SM Entertainment Reports Revenue Decline On Lower Music Sales, Concert Revenue

SM Entertainment’s stock sank more than 7% on Wednesday (Nov. 4) after the label home of K-pop stars aespa and NCT reported an unprofitable quarter. The company said lower physical and digital music sales and concert revenue resulted in a 9% decline in overall revenue.

SME said it generated 291.1 billion Korean won ($205.2 million) in revenue and operating profit of 35.5 billion Korean won ($25 million), which is down 26% from the year-ago quarter. The company operated at a net loss of 1.1 billion Korean won ($775,000) for the quarter, down from a 44.7 billion Korean won ($31.5 million) profit a year ago, “primarily due to foreign exchange-related losses resulting from the appreciation of the Korean won,” Jeongmin Jang, CIO of SM Entertainment, said on a conference call discussing the quarter.

Related

“New album sales volume decreased by approximately 70% year over year as our major artists focused on expanding their overseas activities,” Jang said.

Sales of physical and digital music fell by 51% to 47.1 billion KRW ($33.21 million). SM said it sold 1.67 million copies of artists’ releases in the quarter, driven primarily by sales of NCT 127’s album BLINGY.

There were bright spots in SM’s earnings. The company’s share of major artists’ album releases and
global concert activities, as well as the impact of IP licensing collaborations — what the company refers to as MD/licensing revenue — increased 23.5% year over year to 62.1 billion Korean won ($43.78 million).

Additionally, revenue earned from artists’ appearances, driven by artists’ participation in
international award ceremonies, music festivals, apparel and cosmetics advertising, and other areas increased by 21.3% to 29.2 billion Korean won ($20.6 million).