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K-Pop Agency Hybe Slides on Fears of Album Sales Peaking Out

(Bloomberg) -- K-pop firm Hybe Co.’s shares tumbled in their biggest intraday decline in three months after weaker-than-expected album sales stoked fears of a slowdown.

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The Seoul-based company, which manages artists including boy bands BTS and Seventeen, on Monday reported a net loss of 54 billion won ($40.5 million) in the December quarter, missing analysts’ expectations for a net income of 46.4 billion won. Sales for the December quarter rose 14% — the slowest growth on record, also missing estimates.

The weak quarterly results alarmed investors that the company’s explosive growth phase may have ended. Hybe’s stock slid as much as 7.4% during Tuesday morning trade. Arch-rival SM Entertainment Co. also lost ground, falling as much as 4.5%.

“Hybe has been riding a boom cycle for the last four years and last year’s earnings were exceptionally good,” said Kim Hyun-yong, analyst at Hyundai Motor Securities. “Fandoms’ album hoarding reached a peak last year. As demand from Chinese fans started to fall late last year, we expect the slowdown may continue at least until the first half of this year.”

Read more: Hybe Slips on 4Q Miss, Slowdown in Music Sales: Street Wrap

Physical album sales are also expected to be sluggish in the current quarter, Kim said. The number of monthly average users on Hybe’s fan communication platform Weverse fell in the fourth quarter after reaching more than 10.6 million, the company said.

For the full 2023 calendar year, Hybe reported a 23% rise in sales to 2.17 trillion won, the first time annual revenue at a K-pop firm topped the 2 trillion won mark. Album sales doubled to 43.6 million album units, boosted by BTS members’ solo projects and strong demand for Seventeen and NewJeans offerings, it said.

The company is building a multi-label system that it believes would fill the void created by BTS, now on hiatus while members are on military service. A major part of that goal is breaking into the US mainstream market. Hybe’s US branch contributed 26% of total sales last year, thanks to BTS member Jung Kook’s solo album Seven. The company’s also targeting the debut of a US-based group called Katseye within the year.

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