Shares of YG Entertainment, the label of one of K-Pop’s biggest girl groups, Blackpink, experienced a roller coaster ride when it was time for the band members to renew their contracts. In September, YG Entertainment shares took a dive on two separate occasions due to reports that three members of Blackpink were not planning to renew their contracts. This created a sense of uncertainty in YG as to the future of the group.
However, with no official announcement, and members Jennie and Rosé releasing material under YG in October and November, the question of the renewal of their contracts raised concerns amongst analysts. While some analysts believe that the departure of the members may weigh on the share value, others believe that the risk factor has been priced into the current share price.
This diversity in the opinions of analysts on the situation at YG affects its valuation. Nonetheless, this situation has raised queries about the difference between K-pop and Western music acts. K-pop artists typically enter a management company as a trainee where they train for months or years before debuting. The standardized seven-year contracts that artists sign puts a lot of pressure on K-pop groups and raises uncertainties about their survival beyond these initial contracts.
South Korean media outlets have reported that the cost of training and debuting a new K-pop group can be quite high, creating losses should successful groups leave a label. As such, diversifying their portfolio to ensure sustainable business is one of the approaches global leading entertainment players adopt to navigate the uncertainties in the business. This paints a clearer picture of the complex and pressing nature of contract renewals in the K-pop music industry.