It has been a few months since we last looked at the financial health of the three major entertainment agencies. Now seems like a good time to see how they are doing in 2014. In May 2014, SM Entertainment (KOSDAQ: 041510), YG Entertainment (KOSDAQ: 122870) and JYP Entertainment (KOSDAQ: 035900) posted their 1st quarter financial results (For the period 01/01/2014 to 31/03/2014).
The results were interesting to see the least and there is a lot of information to digest so here is a brief summary of all the information we are about to cover in the rest of the article
- Total combined sales for first quarter 2014 from the three agencies was approximately USD$106 million, which is a USD$33 million increase compared to last year
- SM Entertainment’s total sales revenue was approximately USD$60.19 million, operating profit was approximately USD$4.27 million and net profit was approximately USD$2.59 million
- YG Entertainment posted total sales revenue of approximately USD$39.5 million while operating profit was approximately USD$7.4 million, with net profit being approximately USD$5.2 million
- JYP Entertainment posted a total sales revenue of approximately USD$6.79 million, with operating income finally back in the black at approximately USD$298,000 and net profit also in the positive at approximately USD$843,000
- All three agencies posted percentage increases in total sales YOY (Year over Year) while both YG and JYP saw percentages increases for operating profit and net profit
- YG Entertainment has broken their previous first quarter records, helped by the success of 2NE1
- JYP Entertainment has finally manage to post positive operating profit thanks in part to their merger last year
First off, let’s talk numbers. It will help if you read up on how the companies were doing during the first half of 2013 in our previous article.
Just to make the comparisons between previous results contextually accurate, we will be assuming an exchange rate of 1000 KRW to 0.90 USD. Actual exchange rate is closer to 1000:0.97 but given that these companies declare finances in KRW, there should be no major issues doing our general finance comparisons using the previous exchange rates.
The first half of last year was not the best of times for SM Entertainment. Their operating profits were down YOY (Year over year) and they saw significant decreases in their music export sales compounded by a large increase in expenses.
For first quarter 2014, SM Entertainment’s total sales revenue was approximately USD$60.19 million, operating profit was approximately USD$4.27 million and net profit was approximately USD$2.59 million.
Obviously big numbers don’t mean much with context so let us compare it with previous results.
SM Entertainment hopes that EXO’s Asia Tour will boost their sagging profits
Total sales and net profit both went up YOY by 33% and 44% respectively, however operating profit were down by 6.5%. However these results were still 45% below market expectations. The under-performance has been attributed to a lack of high margin Japanese activities in the first half of this year compounded by the weakening of the Yen, which has negatively affected SM’s potential profit for this quarter.
SM Entertainment will likely not meet market expectations until at least the latter half of this year due to the weakening Yen and the continued impact of the Sewol Ferry disaster, which put a stop to most artist activities in the first half of this year. However during the latter half of this year, EXO’s Asia Tour along with TVXQ and Girls’ Generations Japan Tour is expected to provide the company with a much healthier financial boost.
YG Entertainment has been all smiles for the last couple years, posting constant healthy increases in total sales, operating profits and net profits. They have seen plenty of success in the last year thanks to continued interest in PSY along with the relative success of 2NE1 and Taeyang during the latter half of 2013.
In first quarter 2014, YG Entertainment posted total sales revenue of approximately USD$39.5 million while operating profit was approximately USD$7.4 million, with net profit being approximately USD$5.2 million. These figures are also fairly impressive when compared YOY. Total sales revenue is up 36%, operating profit is up 31% and net profit is up 33%, which means that YG Entertainment has once again beaten their own records and has posted their best ever first quarter results.
The success of “Crush” has helped YG Entertainment break their own records once again
These results were largely thanks to the success of 2NE1’s second album, “Crush,” which made up 13.5% of YG Entertainment’s total sales in first quarter 2014, bringing home approximately USD$5.35 million. 2NE1’s 2014 World Tour and Big Bang In Seoul concerts also contributed positively to YG Entertainment’s first quarter results with total sales revenue of USD$4.57 million or 11.6% of total sales revenue.
YG believes that performances like YG family family tour will help to maintain their momentum
YG Entertainment also expects to continue this momentum through the rest of this year with the 2NE1 world tour concert, YG family world tour, PSY’s comeback and Big Bang’s comeback all scheduled to occur throughout the rest of the year.
Next Page – JYP Entertainment posts healthy figures and we delve a bit deeper into each company’s financial reporting