[넘버스]Hive’s transformation, the big picture drawn by taking over’Ithaka’ beyond BTS

Let’s interpret business, economy and technology with numbers. Numbers are a source of information. Information is open to anyone, and numbers can be seen by anyone, but not everyone has an eye to see the truth behind it. Let’s easily solve the number story with so that everyone can relate.

What image do you think of when you hear the word’big hit’? Most people will think of Big Hit Entertainment, the agency of’BTS’ (BTS). The weight of the word’big hit’ is heavier than ever due to BTS, which is active globally beyond Korea. BTS was not only nominated for the’Best Pop Duo Group Performance’ category at the ’63rd Grammy Awards’, a world-renowned music awards ceremony, and participated as a solo performer of the awards ceremony. As I grew up as a global artist, the awareness of my agency, Big Hit, also increased.

Big Hit announced the news last month that it was changing its name to’HYBE’. In fact, until Big Hit applied for the trademark’Hive’ in December of last year, it was expected that it would be a new artist or service, but no one knew that it would be their mission. In particular, it was analyzed that changing the company name in a situation where BTS’s sales accounted for the majority would be a risky adventure.

Nevertheless, Big Hit and Ani Hive passed the agenda for changing the company name through the regular shareholders’ meeting on the 30th of last month. Chairman Bang Si-hyuk, who created a company and produced BTS to grow into a global artist, said, “We have a new mission, space, and organizational structure to start another, but as always, the nature of what we do does not change.” We believe in the power of music, innovate the industry, and make a difference in our lives.”

Listening so far, it may sound like a saying “when let’s eat once”. This is because even pursuing change is useless if nothing is revealed. However, Hive achieves’the power of music’ and’changes in life’. When looking at Hive’s actions, it’s not innovative, and it even appears unconventional.

One hit wonder? Now the global label

Hive has grown steadily every year. You can check the growth trend just by looking at the profit and loss status. Hive, which achieved 301.3 billion won in sales in 2018, recorded 587.2 billion won and 796.2 billion won in sales in 2019 and last year, respectively. During the same period, operating profit continued to grow in the order of 79.9 billion won, 97.8 billion won, and 1455 billion won. We diversified our portfolio every year through the long-term success of BTS, financing through IPO, and equity investment in labels and IT services.

However, Hive still has a strong view of’BTS One Man Team’. In 2019, it acquired a stake in Source Music and recruited a female idol group’Girlfriend’ as a member of the artist, and added’Seventeen’ and’NU’EST’ to the portfolio last year through the acquisition of a stake in Pledis Entertainment, creating a full-fledged multi-label system. Even though it was built.

The risk factors for Hive’s investments listed in the securities report are more evident. The sales share of BTS, a major artist, recorded 97.4% and 84.7% in 2019 and last year, respectively. Although the proportion of BTS has decreased through the acquisition of labels and portfolio expansion, it is not enough to resolve the bias. As BTS members join the military in order from 2023 onwards,’sustainable growth’ is urgently needed to prepare for a related void.

Hive seeks a breakthrough by acquiring large global labels and improving corporate governance. It is a plan to acquire the global label’Ithaca Holdings’ through the US subsidiary’Big Hit America’. We are also promoting corporate governance restructuring prior to the acquisition of Ithaka Holdings through subsidiary mergers and division of divisions.

On the 30th of last month, Hive appoints Park Young-ho, CEO of Laguna Investment, as a new outside director. From this point, you can get a glimpse of Hive’s efforts to improve its constitution. CEO Park Young-ho is an entrepreneur who served as CEO of Joy City, a game company, and is known as an investment expert. While working at NHN, Korea Investment Partners, and 4.35 minutes, I came to Joy City after building competency in the field of development and investment, and secured large-scale financing and global IP. In fact, Joy City said that during his tenure as CEO Park Young-ho, sales increased by 90% and operating profit increased by 148% after turning to the black. We expect to be able to seek advice on overseas markets and investment through CEO Park Young-ho, who is also the Chief Investment Officer of Joy City.

Hive did not postpone the improvement of its governance structure. We merged with Hive IP and Hive 3 Sixty, which are 100% subsidiaries, while physically dividing the album and label division to establish a new corporation’Big Hit Music’. Through this, the business units, label, solution, and platform, have been compressed into three major locations. You can find strategic elements to increase the label’s presence.

