Unique Business Model Combining Content+Platform+Commerce
Domestic New Idols Also Praised Alongside Globally Popular BTS
[Asia Economy Reporter Minwoo Lee] As the listing of Big Hit Entertainment (hereinafter Big Hit), the agency of the global idol group BTS, approaches, expectations in the public offering market are growing even stronger. As the pioneer who evolved the 'fandom economy,' it is anticipated that the ripple effects will be even greater in the future.
Big Hit officially announced its listing next month by submitting a securities registration statement to the Financial Services Commission on the 2nd. The market capitalization is expected to reach up to 4.8 trillion KRW. This reflects a premium as the top stock, higher than the existing entertainment Big 3?SM, JYP Entertainment, and YG Entertainment.
While BTS, who is making new history in the global music industry, remains a key factor, the fact that Big Hit is evolving into a multi-label company is also positive. The dependence on BTS has eased from 97% last year to 88% in the first half of this year, thanks to strategic mergers and acquisitions (M&A) that improved the artist portfolio. In addition to BTS, artists such as TXT, Seventeen, NU'EST, and GFriend have been added. Over the past three years, the compound annual growth rate (CAGR) reached 156% in sales and 112% in operating profit.
Jiin Hae, a researcher at Hanwha Investment & Securities, commented, "Despite the COVID-19 pandemic in the first half of this year, Big Hit showed high profitability by achieving high growth overseas and expanding the proportion of intellectual property (IP) sales." In fact, Big Hit recorded consolidated sales of 294 billion KRW and operating profit of 49.7 billion KRW in the first half of this year. This is about half of last year's record-high sales of 587.2 billion KRW and operating profit of 98.7 billion KRW.
What is even more noteworthy is the unique revenue model that combines commercial and platform businesses. Big Hit's differentiators include ▲ IP production through storytelling and world-building ▲ diversification of revenue using IP ▲ virtuous cycle of platform business with direct distribution. In particular, the fandom of its mega IPs is very solid. The subscriber count of its proprietary platform 'Weverse' has reached 13.53 million, composed of 6.73 million BTS fans, 2.63 million TXT fans, 2.11 million I-LAND fans, and 1.27 million Seventeen fans.
Researcher Jiin explained, "Based on this, it is possible to strengthen communication (community) between fans and stars, develop subscription service revenue models, and even serve as an e-commerce platform that sells all products directly." Recently, in response to COVID-19, Big Hit held the 'BangBangCon Online Concert,' achieving significantly higher results in 90 minutes compared to offline performances. It is analyzed that the strong fandom was attracted into the Weverse ecosystem, enabling internalization of all production and distribution and eliminating unnecessary fees.
Through this, the sales proportion in the first half rose to 38% online and 48% in artist indirect participation. This overcame physical space and time limitations, and the company's production capabilities, planning skills, and competitiveness played a bigger role than temporary popularity, receiving favorable reviews. Researcher Jiin said, "As a business model combining content, platform, and commerce, it deserves high evaluation," and added, "With the momentum from M&A and the expansion of indirect participation, simultaneous growth in scale and profit is expected to continue next year."
Meanwhile, Big Hit will conduct a demand forecast for institutional investors over two days on the 24th and 25th, and finalize the public offering price on the 28th. Subsequently, subscription for general investors will be held on the 5th and 6th of next month. NH Investment & Securities, Korea Investment & Securities, and JP Morgan are the lead underwriters for the listing. Mirae Asset Daewoo is the co-underwriter. Big Hit, which will be listed on the KOSPI market, plans to offer a total of 7.13 million shares this time. The expected price range is 105,000 to 135,000 KRW per share. The public offering is expected to raise up to 962.6 billion KRW, potentially surpassing SK Biopharm (959.3 billion KRW) and Kakao Games (384 billion KRW) in scale.
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