HYBE to develop game biz further to cut reliance on BTS

South Korea’s HYBE Co. plans to accelerate the development of its game business by separating the unit as the entertainment giant aims to cut the reliance on the world’s top boy band BTS and diversify its portfolio into new sectors including games, the metaverse and non-fungible tokens.

HYBE has decided to set up a unit in the US and transfer its business for game development and publishing to the new corporate, according to investment banking industry sources on Tuesday. The company is seeking partnerships with major game developers such as Krafton Inc., Netmarble Corp. and NCSoft Corp. HYBE may consider joint ventures with them in the US.

The company earlier announced a plan to launch a JV for the NFT business in the country during the first half with Dunamu Inc., the operator of South Korea’s largest cryptocurrency exchange.

The decision to base its key future businesses in the US indicated HYBE is establishing key strategies for future content businesses in global markets, industry sources said.

 LESS RELIANCE ON BTS

HYBE needs to cut its reliance on BTS. Its music unit Bighit Music Co., to which BTS and Tomorrow X Together belong, reported an operating profit of 127 billion won ($103.1 million) last year, accounting for 66.7% of HYBE’s total profit of 190.3 billion won.

BTS’ Jin, born in 1992 and the oldest among the seven members, is obliged to begin his South Korean military service by the end of this year under current laws. Lawmakers are discussing amendments to the laws allowing a possible exemption from the duty for the band's members, but it is uncertain if the parliament will approve the revised bills given strong opposition to the exemption among the public.

If they must fulfill their military service, concerns are expected to mount over HYBE’s ability to generate profits.

DISAPPOINTING PERFORMANCE

HYBE made inroads into the game business with an acquisition of Superb Corp., a rhythm game developer, in 2019.

The entertainment behemoth merged the subsidiary to combine its own game division and reorganized it as a new unit called HYBE IM that has 70 to 80 game developers. It launched BTS World with its second-largest shareholder Netmarble in 2019 and published games such as Rhythm Hive, which utilized BTS’ characters, in February last year. The unit is scheduled to release more of its own games in the first half.

HYBE’s game business, however, has been disappointing as its sales have come to just around tens of millions of dollars, making up just a little of its total revenue.

CORE OF HYBE PLATFORM

HYBE is predicted to speed up the development of its game business with the separation, industry sources said. Since its listing in October 2020, the company has been introducing itself as a platform operator, not an entertainment agency. It aims to create sustainable profit sources with the establishment of a platform to constantly communicate with fans rather than just developing artists and selling their albums.

The company chose the game business as one of its core content to accomplish the target and has been preparing measures to develop the sector for three years. Last year, it appointed Park Ji-won, former head of a game publisher Nexon Korea, as the CEO to boost the move.

The game business is a key sector for HYBE to make profits from fandoms by utilizing the intellectual property of its artists such as BTS. The company recently introduced its game unit to investors and unveiled investment plans for the business.

“If the company creates a game that allows direct contact with beloved artists within the metaverse rather than simply borrowing BTS’ songs and characters, its game business will be an incomparable cash cow,” said an industry analyst at a local brokerage house.

Write to Jun-Ho Cha at chacha@hankyung.com
Jongwoo Cheon edited this article.