Posted July. 26, 2011 07:26,
Updated November. 30, -0001 00:00
On the back of the K-pop boom, the stocks of talent managing agencies SM Entertainment, JYP Entertainment and YG Entertainment have grabbed the spotlight. SM leads the market and is closely followed by JYP and YG, opening a new chapter in the Korean industry.
SM went public in 2000 and JYP pulled off a backdoor listing by acquiring J. Tune Entertainment early this year. YG also plans to get listed after undergoing a preliminary screening for the KOSDAQ last month.
The major three agencies are at the center of the Korean Wave and expected to compete in stock prices.
Though all of them are based on idol stars, they are different. SM initiated the Korean Wave with singers ranging from BOA to Dongbangshingi and laid the foundation for the entry of Korean pop into the Japanese market. Other SM groups such as Girls Generation, Super Junior, Shiny and f(x) are also competitive, experts say.
Gong Tae-hyeon, a researcher at Samsung Securities, said, SM`s strength is that even if a group is dismantled, another idol group can replace it since it owns many star groups.
SM`s performance including revenue topped that of its two rivals last year with 86.4 billion won (81.9 million U.S. dollars) in revenues and 25.7 billion won (24.3 million dollars) in operating income.
The agency also has a diverse portfolio. It started a karaoke business and began developing a video cultural tourism complex in Mungyeong, North Gyeongsang Province, with a strategy combining star entertainment with a "comprehensive" leisure and tourism business.
YG, which has rapidly grown with groups Big Bang and 2NE1, posted 44.7 billion won (42.3 million dollars) in revenue and 10.3 billion won (9.76 million dollars) in operating income last year. Though it has fewer stars than SM, it earned high profits with small but solid music sales.
Lee Hyeon-jeong, a researcher at SK Securities, said, Unlike other groups, (YG) displays a unique style of music, creating a lot of added value such as music sales.
JYP raked in 31.7 billion won (30 million dollars) in revenue last year, smaller than SM and YG, but has a number of stars such as 2PM, 2AM, Wonder Girls and miss A. It started building a network as represented by the recent stock purchase of LOEN Entertainment, a subsidiary of SK Telecom.
JYP is now the second-largest shareholder (25.45 percent) in LOEN, which also runs Melon, Koreas largest music service provider.
Despite their popularity, entertainment stocks have long been neglected in the Korean stock market. This is because their performances used to fluctuate and stock prices repeatedly rose up and down due to good and bad news such as the debut or dismantlement of a group.
The big three talent agencies, however, are racking up steady profits and seen for their potential growth as they lead the K-pop boom in the world.