SM Entertainment's revenue falls despite increase in album sales from NCT 127, released aespa

With a roster of new artists and a newly launched joint venture in North America, SM Entertainment's revenue reached 250 billion won ($189.5 million at the period's average exchange rate) in the fourth quarter of 2023, down 3.4% on a year-over-year basis and down 6.1% from the third quarter, the company announced on Wednesday (February 7th). Operating profit fell 51.7% to 10.9 billion won ($8.3 million) while the company posted a net loss of 19.7 billion won ($14.9 million) compared to a net profit of 1.9 billion won ($1.4 million) in the previous period.

The company attributed the decline in revenue from its concert-related subsidiaries to smaller concerts and the decline in its content-related subsidiaries to “slow business conditions.”

SM Entertainment sold 5.6 million albums in the fourth quarter, up 40% from the previous quarter. NCT 127's album Fact check sold 1.86 million units and aespa's Drama The EP sold 1.26 million units. In terms of concerts, NCT Wish performed 24 concerts in nine cities in Japan before the release of their debut album later this quarter. SHINee performed for 80,000 fans in four concerts in Japan. NCT 127 held six concerts in Seoul, Korea with a total attendance of 60,000.

For the entire year, SM Entertainment released 64 albums that sold a record 20.1 million units, and its artists performed in 340 concerts around the world. RIIZE, the first boy band to debut under the company's new multi-producer system — an organizational structure introduced in 2023 to break away from the previous system that relied solely on the founder and ousted main producer Lee Shu-man — sold more than 1 million units of his debut album, Get a guitarwhich was released in September.

“The multi-producer system, which is a key part of our SM 3.0 strategy, has been running successfully since its introduction last year, and active music activities are underway under the guidance of each SM production manager,” CEO Jang Cheol Hyuk he said during Wednesday earnings call. The system is intended to speed up the introduction of new artists and material by giving other leaders decision-making powers.

Looking ahead to 2024, SM Entertainment will launch four new artists: NCT Wish, virtual artists naevis, an unnamed girl group, and a UK-based boy band. The company also plans to release global albums for major artists at least once a year and expand the scale of global concerts, Jang said.

In the first quarter, SM has EPs from NCT Dream, TEN, Taeyong, and Wendy, while NCT 127 is holding 13 dates in Japan, Indonesia, the Philippines, Thailand, and Macau. The second quarter will see a new album from aespa and EPs from Red Velvet, RIIZE, SHINee, SUHO and WayV, as well as 15 concert dates for NCT Dream in Korea, Japan and Southeast Asia. Other artists such as MINHO, TVXQ!, Super Junior-LSS, SHINee, TAEmin, and aespa each have a handful of shows during the first or second quarter.

SM Entertainment also expects to see results from its North American partnership with Kakao Entertainment. The two companies are “working to create and expand local partnerships for artists,” Jang said. He pointed to the strategic joint venture agreement with Moon & Back, a UK-based entertainment and TV production company, which will feature a five-piece boy band in the UK and perform songs originating from KMR, the new subsidiary of SM Entertainment.