Blackpink’s contract renewal sent YG shares on a wild ride

INDIO, CALIFORNIA – APRIL 22: Jennie, Jisoo, Lisa, and Rosé of BLACKPINK carry out on the Coachella Stage throughout the 2023 Coachella Valley Music and Arts Competition on April 22, 2023 in Indio, California. (Photograph by Emma McIntyre/Getty Photographs for Coachella)

Emma Mcintyre | Getty Photographs Leisure | Getty Photographs

Within the oversaturated Okay-pop music scene, teams come as shortly as they go.

Most contract renewals happen with out a lot fanfare — however not for Blackpink, one of many greatest woman teams on the earth.

When members of the woman group have been as a consequence of renew their contracts, shares of their label YG Leisure went on a wild trip.

In September, shares of the Kosdaq-listed YG Leisure plunged on two separate events. Shares of the leisure group fell 9% on Sept. 14 and tumbled 13% on Sept. 21 when media reported that three of its members is not going to renew their contracts with the label.

Nonetheless, YG’s inventory has risen to date this yr, with the corporate recording a year-to-date achieve of 23.38% as of Nov. 21.

Simply this week, South Korean outlet Munhwa Ilbo revealed that particular person members is not going to be renewing their unique contracts with YG, however the group will reportedly continue group activities as Blackpink below the label. Shares of YG climbed about 3% on that information.

Analysts have combined sentiments over the latest growth.

[YG Entertainment] has relied an excessive amount of on a couple of artists whereas its rivals have bolstered their artist lineups.

Minha Choi

Senior Analyst, Samsung Securities

Samsung Securities senior analyst Minha Choi minimize his goal worth for YG Leisure by 9.5% to 76,000 gained, representing an upside of 41% from Tuesday’s shut.

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“Three months have handed since Blackpink members’ contract expired in August. However there was no official announcement concerning the contract renewal. The uncertainty is weighing on shares,” Choi mentioned in a Nov. 14 be aware.

Nevertheless, on condition that members Jennie and Rosé launched materials below YG in October and November respectively, the analyst assumes the contract renewal will happen in his present valuation, though he stays “conservative concerning the variety of the group’s actions.”

The upcoming debut of recent woman group Babymonster on Nov. 27 will doubtless function a progress driver for the corporate, Choi added.

Nevertheless, he identified that YG “has relied an excessive amount of on a couple of artists whereas its rivals have bolstered their artist lineups.”

Then again, NH Funding and Securities maintained their “purchase” score and goal worth of 87,000 gained on the inventory, representing an upside of greater than 60%.

The analysts, Hazell Lee and Seungjun Lee, mentioned in a Nov. 14 report that the agency’s present share worth has baked in all main danger components, together with artist departure, which implies an easing of earnings uncertainty for YG.

‘Seven yr curse’

Not like Western artists and music acts, who’re usually shaped earlier than signing with a label to advertise, Okay-pop artists often enter a administration firm as a trainee.

They practice for a interval of months or years earlier than being chosen as a full fledged artist. If the trainee would not make the debut lineup, the individual must depart the corporate.

Contract renewals are a milestone for Okay-pop teams due to the standardized seven-year contracts that artists signal with labels — it is even been known as the “seven-year curse,” the place teams disband on the finish of their contracts.

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Some media shops even questioned if Blackpink would survive the “seven-year curse.”

As such, ought to a profitable group depart a label, this is able to imply an enormous loss for the corporate, given the fee wanted to coach and debut a brand new group from scratch.

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South Korean media outlet JoongAng Ilbo reported in December that the cost of creating a girl group can vary between 2 billion gained and 5 billion gained (about $1.55 million to $3.89 million).

Citing South Korean leisure firm Fantagio, the report mentioned the price of creating a lady group with three years of coaching for its members is estimated at 3.18 billion South Korean gained, or simply over $2.47 million.

Bokyung Suh, director and senior analysis analyst at Bernstein mentioned: “We all know that leisure is usually thought of as a lottery enterprise, as we can not simply forecast the long run and efficiency earlier than launching the mental property, equivalent to Squid Sport or Sport of Thrones.”

“So that is the explanation why the worldwide main leisure gamers attempt to diversify their IP portfolio, to run their enterprise extra sustainably,” he informed CNBC’s “Street Signs” in an interview on Sept. 25.

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