Hybe and SM Entertainment Explore Opportunities Amid Doubts Over Profitability

Courtesy of CJ ENM

K-pop powerhouses such as Hybe and SM Entertainment have shown increasing interest in the music market of the Middle East.
 

▲ Hybe Chairman Bang Si-hyuk / Courtesy of Hybe

Last week, Hybe Chairman Bang Si-hyuk met with United Arab Emirates President Mohamed bin Zayed Al Nahyan to discuss potential cooperation in K-pop ventures. SM Entertainment, under its founder and former chief producer Lee Soo-man, signed a memorandum of understanding with the Saudi Arabian Ministry of Culture in November 2022 to establish a content creation studio and host a large-scale K-pop concert in Saudi Arabia.

Following Kakao Entertainment's acquisition of SM Entertainment in 2023, discussions were held with Saudi Arabia Tourism Authority officials to enhance cultural exchanges utilizing the company’s intellectual property.

However, efforts by K-pop companies to develop the Middle Eastern market have faced skepticism from industry insiders. According to an official from a local entertainment company, while the region's large youth population is attractive to K-pop companies, the profitability and market size remain low. The International Federation of the Phonographic Industry's latest Global Music Report did not list any Middle Eastern country among the top 10 largest music markets in 2022.

The Saudi Arabian music market was estimated at $44.06 million in 2022, compared to Australia, which generated $216.9 million. The Middle East and North Africa ranked fourth in the fastest-growing regions for recorded music revenues in 2023, with a growth rate of 14.4 percent. 

▲ K-pop girl band NewJeans performs at KCON 2022 Saudi Arabia, at Boulevard Riyadh City on Oct. 1, 2022 / Courtesy of CJ ENMSaudi Arabia has a young population, with 63 percent of its 32.2 million residents under the age of 30 and an internet penetration rate of 98 percent. These factors are significant for K-pop companies exploring new markets. CJ ENM staged KCON, the world’s biggest K-pop concert, in Saudi Arabia in 2022 and 2023 to test the market, but future events remain uncertain.

The second KCON festival in Saudi Arabia in 2023 did not perform well, with a less popular lineup of K-pop artists. A K-pop concert promoter noted that high-profile groups like BTS and Blackpink are unlikely to perform in the Middle East due to insufficient financial incentives. The Saudi Arabian government has also reduced its budget for future K-pop concerts, now approving fewer projects.

An industry source indicated that the Middle Eastern market is a lower priority for K-pop entertainment companies compared to the US, Japan, and Latin America. The US and Japan remain the largest music markets, while Latin America is a growing market of interest.

"For now, there is no good reason to choose the Middle East over the former three," the source said.

Sayart 

Blue YIM, yimyoungseo1010@naver.com