Cube Entertainment Reported To Have Faced A Significant Financial Loss Last Year

2017-03-04 21:13:09 2017-03-04 21:13:09

KOSDAQ (a South Korean trading board) entertainment agency Cube Entertainment is reportedly facing a massive deficit this year after serious operating losses in 2016, the departure of flagship group BEAST, and THAAD.

According to the Financial Supervisory Service’s Data Analysis, Retrieval and Transfer System on March 4, Cube Entertainment had posted an operating loss of 5.7 billion won (almost $5 million) in 2016. In 2015 the company had posted an operating profit of about 710 million won (about $600,000), making their overall 2016 loss about 6.7 billion won (about $5.6 million).

Cube’s sales, at 19.4 billion won, decreased 13.1 percent in 2016 compared to the previous year. With a corporate tax of 6 billion won, the company posted a net loss of 5.1 billion won.

According to securities business circles, a major factor in Cube’s loss is the departure of flagship group BEAST, who reportedly made up 45 percent of their total sales.

In 2016, Cube saw original BEAST member Jang Hyunseung leave the group, as well as the disbandment of another flagship group, 4minute. In 2017, the remaining members of BEAST left the company entirely to focus on their new agency, Around Us.

A source from Cube Entertainment stated, “As the artists in our agency came to the end of their contracts, the management’s sales decreased. The expansion of the management business portfolio and other increases in expenses led to the reduced profit and loss.”

Cube’s affiliate companies are also struggling, with Cube Entertainment Japan Co., Ltd and Star Line Entertainment suffering losses as well. In addition, the effect of THAAD on Korean exports to the Chinese market continues to be a factor in the Korean entertainment industry.

As of March 4, Cube Entertainment’s stocks sit around 1880 won (about $1.63), a 5.29 percent decrease since the previous day. On September 23, 2016, their stocks had hovered around 5090 won (about $4.42), indicating a drop of 63.06 percent in six months.

A source from securities business circles said, “The Chinese authorities are stepping up on their resistance to Korean imports as a result of THAAD. Even the big entertainment agencies in KOSDAQ like YG and SM are struggling, so it’s possible that Cube’s stocks will never recover their peak again.”

Although Cube Entertainment has announced a relaunching of BEAST with Jang Hyunseung and some new members, some internal problems may impede development in that area. Cube also launched a new group last year, PENTAGON, who does not yet bring in the steady earnings that the company needs from a flagship group.

Lee Won Seok, a researcher at NH Investment and Securities, said, “The uncertainty surrounding the dismissal and departure of existing flagship groups have reduced the visibility of the company’s performance. As all domestic entertainment agencies are experiencing the impact of THAAD, clearing up the uncertainty around BEAST has to take top priority.”

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