities firms.

Industry experts emphasize that for the K-Pop market to sustain long-term growth, there must be a focus on discovering new mega IPs to follow in the footsteps of BTS and BLACKPINK, while also reevaluating the current marketing strategies that prioritize commercial gains over artistic integrity. One insider noted, "Marketing that loses sight of the core essence will ultimately be rejected. In a rapidly shifting market where fandoms are becoming more transient, inducing fatigue and financial strain on fans could lead to the collapse of the K-Pop fanbase."

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