Big Hit Entertainment Co., behind the K-pop idols BTS, is switching its focus to online concerts, merchandise and character businesses from offline performances, said its senior executives on Sept. 22, with two of the seven boy-band members approaching their mandatory national military service, which lasts about two years.
“Big Hit has been building a business model to maximize profits even without its artists’ activities,” Han Park, Big Hit’s investment & strategy head, told
a web-based conference before its Sept. 24-25 IPO bookbuilding.
“Bit Hit is well-versed in the fandom-based business model, targeting fans with blind loyalty to artists. We have expertise in transforming the fandom business into a value-added business,” he added.
During the IR session, the South Korean entertainment company aimed to dispel market concerns about the possible impact of the BTS members' military service on its earnings, heavily dependent on the boy band.
“Revenues from BTS’ activities account for just half our total revenues,” said Park. “We will help them grow as iconic artists, such as Rolling Stones or Metallica, who make money from performing just once every couple of years,” said Park.
When the two go for military service, BTS' individual members will be able to perform solo or in smaller groups. During this time, Big Hit believes it can generate a steady stream of revenue from BTS in many ways: through solo and smaller group performances; indirect participation through online concerts, mobile games and video content; as well as merchandise sales. In 2018, BTS renewed a seven-year contract with Big Hit.
The indirect participation events made up almost half of Big Hit's revenue in the first quarter of this year, up from 31% in 2018. The company takes a bigger portion of profits from indirect participation than from albums, concerts, advertisements and TV appearances.
ONLINE FAN COMMUNICATIONS PLATFORM
Big Hit’s online fan club platform, Weverse, has become a new source of revenue growth, accounting for 38% of total revenue in the first quarter, up from 4% in 2018. Weverse is also home to multimedia content for BTS and other Big Hit fan groups. The sales model based on the online platform differentiates Big Hit from other entertainment companies in the country, said Park.