YG's future now depends on BabyMonster

YG Entertainment's rookie girl group BabyMonster [YG ENTERTAINMENT]

Blackpink members' decisions to part ways with YG Entertainment for their solo activities are dealing a severe blow to the K-pop agency behind the popular girl band — and analysts are pessimistic about the company's future.

The downbeat outlook demonstrates just how vulnerable overreliance on one “cash cow” group can leave an entertainment company, as other YG groups, such as Treasure and BabyMonster, have failed to land with a bang on the K-pop scene.

Shares for the K-pop agency hit a 52-week low of 42,900 won ($32.66) on Monday, shaving off more than half from its 52-week high of 95,200 won from May 30, 2023.

It was not long ago that Blinks hurrahed as YG announced that all four Blackpink members — Jisoo, Jennie, Rosé and Lisa — agreed to renew their contracts with the agency and continue their activities as a quartet in early December.
Their hopes were dashed, however, when the company clarified on Dec. 29 that the members would only be working with the label for their group activities and would be looking elsewhere for their solo work.

YG shares dipped following the announcement. At the start of trading on Jan. 2, shares fell 6.58 percent to 47,550 won from the previous trading day.
Blackpink's intellectual property still belongs to YG, and the company is still expected to bring in considerable revenue from sales of concert tickets, albums and related merchandise. But the members' solo activities are now out of its reach. If Jennie signs with a new brand, Lisa releases a solo album or Jisoo lands a pivotal acting role, the artists are not required to share profits with YG. And the company does not have another blockbuster K-pop group to fill Blackpink's shoes.

Further specifics of the group contract were not disclosed to the public. It is unclear, namely, how long the quartet will remain under the label and the proportion of its profits to which the company is entitled.

Analysts, in turn, lowered YG’s target stock prices. Hana Securities trimmed 16 percent off its target price to 78,000 won; NH Investment & Securities lowered theirs 20 percent to 70,000 won and Daol Investment & Securities chopped its own 30 percent to 70,000 won.

The spotlight now falls on YG’s rookie girl group, BabyMonster, which debuted last November with the digital single “Batter Up.” The band has been promoted as successors to Blackpink, but analysts are maintaining a conservative outlook on its first quarter impact, as its group activities have delayed beyond market expectations.

BabyMonster’s new digital single is scheduled to drop on Feb. 1 with a physical EP to follow on April 1. But the group has yet to appear on music shows or interact with the public despite the fact that it debuted last year.

“Plans for BabyMonster’s album release are later than what the market anticipated at the beginning of the second quarter,” said Daishin Securities analyst Lim Soo-jin. “Revenue expectations for the YG Entertainment, in turn, are to be lowered based on [fewer] group activities from Blackpink and BabyMonster.”

Hana Securities analyst Lee Ki-hoon anticipates that it will take a while for the agency to settle on Blackpink's next comeback date.

“We anticipate that YG Entertainment will need time, presumably the second and third quarter, to decide on the timetable for Blackpink’s return,” Lee said. “Until they do, BabyMonster’s growth is critical, as they’ve announced two new releases. In the short term, YG’s growth momentum is concentrated on the second quarter.”