End of YGX.. YG Entertainment: "A Strategic Choice to Focus on Music and Concert Business"
YG Entertainment has decided to liquidate its dance academy and other non-core subsidiaries as part of a strategy to concentrate on its core businesses, particularly music and concert production. This move is seen as an effort to streamline operations and enhance the company's focus on its main revenue-generating activities amid declining performance in its concert business.
Ilgan Sports has confirmed that YG Entertainment is in the process of liquidating its subsidiary, YGX. Over the past few years, YG Entertainment has been consistently winding down its non-core affiliates. The company plans to focus on its main business of music production and live performances. However, YG Entertainment's concert revenues have recently plummeted, and the outlook isn't particularly promising. It remains to be seen whether YG can overcome this crisis through the liquidation of subsidiaries and nurturing of new talent.
According to Ilgan Sports' investigation, YG Entertainment is currently in the process of liquidating YGX. The corporate registration records show that YGX resolved to dissolve on July 8th. Dissolution means that the corporation loses its original legal status and begins the liquidation process, including settling assets.
YG Entertainment established its subsidiary "Company X" in 2017, which changed its name to YGX in 2018 and launched a label business. YGX took over operations related to the now-defunct label "HIGHGRND," absorbed NHR, and managed a dance academy. NHR was a DJ label previously operated by Seungri, a former member of Big Bang.
Yang Hyun-suk, YG Entertainment's chief producer, stated in May 2018, "Since I was a dancer myself, running a dance academy was something I always wanted to do before even founding YG Entertainment." He added, "I believe we can target overseas markets in various ways through collaborations between NHR DJs and YG artists."
Initially, YGX garnered significant attention in the entertainment industry. Several DJs from NHR joined, along with famous celebrities like Lee Soo-hyuk, Joo Woo-jae, and Han Seung-yeon, as well as well-known producers like CHOICE 37. However, the problem lay in its performance. YGX's revenue in 2018 and 2019 was 1.4 billion KRW and 2.7 billion KRW, respectively. In comparison, YG Entertainment's revenue in 2019 was 264.5 billion KRW, making YGX's contribution to YG's revenue less than 1%. Additionally, YGX posted losses of 1.2 billion KRW in 2018 and 1.8 billion KRW in 2019.
In 2020, YG Entertainment transferred most of the celebrities under YGX to its main label, except for dancers. From that point, YGX was restructured into a specialized subsidiary focused on dancer management and dance academy operations. YGX continued to maintain a presence, particularly gaining public attention when its dancers appeared on the Mnet program "Street Woman Fighter." The fact that both celebrities and the general public could take lessons at the YGX dance academy also contributed to its popularity.
However, YGX ultimately failed to escape from its deficit and resolved to dissolve. The academy ceased operations in April, and its official social media accounts were made private. The building where YGX's headquarters were located now features a sign for "YG Training Center" instead of YGX.
A YG Entertainment official commented on the matter, saying, "It was not profitable to maintain YGX as an independent corporation, so we will transfer the dancer management business to YG Entertainment and wind down the academy business." The official added, "Our goal is to strengthen our core business."
In recent years, YG Entertainment has been downsizing its operations. In 2022, YG Entertainment liquidated its food subsidiary, YG Foods. In 2023, it liquidated the cosmetics company Code Cosme International and sold its golf service provider, Greenworks. This year, YG is also pursuing the sale of its drama production company, Studio Plex. Businesses like food, cosmetics, and golf are not closely related to YG's core entertainment business. However, Studio Plex and YGX are directly or indirectly connected to the entertainment industry.
Regarding this, YG Entertainment explained that the decision to focus on its core business, particularly in music and concert production, is a deliberate choice. The recent performance of YG’s music and concert business has been lackluster. YG’s revenue dropped from 315.8 billion KRW in the first half of last year to 177.4 billion KRW in the first half of this year, a decrease of 43.83%. Concert revenue, in particular, plummeted by 87.45%, from 71.7 billion KRW to 9 billion KRW. While YG posted an operating profit of 65.3 billion KRW in the first half of last year, it turned to an operating loss of 18 billion KRW in the first half of this year.
The cancellation of contract renewals with BLACKPINK members is cited as a significant factor affecting YG's performance. BLACKPINK members will continue to perform as a group under YG Entertainment but will pursue individual activities under different agencies. With no planned BLACKPINK concerts this year, YG cannot expect significant revenue from the group in the near future. Although YG’s group 2NE1 recently announced a reunion and plans for a global tour starting in October, it is unlikely to fill the gap left by BLACKPINK.
Securities analysts believe that the success or failure of nurturing new talent will determine YG Entertainment’s future performance. Kihoon Lee, a researcher at Hana Securities, noted, "The aggressive investment in new talent, combined with the activity gap of existing artists, is increasing the burden of amortization of intangible assets. We expect another quarter of losses in the third quarter, with an annual operating loss forecast of around 10 to 20 billion KRW."
Regarding this, the YG Entertainment official added, "It seems that we have performed best when focusing on our core business. Ultimately, the structure is aimed at expanding our core business, and we plan to show more new aspects related to our artists' activities."
Meanwhile, YG Entertainment's competitor, JYP Entertainment, has been taking a similar approach. In 2019, JYP Entertainment sold its audio-visual equipment subsidiary, JINN TUNE, and liquidated its footwear brand development company, JY1. While JYP Entertainment pursued a blockchain business in 2022, it has effectively abandoned the project (related article: [Exclusive] ‘Due to profitability concerns…’ The Inside Story of JYP Entertainment’s Reconsideration of Its Blockchain Business).
Recently, JYP Entertainment has seen a decline in performance as the activities of its boy group Stray Kids and girl group TWICE have slowed. JYP's revenue decreased by 13.93%, from 269.8 billion KRW in the first half of last year to 232.2 billion KRW in the first half of this year, and its operating profit dropped by 51.03%, from 87.7 billion KRW to 43 billion KRW over the same period.
Kyu-yeon Kim, a researcher at Mirae Asset Securities, commented on JYP Entertainment, saying, "There is an urgent need for new talent to prevent further declines in profit margins. With Stray Kids, which accounts for the largest portion of revenue, set to renew its contract in 2025, the emergence of IP (intellectual property) that offsets the damage to profit margins from recalculating settlement rates is crucial."
