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BTS agency HYBE buys stake in its K-pop rival

<i>The Chosunilbo JNS/ImaZinS Editorial/Getty Images</i><br/>NCT 127 at a press conference in September 2022 in Seoul.
ImaZins via Getty Images
The Chosunilbo JNS/ImaZinS Editorial/Getty Images
NCT 127 at a press conference in September 2022 in Seoul.

By Yoonjung Seo and Michelle Toh, CNN

HYBE, the management agency behind superstar boy band BTS, will become the biggest shareholder of its K-pop rival, SM Entertainment.

The move strengthens HYBE’s dominance in South Korea’s music industry, where it is already the biggest player, even as it seeks to expand abroad.

The South Korean entertainment giants announced the deal Friday, with HYBE set to pick up a 14.8% stake in SM Entertainment for 422.8 billion Korean won ($334.5 million).

SM was founded by legendary music producer Lee Soo-man, who is widely referred to in South Korea as “the godfather of K-pop.” The company is known for representing hit artists, such as NCT 127, EXO, BoA and Girls’ Generation.

News that the two companies were joining forces fired up investors. SM Entertainment’s shares soared 16% in Seoul on Friday. HYBE’s stock initially rose 3%, before paring gains to close down 1.5%.

Outside of BTS, HYBE also represents prominent bands such as NewJeans, Tomorrow x Together and Seventeen.

But its marquee act is currently on hiatus. Members of BTS started individual compulsory military service in South Korea late last year, and the group as a whole is expected to reconvene around 2025.

Now, HYBE is turning its attention elsewhere.

“This acquisition represents a major step by HYBE to integrate the global expertise of both companies to become a game changer in the global music industry,” the company said in a statement.

HYBE has been taking steps to expand its global reach. On Thursday, it announced another major deal in the United States, saying it would acquire the owner of Quality Control, a hip-hop label that represents popular artists including Migos and Lil Yachty.

That deal will help HYBE build a stronger presence in the US music market, according to Sunhwa Lee, an internet and entertainment analyst at KB Securities. In a report Thursday, she noted that the company’s broader ambitions were “to go beyond the boundaries of K-pop and develop new global artists across various genres.”

“This partnership is a vital part of our growth plan to innovate the entertainment industry through a diversified portfolio,” HYBE Chairman Bang Si-Hyuk said in a statement. “We will work together to continue adding depth of hip-hop to the global music industry.”

‘One-two punch’

Bernie Cho, a Seoul-based music industry executive, said the two deals announced were unlike anything he’d seen.

This “may be the biggest one-two power punch I’ve ever seen or heard [of] in the history of the K-pop industry,” said Cho, president of DFSB Kollective, a music artist and label services agency.

He said the deals had the potential to put HYBE in the same league as the “big three” major record labels: Sony, Universal and Warner Music.

“HYBE, in their post-BTS stage, have really stunned and surprised fans and financial analysts by really smart, really savvy huge deals,” he added.

In 2019, BTS accounted for as much as 90% of revenue at its management company, then known as Big Hit Entertainment. That left analysts concerned that the firm, later renamed to HYBE, was overreliant on the band.

Since then, however, HYBE has expanded its roster.

In recent years, its slate has grown to include other global celebrities, including Justin Bieber, Ariana Grande and Demi Lovato, who are represented by a team under HYBE’s US subsidiary.

The South Korean firm has also has a tie-up with Big Machine Label Group, an affiliate that oversees some of the top artists in country music, such as Sheryl Crowe, Rascal Flatts and Tim McGraw.

“HYBE is no longer a K-pop juggernaut. The K has now become silent,” said Cho. “They’ve become a pop music juggernaut.”

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