From high dependence on BLACKPINK to TREASURE’s slow growth, is YG being dragged down? 

On November 10th, YG Entertainment announced that its sales and operating profit for the third quarter of this year were 114.6 billion won and 15.53 billion won, respectively.  This is a 33% increase and 10% decrease compared to the same period last year, respectively.

Sales were less than 5% and operating profit was less than 22% compared to consensus (market expectation). Part of the sales of BLACKPINK’s full album “BORN PINK”, released in September, is believed to have been postponed to the fourth quarter.

After the announcement, securities firms lowered the target price of YG all at once. The high dependence on BLACKPINK is dragging down YG. Specifically, BLACKPINK accounted for a whopping 92% of YG’s 3rd quarter album sales.

Another worrying factor is that YG’s cash cows, BLACKPINK and BIGBANG are set to renew their contracts in 2023.

However, the growth of their junior groups is too slow. 4th gen boy group TREASURE is even showing a downward growth trend. The first-week sales of TREASURE’s album released in October were only 400,000 copies, down from 540,000 copies in the previous album.

In the midst of this, members Bang Yedam and Mashiho recently ended their exclusive contracts with YG and withdrew from TREASURE. 

In the case of Bang Yedam, he was the runner-up in SBS “K-Pop Star” season 2 and gained massive attention, only to be “locked up” in YG basement for an extremely long time. As a result, when TREASURE made their debut, they became a hot topic as the so-called “Bang Yedam’s group”, leading to Bang Yedam’s departure putting TREASURE in turmoil 2 years later, before they could even rise to the top like their seniors. 

Park Hakyung, a researcher at Korea Investment & Securities, pointed out the high dependence of YG on BLACKPINK and the negative growth of TREASURE, at the same time analyzed that “Concerns about the growth of new artists are rising, while high dependence on the existing lineup is lowering investors’ sentiment.”

He also added, “The music sales of YG are being driven by BLACKPINK and BIGBANG, and both groups will be discussing to renew their contracts next year, raising concerns about a performance void in the absence of these IPs (intellectual property). The growth of TREASURE and the success of the new girl group will thus be variables in the stock price momentum for YG Entertainment.”

Park Sooyoung, a researcher at Hanwha Investment & Securities, also expressed, “The current figures for BLACKPINK are excellent and TREASURE’s fandom expansion in Japan is positive, but visibility is still falling. It seems necessary to be confident that the launch of new intellectual property (IP) at home and abroad will be successful along with regional expansion to the outside world”.

Lee Kihoon, a researcher at Hana Securities, also said, “In a situation where BIGBANG and BLACKPINK’s exclusive contract are expiring next year, investors are avoiding the related uncertainties, and even if they are all renewed, BIGBANG’s tour activities have been absent for several years, while the dependence on BLACKPINK’s performance is too high.”

He also suggested that YG should quickly resume BIGBANG’s tour activities or debut a new girl group that will show rapid growth. 

However, some analysts said that the fourth quarter results were expected. 

In particular, Lee Sunhwa, a researcher at KB Securities, mentioned, “BLACKPINK is conducting a total of 45 concerts for their world tour, which is an increase from the 34 concerts conducted in the world tour prior to COVID-19.”

Source: daum