K-pop 'China Shock', Album Sales Down 95%, Is This the Second Hanhanryeong?

SM aespa, JYP Stray Kids Initial Sales Decline
K-Pop Album Sales in China Drop Over 95% in Second Half
HYBE Shows Growth Amid 'Decoupling' Phenomenon

The 'China Shock' has hit K-pop. Album sales of K-pop in China have dropped by more than 95% in the second half of this year. It is practically a market exit level. As the decrease in album sales of top-tier idols in China has been confirmed, concerns are rising that the overall growth rate of the entertainment industry might slow down. On the 17th, the first-week sales (initial sales) of Stray Kids and aespa decreased by 19.8% and 33.5% respectively compared to their previous releases, causing the stock prices of entertainment companies to plummet simultaneously.

From the top left clockwise: HYBE, SM, YG, JYP headquarters
[Photo by Kang Jin-hyung, Asia Economy; provided by SM, YG, JYP]

Looking at a broader period, the combined market capitalization of the four major entertainment companies (HYBE, JYP, SM, YG) evaporated by 6.7975 trillion KRW in five months. This coincides with the period when sales in China sharply declined. From June 22, when it was 21.7493 trillion KRW, it shrank to 14.9518 trillion KRW as of the closing price on the 22nd. Considering that all four companies recently announced record-high third-quarter earnings, the shockwave is significant.

“Not a natural decline but due to artificial regulation”

The decline in sales in China began in early summer. There has been a clear negative growth for the past five months. In June, the export amount of albums to China was $156,000, a 97.7% plunge compared to $6,954,000 in the same period last year. From July to October, there was also more than 95% negative growth. However, during this period, the decrease in sales in China was not a major issue because the album sales of the main idols of major entertainment companies were still growing.

However, aespa and Stray Kids are the main groups of SM and JYP, respectively. These two groups, in their 4th and 7th years respectively, have surpassed their previous album sales with every new release. This time, for the first time, their growth trend was broken, and the core reason was analyzed to be the decrease in sales in China, which sent shockwaves through the market. According to a report released by Kyobo Securities on the 20th, among the 1.69 million initial sales of aespa’s album released in May, Chinese fans purchased 1.02 million copies, accounting for 60.4%. For Stray Kids, the Chinese share was 24.7% of the 4.61 million initial sales of their June album. Most of these volumes have disappeared.

Album sales account for about half of the entertainment companies’ revenue. As of the third quarter, HYBE’s album sales accounted for 49.1%, JYP’s 41.3%, and SM’s 42.5% of their revenue. The exact cause of the sharp decline in sales in China has not yet been clearly identified. Seongguk Park, a researcher at Kyobo Securities, said, “It is speculated to be due to various reasons such as shadow regulations by the Chinese government, sluggish Chinese economy, self-regulation among Chinese fan clubs due to competition, and the limit of K-pop growth.” He added, “It is believed to be caused by intervention from regulatory authorities rather than a natural demand contraction.” What is certain is that idols highly dependent on China may suffer significant damage for the time being. In the industry, there are even remarks like, “After games, are we now the target of the Hanhanryeong (Korean Wave ban)?”

HYBE pursues ‘decoupling’, each company focuses on nurturing ‘local groups’

On the other hand, the initial sales of artists under HYBE continue to grow, showing a ‘decoupling’ phenomenon (moving independently contrary to the overall trend). On the 17th, ENHYPEN sold 1.38 million copies within a day of album release, surpassing the previous initial sales of 1.32 million. Seventeen, who made a comeback in October, set a new K-pop record for the highest initial sales with 5.09 million copies, and TOMORROW X TOGETHER also exceeded their previous record (2.18 million) with 2.25 million copies. HYBE views this as the result of its ‘expansion strategy’ that has been in operation for years. Through acquisitions of Ithaca Holdings and QC Media Holdings in the U.S. and establishing a Latin American corporation, it has built an ecosystem that does not rely on specific regions or markets. YG Plus, which distributes HYBE artists’ albums, also benefited by recording its highest-ever market share (57.6%) in October.

Entertainment companies are launching ‘localization projects’ to overcome growth limits and create new opportunities for advancement. HYBE recently collaborated with U.S. Geffen Records to finalize the members of the six-member global girl group ‘Cats Eye’ after a 90-day audition. JYP also partnered with U.S. Republic Records to launch the local U.S. girl group ‘Bicha’. Park Jin-young, founder and CCO (Chief Creative Officer) of JYP, appeared on the YouTube channel ‘Shuka World’ expressing confidence by saying, “If I had extra money, I would definitely buy JYP stocks.” SM is working with the British entertainment company Moon and Back to produce a rookie boy group that will be active in Europe.

This content was produced with the assistance of AI translation services.