HYBE’s new strategy is a blueprint for more than BTS

With its crown jewel, BTS, set to join the military, HYBE is without a doubt in a unique situation. This week, HYBE shared their strategy in a detailed letter to shareholders, and there has already been much debate over how the company will fare without its breadwinner. But even if you remove BTS from the equation and focus only on the basic principles of that strategy, not only does it still make sense, but it may be critical for the way the industry is evolving.

A content trove

The direct-to-fan movement enables artists to nurture deeper connections with their fans and create new revenue streams. But it also piles on pressure for artists to churn out content all the time, ironically leaving them with little time to make music. One of the key benefits of signing with a label is having a company take care of all the non-music-making needs, from marketing to finance. Labels still do this important work, but as marketing and fandom-building are increasingly tied to social media, it is getting harder for artists to delegate these duties. So, labels need to evolve their value proposition to meet this new reality. 

Enter HYBE’s “artist-indirect” business, focused on creating new products and content using the artist’s IP (like cartoons and lyric books) that the artist does not need to be there for. This requires the artist to relinquish more of their rights to the label, but there is clear value in the exchange. “When the artists are directly involved in more activities and projects, their health and quality of the content are bound to be compromised,” the company has said about the strategy. In the same vein, the company said it “secured content in advance” of BTS’ hiatus, “which will enable BTS to continue their engagement with fans for the foreseeable future”. Should labels not be doing this with all of their acts, whether they have plans to serve in the military, hole up in the studio, or simply take a break? Of course, labels already create heaps of content for their artists, and accumulate it ahead of time — but these are often marketing assets, not content assets. Western artists need to start putting the same effort they put into marketing into content. 

The Weverse fan funnel

To lessen that same pressure, we have also written about the need to nurture self-sustaining fan-to-fan communities in addition to artist-fan engagement. HYBE has made this key to their strategy through Weverse. Now, BTS is adding subscription-based services to Weverse as well as onboarding international artists, including from Japan and the US. This presumably includes the Ithaca Holdings roster, home to Ariana Grande and Justin Bieber. With a product like Weverse, HYBE is not only nurturing fan-to-fan communities but is also funneling social fandom back into its own company. Meanwhile, most labels benefit only indirectly from the flurry of engagement fandoms generated on platforms like Twitter and TikTok. Now, HYBE is preparing to redirect that activity to its own platform with even more artists.

Tech to fill the gaps

HYBE recently acquired the artificial intelligence (AI) startup Supertone, which has been used to recreate the voices of deceased pop stars. HYBE plans “to unveil new content and services to our fans by combining our content-creation capabilities with Supertone’s AI-based speaking and singing vocal synthesis technology”. Reading between the lines, it seems that HYBE could do anything, from using BTS’ voices in chatbot apps to creating new BTS songs without the artists’ presence — something that will be understandably off-putting to many people, but it is becoming more and more of an inevitability for the industry. HYBE is also steadily acquiring the tools to create entirely virtual artists, a phenomenon that music fans in the East have long been familiar with. 

The engine is ready — but is there fuel?

With its smart business model and sophisticated technology, HYBE has designed a powerful engine to compete in the record label race. But does it have enough fuel to make it to the finish line? There is no avoiding the fact that record labels are a hits business, and mainstream hits are becoming more and more difficult to achieve. BTS-level success has always been rare, but it is getting rarer. Nonetheless, in a fragmented space where we are seeing fewer superstars and more cult stars, knowing how to cultivate and sustain fandom — not just audiences — will become even more key to success. Perhaps this is part of the reason HYBE is now doubling down on this strength.