SM Entertainment, Facing Decline in Album Sales, Launches Dedicated Performance Unit to Make Concerts a Cash Cow

SM Entertainment's Operating Profit Drops 23% Due to Decline in Album Sales
Easing of Overheated Album Competition After the Pandemic
Protecting Profitability Through Specialized Concert Organization and Expanded Workforce

Concerts by top star idols at home and abroad are drawing attention as SM Entertainment's (SM) new 'cash cow.' As album sales, which surged briefly during the COVID-19 pandemic, have stagnated since last year, the company is strategizing to boost profitability in domestic and international concert businesses to create new growth engines.

According to industry sources on the 12th, SM has set a strategy to increase the number of concerts held this year and to enhance efficiency by directly leading the concert business from headquarters. An SM official explained, "We have subdivided the concert team into 'planning' and 'production' and significantly increased personnel, playing a key role. Previously, we outsourced concert tasks to subsidiaries, but now the headquarters is fully taking on this function."

SM Entertainment celebrated its 30th anniversary with the concert 'SM Town Live 2025' held last month, where H.O.T. members Tony An and Kangta, along with NCT Dream, performed the song 'Candy.' Photo by SM Entertainment

Looking at SM's fourth-quarter performance last year, concert revenue stood out. According to Daishin Securities, due to the expansion of concert scale, concert revenue reached 22.5 billion KRW, an 88.5% increase compared to the same period the previous year. Performances were held with NCT U 12 times, NCT Dream 9 times, TVXQ 9 times, Chanyeol 14 times, and Yuta 9 times.

This 'internalization of the concert business' was outlined in the 'SM 3.0' system announced in 2023 after former chief producer Lee Soo-man left. Since then, the concert team began to establish itself as a permanent department. Under the SM 1.0 to 2.0 system (1995?2023), led by Lee Soo-man, the internal concert team was repeatedly created and dissolved. There was also a contractual limitation with the concert subsidiary Dream Maker on the 'maximum number of concerts per year.' Even if they wanted to hold more concerts, they could not.

One reason SM has focused on the concert business is the sharp decline in album sales, which generally have relatively high profit margins. As a result, SM's total operating profit last year was 87.5 billion KRW, down 22.8% from 113.4 billion KRW in 2023. Entertainment companies, including SM, have long encouraged multiple album purchases by including different photocards for each idol member or increasing the chances of winning fan sign events the more albums fans buy.

Especially during the COVID-19 pandemic, when face-to-face activities were restricted and concerts could not be held, competition among entertainment companies for album sales records overheated. An industry insider explained, "Excessive marketing practices, such as 'first-week sales competition,' 'infinite fan sign events' (continuously holding fan sign events until album stock is depleted), and 'album pushing' (shipping more than necessary or forcing middlemen to buy), which were pointed out as various problems, have eased since last year, leading to a decrease in sales."

According to the Circle Chart operated by the Korea Music Content Association, physical K-pop album sales last year were 98.9 million copies, a 17.7% decrease from 120.2 million copies the previous year. The 'K-pop 100 million sales era' that began in 2023 ended after just one year. The increase in album exports was also minimal. According to customs export-import trade statistics, album export value last year was 291.83 million USD (approximately 423.8 billion KRW), a mere 0.55% increase from 290.23 million USD in 2023.

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