NewJeans, Hype and Coachella shows will make a difference in Kpop

Shares of K-pop's „big four” companies have all fallen since the start of the year. JYP Entertainment shares are down 37% year-to-date, while YG Entertainment is down nearly 17%. Cosby-listed Hype, home of superstars BTS, fell about 4.5%.

Shares of SM Entertainment fell more than 17%. The decline comes after one of the agency's artists was embroiled in a dating scandal. widely International And Domestic Coverage.

In February, the stock fell to its lowest level since October 2022 for five consecutive sessions following drama surrounding Karina, the leader of women's group Espa. Selling out $50 million destroyed As Chinese fans reduce SM's market value threatened to boycott the group's albums.

Still, Goldman Sachs sees „high potential for a rating re-rating” as the companies continue to deliver multi-year earnings growth. By 2023, all four companies Published more whole year revenue and net profit.

Goldman said the sales are related to markets focused on album sales, which have historically been considered a key proxy for fan base and, by extension, opportunities for companies.

„We challenge this mainstream mindset, arguing that offline concert attendance… is the best metric for measuring K-pop's growing reach,” the analysts wrote. They explained that album sales are tainted by wallet sharing, where a fan can buy multiple albums — a common phenomenon among K-pop fans.

Analysts have attributed album sales to a lack of offline interactions during the pandemic, distorting the fan-related metric.

Evaluating the industry by in-person concert attendance, Goldman said „growth has not stopped measuring at a rapid pace,” and „in the near term, we see audience growth in Japan as a major growth driver.”

Analysts see significant fan growth potential for K-pop companies in Japan, „which we believe is being overlooked by the market.”

Japan has one of K-pop's largest overseas fan bases, with Hype, SM and JYP taking a combined 7% share of Japan's live music market. Goldman pointed out that Japan's top talent agency, Johnny & Associates, was embroiled in a major scandal that led to the industry becoming more favorable to K-pop artists.

In 2023, Japan's biggest music show Kouhaku Uta Gassen invited five K-pop artists produced by K-pop companies and two localized groups. This is the first time since 2011 that male K-pop artists have been featured on the show.

Goldman estimates that Japan concert attendance will grow at a compound annual growth rate of 24% from 2023 to 2026, with the combined share of Hype, JYP and SM doubling from 7% to 14%.

SM's new Japanese boy group NCT Wish and JYP's upcoming boy group NEXZ are Japan's growth catalysts.

Goldman is also interested in the growth of K-pop's global fan base, particularly in markets such as the US

The report pointed to hype-managed girl group Newjeans' success in the US charts. In a March 27 report, NewJeans' most recent album hit No. 1 on the US Billboard 200, analysts noted. The group's lead single „Super Shy” peaked at No. 2 on the Billboard Global 200.

The group was also the first South Korean girl group to perform at Lollapalooza. The The Chicago Sun-Times reported The group managed to attract the largest ever audience for the festival's 5pm slot.

Le Sserafim, managed by Hybe subsidiary Source Music, debuted at the Coachella music festival on April 13, with another performance scheduled for April 20.

Hype recently announced the expansion of its partnership with Universal Music Group, including exclusive distribution rights for Hype's artists and labels. UMG's roster includes Taylor Swift, Ariana Grande and Justin Bieber.

Goldman said the announcement is a clear sign that K-pop is becoming mainstream globally, leading to a competitive level that allows for stronger bargaining power in business relationships.

The analysts concluded that the sector „has a long runway to grow” and „further downside for the wallet share normalized closer to pre-Covid levels is less likely in our view.”