The label division categorized Pledis, Source Music, Big Hit Entertainment Japan, T&D Japan, and K-OG Entertainment into a parallel structure, with Big Hit Music first. Hive absorbs Hive IP, which is in charge of developing and distributing artist-based secondary contents such as MD, characters, and publications, and Hive Three Sixty, which is engaged in performance planning and agency, record/sound distribution, video content production and distribution, and advertising agency. As a result of the merger, the solution division will be reorganized into Hive Edu (educational), superb (rhythm game development), and Big Hit Solutions Japan (in charge of Japanese business). The platform business was classified and managed into Weverse Company and Big Hit America.

The point to note here is the sound source and label business. The sales portion of the album and label division within Big Hit was 40.26% as of last year. As the sales of performances, which exceeded 32.5% in 2019 and threatened the album and label business, sharply declined in the aftermath of Corona 19, the presence of the label business increased last year. It can be interpreted as launching Big Hit Music with’Big Hit’ to reinforce the album and label division, which has become a major source of sales. It would be a judgment that we cannot give up the symbolism of’Big Hit’ on the global stage. The birth of Big Hit Music can be interpreted as this passage.

Complex synergy aimed at’economy of scale’

The final puzzle to solve’Next BTS’ was the acquisition of’Ithaca Holdings’. The acquisition of Ithaka Holdings cannot be viewed as a simple factor to fill the gap in BTS. Hive’s strategic business is hidden through’Mega Deal’ worth KRW 1 trillion.

Hive acquired a 100% stake in Ithaca Holdings, a U.S.-based comprehensive media holding company covering the fields of music management, record label, publishing, film, and TV show, through the U.S.-based subsidiary Big Hit America, in accordance with the resolution of the board of directors on the 2nd. I signed a contract.

BH Odyssey Merger Sub, a special purpose corporation established by Big Hit America as a wholly owned subsidiary on the 22nd, reversed the merger of Ithaca Holdings, the target of the acquisition. Executives and artists belonging to Ithaca Holdings Group, including Hive, will participate in the capital increase. When a blood transfusion of 1.728 trillion won secured through this is transfused to Big Hit America, it will be paid to Ithaca Holdings as consideration for the merger. The acquisition funds will be used to repay the debts of Ithaca Holdings creditors in addition to the consideration for the merger. When BH Odyssey Merger completes the merger of Ithaca Holdings, the structure to become Hive’s subsidiary is completed. The payment date for mergers and acquisitions related to mergers and acquisitions is May within 5 business days from the date of approval under the U.S. Antitrust Improvement Act.

However, the picture in which Hive has completed its vertical governance structure through physical division and mergers and acquisitions and owns Ithaca Holdings through its subsidiary Big Hit America is a part that is not readily understood. What synergy does Hive expect from Ithaca Holdings?

Hive has divided the synergies that can be obtained through the acquisition of Ithaca Holdings into five major categories.

△Securing a foundation for future growth by securing a lineup of global artists belonging to Ithaca Holdings such as Justin Bieber, Ariana Grande, Jay Balbin, Demi Lovato, etc.△Expanding indirect sales of new artists through connection with business platforms △Global entertainment industry for label artists Effective support of overall services locally △Achieving economies of scale by combining Ithaca Holdings and Hive’s artist pool, and expanding business feasibility by sharing mutually owned IP △Complementing Hive’s strong solutions and platform with Ithaca Holdings’ brand The goal is to discover new businesses in the sea.

This is expected to serve as a bridgehead for strengthening the North American and European markets while expanding the global advance of artists belonging to domestic labels, including BTS. It can also be used as a justification for extending the contract with’Girlfriend’, whose contract expires this year, and’Seventeen NU’EST’, whose exclusive contract ends next year. If the artists mentioned above increase their global awareness, it is expected that the bias in BTS sales will also be reduced. Big Hit America, which operates a platform business, strengthens its label business in the U.S. and enables independent management to enter new businesses linked to each subsidiary.

Hive’s big picture is expected to be outlined in July, when the corporate governance reorganization is completed. With the launch of Big Hit Music to continue its global identity, can the alliance front with the super-large label leading to Ithaca Holdings become Hive’s’wings’? As Chairman Bang Si-hyuk said, this is why we look forward to Hive’s milestone in taking on new challenges for’the power of music’ and’change of life’.