Will HYBE be able to pull this off?
HYBE, the parent company of global K-pop group BTS, has entered the gaming industry, which is being interpreted as part of an effort to diversify its revenue model away from the existing music label business, which is heavily reliant on BTS, and toward new businesses such as games, non-fungible tokens (NFT), and the metaverse.
According to the investment banking (IB) sector, HYBE chose to form a company in the United States and move its game development and publishing operations there. The new corporation's name is expected to be 'HYBE IM,' following the present gaming division's organization. It is also encouraging collaborations with significant local and international gaming businesses including Krafton, Netmarble, and NCsoft. It may be possible in certain situations to create a joint venture in the United States. HYBE also stated that in the first part of this year, it will form an NFT joint venture with Dunamu in the United States. It is estimated that HYBE is making a significant jump in the future content business in the global market, with all firms that will be the foundation of the company's new business deciding to locate in the United States rather than in Korea.
In 2019, HYBE joined the gaming industry by purchasing Superb, a rhythm game developer, and establishing it as a wholly owned subsidiary. To enhance its size, the firm joined with the company's gaming business last year, and it was recently restructured into a new entity named HYBE IM. HYBE IM employs between 70 and 80 game developers. In 2019, it debuted 'BTS World' in conjunction with Netmarble, HYBE's second-largest shareholder, and in February of last year, it produced games such as 'Rhythm Hive' featuring BTS members as characters. However, the outcomes of the games that have been published so far have fallen short of expectations.
The industry anticipates that HYBE will significantly boost its gaming business. Since its initial public offering in October 2020, HYBE has positioned itself as a platform business rather than an entertainment agency. The goal is to break away from the system of fostering and launching artists and selling records and instead create a platform that engages with fans on a continual basis in order to earn continuous income.
For the last three years, HYBE has been preparing by picking games as one of the main components to make this notion a reality. Former Nexon CEO Park Ji Won was appointed as CEO of HYBE last year, accelerating the company's progress toward its objectives.
HYBE said that it has planned to improve its gaming business in order to lessen its reliance on BTS income. Big Hit Music, which includes BTS and TXT, had an operational profit of 127 billion KRW (103 million USD) last year, accounting for almost 66 percent of HYBE's overall operating profit of 190.3 billion KRW (154 million USD). Jin, BTS's oldest member, was born in 1992 and is required by law to enroll in the military by the end of this year. Although the National Assembly is debating a measure for special military service against BTS, there is much resistance, therefore there is considerable uncertainty.
The gaming industry is a representative area that may directly employ its artists' intellectual property rights (IP), such as BTS, and is regarded as a vital part in the so-called 'fandom to earn' aspect, which leads to revenues. HYBE presented the talents of its in-house gaming experts and demonstrated its dedication to the game industry during a recent conference call for investors.
"If a game is produced that permits direct interaction with beloved artists inside the metaverse, rather than merely copying BTS' songs and characters from the game," said an analyst in charge of HYBE at a local securities firm, "the gaming industry will generate exceptional cash flow."