HYBE 2.0 diverges from the major-label blueprint in 4 key ways — will it work?

HYBE kicked off the month with new leadership and a new plan to bring the Korean entertainment company into its next era of growth. In a letter to shareholders, outgoing CEO Jiwon Park and new chief Jason Jaesang Lee were refreshingly open about HYBE’s past weaknesses as they laid out a plan to prepare for market shifts and bring the “K-pop system” to new genres and regions. 

With its acquisitions of Ithaca Holdings (including SB Projects and Big Machine Label Group) in 2021 and Quality Control last year, HYBE has moved ever closer into the orbit of Western major labels. But its strategy differs from the traditional major-label blueprint in four key ways outlined in the HYBE 2.0 memo:  

1. Reducing its reliance on superstars

BTS gave HYBE plenty of experience with building global superstars. But the group also helped HYBE understand the risks of a business model that relies on a handful of stars in an increasingly fragmented listening space. In contrast with 2019, when HYBE says 95% of its revenue depended on “a single artist’s business”, the company now operates 12 labels across the US, Japan, and Latin America and says its revenue base “does not heavily depend on the activities of a single artist”. This ties in with a “localised” process of developing and launching artists that centres around “local culture”. To be fair, the Western major labels are heading in this direction as well, but it constitutes a radical shift from what has been the record label blueprint for decades.

2. Prioritising the Global South

MIDiA forecasts that the Global South will dominate the global subscriber base by 2031, with Asia Pacific and Latin America key to that growth. Having already established a foothold in Asia Pacific, HYBE is setting its sights on building its repertoire in Latin America. While this region has lower spending power, it is increasingly driving global music consumption and thus, not only growing its proportion of streams but also its cultural capital. Of course, Warner Music Group, Universal Music Group, and Sony Music Group are all invested in these regions as well, but do not have strong repertoire share there (apart from perhaps Sony). In fact, UMG’s lower repertoire share in the Global South is one of the reasons its recent earnings report results differed from Spotify’s.

3. Developing artists before launching them

The economics of streaming have led many labels to focus on signing pre-existing successes, often to singles deals, flipping the traditional A&R process upside down. While this strategy has no doubt helped labels grow market share, it has also short-changed talented creators and prioritised quick wins over longevity. This is what makes the “K-pop system” of spending years incubating artists and bands before they debut, often in a boot camp-like environment, so unique. HYBE stresses that its new group KATSEYE, a partnership with UMG’s Geffen Records, was developed behind-the-scenes for two years before releasing their first single.

However, this approach can be a double-edged sword if the process fails to take into account signals from the outside. Social platforms allow artists and their teams to test concepts and adjust strategy more quickly, with users on the other end of the content feed acting as real-time focus groups. Of course, concentrating too heavily on consumer feedback to short clips has its drawbacks; the winning approach falls somewhere in the middle.

4. Expanding its superfan app

Outside of BTS, HYBE is perhaps best-known for its superfan app Weverse, now home to fandoms for Western artists like Ariana Grande and Conan Gray. While Warner Music Group CEO Robert Kyncl has said the company is building a similar product, HYBE is the only label of its stature to own a social platform — a valuable asset in a world where social is competing for music consumption time, and the entire music industry is intent on monetising fandom. On that note, HYBE plans to launch a subscription Weverse membership in Q4, with features like exclusive content and priority access to events. Nonetheless, the battle for consumer spend and attention is more competitive than ever, and what works for K-pop fans in Korea cannot necessarily be copied and pasted in other regions. 

Bonus: Launching label services

While this strategy is not exclusive to HYBE, the company’s move to offer label services under its US division is worth noting. The move allows HYBE to cater to the growing number of mid-tier and long-tail artists who seek distribution-plus-label-services deals ––the top choice of ideal release partner among professional music creators surveyed in MIDiA’s 2024 creator survey — and explore potential synergies with existing artist labels. “We have identified a growing demand for change in the traditional business structure in the US market”, the letter stated, and rather than resisting that change, as is the common knee-jerk reaction in the music industry, HYBE 2.0 appears intent on driving it.