Will Blackpink’s renewal be enough to save troubled YG?

Industry

Published: 08 Dec. 2023, 08:31 Updated: 08 Dec. 2023, 13:17

Will Blackpink’s renewal be enough to save troubled YG?

From left, Blackpink members, Lisa, Jisoo, Jennie and Rose pose for a photo at the MTV Video Music Awards at the Prudential Center on Aug. 28, 2022, in New Jersey. [AP/YONHAP]

Blackpink's long-anticipated contract renewal gave YG Entertainment, the K-pop band's agency, a much-needed boost but only for a short period.

The stock price of YG Entertainment shot up 25.62 percent on Wednesday, the day of the renewal announcement, but it entered into a negative territory again on Thursday by declining 3.32 percent to close at 58,300 won ($44.07).

The K-pop agency still faces a multitude of challenges including a weak new artist lineup to succeed Blackpink and a tainted reputation following drug scandals involving the company's chief and artists.

Compared to the peak share price this year of 95,200 won in May, Thursday’s price was down by 38.76 percent.

Despite a lower-than-expected turnaround, the news of Blackpink's contract renewal means that the K-pop agency has overcome the imminent crisis and that its market cap is expected to rise, according to experts.

The girl group’s influence in the agency earnings is dominant — over the yearlong world tour that Blackpink went on from October 2022 to September this year, it has reaped sales of $260 million, according to U.S. concert analysis platform Touring Data.

“Many of YG’s renowned artists’ intellectual properties [IP] were concluded this year, so Blackpink’s contract renewal comes at a pivotal timing for the company’s valuation,” according to a report by Lee Ki-hoon, an analyst at Hana Financial Investment. “It will also provide a suitable environment for BabyMonster to grow in following years.”

YG Entertainment’s market cap is anticipated to grow to 1.4 trillion won based on estimated 75,000 won per share, Lee said.

Blackpink speak on the stage at the 2022 MTV Video Music Awards ″VMA's″ at the Prudential Center in New Jersey on August 28, 2022. [UPI/YONHAP]

YG Entertainment’s shares are projected to grow from an estimated 80,000 won per share to 90,000 won, up 12.5 percent, according to Daishin Securities analyst Lim Soo-jin.

“Uncertainty revolving around Blackpink’s activity, which was evaluated to be a discount factor, has been resolved,” Lim said. “Although each members’ individual contract renewal is still under discussion, [the group’s contract renewal] has already been considerably reflected in the stock rise and is expected to surge more when two or more members announce the extension of their contracts.”

As the members are currently on a break, Lim anticipates that Blackpink will resume its activities from the fourth quarter of next year, which will be reflected in YG’s earnings from 2025.

BabyMonster, a six-member rookie girl group that debuted last month with a hip-hop single “Batter Up,” succeeded in capturing the attention of global fans but the atmosphere from its home country of Korea still remains questionable.

“Anticipation over BabyMonster’s potential is high,” Lim said. “The initial fandom scale is 60,000 people, similar to the respective size of Le Sserafim and Nmixx who have sold more than 1 million albums.

“However, BabyMonster’s EP sales will be lower than that. When peering into the group’s fandom community, it mainly constitutes of foreigners from Southeast Asian regions, very similar to Blackpink’s fandom structure. Considering that Blackpink’s fandom number is 240,000 and it had 1.6 million sales in the first week for its album ‘Born Pink,’ Baby Monster’s debut album sales is projected to reach around 400,000.”

Other K-pop groups born out of YG, such as boy band Treasure which was the first K-pop act after Blackpink, are not faring as well as anticipated. The boy band's second full-length album "Reboot" released in July became Treasure's first album to sell more than 1 million copies, three years since its debut in August 2020.

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