SM Entertainment-signed Aespa. Photo Credit: Eternal Return
Despite a double-digit year-over-year (YoY) improvement on the album and digital music side, SM Entertainment experienced a small revenue decline during 2023’s final quarter, according to a newly released earnings report.
The professional home of K-pop acts such as Red Velvet, Aespa, and Louis Vuitton-sponsored Riize just recently posted its financials for the latter three months of 2023. Following record-high album sales as well as revenue of ₩266.3 billion (currently $200.41 million) for last year’s third quarter, SM has disclosed $188.05 million/₩250 billion in revenue for Q4.
That sum, in addition to marking a slip from Q3, represents a roughly 3.4% YoY decline, which the Dream Maker parent chalked up to concert-size reductions as well as “slow business conditions” on the advertising and content fronts.
As part of the $188.05 million total, the company, which is reportedly continuing to grapple with both organizational and regulatory scrutiny as a result of its connection to Kakao, attributed $123.14 million (₩163.7 billion) to core operations.
That refers specifically to $68.15 million/₩90.6 billion generated from “album/digital music” (up 17.7% YoY, as mentioned, but down 20.1% quarterly) and $20.16 million/₩26.8 billion from TV and advert appearances (up 6.3% YoY and 24.6% quarterly), the resource shows.
(Across all of 2023, SM released 64 albums and digital projects, with new albums having moved a record 20.1 million copies, CEO Jang Cheol Hyuk noted during the Q4 earnings call.)
Another $8.95 million/₩11.9 billion derived from concerts (up 59% YoY and down 51.3% quarterly), besides $25.35 million/₩33.7 billion in the “MD/licensing” category (down 18.5% YoY but up 16.8% quarterly) and $451,000/₩600 million from other sources, per the Hybe rival. All told, the segment achieved net income of $7.07 million/₩9.4 billion, up 18.1% YoY but down 74.5% quarterly.
However, SM identified comparatively lackluster results for its “major subsidiaries,” like the aforementioned Dream Maker as well as KeyEast and SM Culture & Contents. As a whole, the units turned in $97.04 million/₩129 billion in revenue (down 5.4% YoY but up the same percentage quarterly) and a net loss of $40.54 million/₩53.9 billion (an improvement from Q4 2022 but not Q3 2023’s $2.33 million/₩3.1 billion in net income).
Consequently, SM Entertainment suffered an overall $14.82 million/₩19.7 billion net loss during Q4 2023, down from $63.34 million/₩84.2 billion in Q3 2023 net income and $1.43 million/₩1.9 billion in net income from the prior-year quarter, according to the report.
Looking ahead to the remainder of 2024, SM also highlighted an over 35-album release schedule – including forthcoming projects from Thailand-born Ten (a mini-album that will drop tomorrow), NCT Dream (a March mini-album), Red Velvet (a Q2 mini-album), and Aespa (a Q2 album), to name a few.
Several of the same acts have likewise teed up high-profile concerts and tours, including NCT Dream’s world tour, while a British boy band, an unnamed girl group, and more are on the horizon for SM.
Behind these efforts, the business is banking on 2024 revenue of $528.66 million/₩703 billion for its core operations, with a $376.05 million/₩500 billion tranche earmarked for continued label buyouts, an ongoing publishing buildout, “global expansion,” and “virtual IP.”
When the market closed today, SM Entertainment stock (KRX: 041510) was worth an even $54.91/₩73,000 per share, reflecting a small decrease from opening and an approximately 37% falloff from mid-February of 2023.
