SM Entertainment reports increase in operating profit

Girl group aespa [YONHAP]

SM Entertainment reported 35.7 billion won ($27.4 million) in operating profit in the second quarter, beating the market consensus on strong album sales and the global resumption of concerts by its artists.

The K-pop agency's quarterly operating profit skyrocketed 84 percent on year, exceeding the market consensus of 31.2 billion won compiled by FnGuide.

Profit improvements were made due to the spreading out of fixed costs from increased revenue. A boost in album sales, such as aespa’s EP “My World” which sold over 2 million copies, contributed to the revenue increase as well as the increasing number of concerts held globally.

Quarterly revenue rose 30 percent to 239.8 billion won, in line with analysts’ expectations of 238.9 billion won.

Revenue generated from concerts skyrocketed 252 percent on year to 20 billion won as more concerts took place. A total of 60 concerts were held globally, a massive jump compared to the six concerts held during the same period in 2022.

Boy band NCT Dream took the lead there with 17 concerts, followed by fellow boy band TVXQ! and girl group Red Velvet with 12 and 11 concerts.

In turn, sales made from related merchandise jumped 74.8 percent to 42.4 billion won as more pop-up stores accompanied new album releases.

Net profit jumped 11.6 percent to 28.3 billion won, surpassing the market estimate of 25.3 billion won.

Boy band NCT Dream [YONHAP]

Under the agency's new multi-label system, a total of 10 artists will release albums in the third quarter. EXO and NCT Dream each released full-length albums “Exist” and “ISTJ” in July, and artists including U-Know Yunho, Hyoyeon, NCT and aespa will release EPs, albums and singles this month. In September, Super Junior’s Yesung, SHINee’s Key and Exo’s D.O will return to the music scene alongside boy band Riize in its debut.

For concert lineups, NCT Dream held a concert tour in North America last month. aespa is holding a world tour in Thailand, Japan, the United States, Mexico, Brazil, Germany, Britain and more until September 30. Boy bands NCT and SHINee will also host concerts in Japan in the second quarter.

Through the multi-label system announced by SM in March, six production centers were established that wholly manage the artists making a comeback.

“The launch of multi-production centers allowed each center to effectively manage the artists’ preemptive promotion before their albums' official release dates, as well as expand the creativity of their music and their activities during their comeback period,” SM CEO Jang Cheol-hyuk said at a conference call Wednesday.

Jang added SM’s existing subsidiary “SM Friends” transitioned into a music publisher with a new name, “Kreation Music Rights,” to create a more organized system for music publication, provide the agency with a steady supply of new music and distribute the proper royalties to the producers.

SM will also strengthen its partnership with Kakao, according to the CEO.

On Tuesday, the agency and Kakao Entertainment announced the establishment of a joint venture in North America to accelerate the global promotion of their artists.

“Using Kakao Entertainment and SM Entertainment's U.S.-based networks, we’ll do our best for our artists to successfully enter the U.S. market and increase our market share there,” Jang said.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]