HYBE, the company behind BTS and Seventeen, just launched a label services business in the US

Last week, HYBE, the South Korea-headquartered music company behind superstars BTS and SEVENTEEN, rebooted.

The company launched HYBE 2.0, a new global strategy under the leadership of newly appointed CEO Jason Jaesang Lee, who is succeeding Jiwon Park,  HYBE’s CEO for the past three years.

One of its most surprising plans was buried in a detailed run-down of the new structure.

HYBE revealed that it’s entering one of the most competitive (and lucrative) sectors in modern music: providing distribution and services for independent artists.

HYBE, which generated USD $1.66 billion last year, is launching its new label services business with a focus on the United States. It will operate under the firm’s US division HYBE AMERICA, which continues to be led by CEO Scooter Braun.

In a letter to shareholders last week, signed off by HYBE’s new CEO Jason Jaesang Lee and former CEO Jiwon Park, (referred to in the note as HYBE’s Representative Director), the company confirmed that the new label services unit will provide “comprehensive services for labels and artists,” including distribution, marketing, and promotion.

The company’s entrance into the label services sector arrives amid increased M&A interest in businesses focused on offering such services to labels and independent artists.

Warner Music Group, for example, confirmed in March that it was considering making a bid for Paris-headquartered digital music company Believe, a key global player in this world. WMG later announced it had decided not to pursue an acquisition bid for the company. WMG did, however, recently swoop for a stake in Brazil-based distributor and music platform Sua Musica.

Elsewhere, Downtown Music Holdings, another large player in the services space – with annual revenues understood to stand at around $900 million – has reportedly been discussing a potential sale with both private equity firms and at least one major music company.

This heightened interest in the independent distribution and services sector coincides with the rise of the ‘middle class’ of indie artists, who, according to recent Luminate stats, are nibbling into the majors’ streaming market share.

HYBE’s new CEO told the company’s investors last week that the firm has “identified a growing demand for change in the traditional business structure in the US market due to its fragmentation, complex contractual relationships, and simplified care for individual artists at larger labels”.

He added: “Additionally, the increasing need for change is driven by the segmentation of consumer preferences and the enhanced efficiency brought about by technological advancements.”

In response to these changes, HYBE’s CEO continued, the company plans “to develop a business model that leverages HYBE’s strength in supporting artist growth”.

He added that the label services unit “will go beyond simple recording or management contracts with local artists, offering comprehensive services to innovate the market.” It will also “combine traditional management practices in the US with HYBE’s 360 business model.”

“We have identified a growing demand for change in the traditional business structure in the US market due to its fragmentation, complex contractual relationships, and simplified care for individual artists at larger labels.”

Jason Jaesang Lee, HYBE

HYBE’s CEO also suggested that the new unit will benefit HYBE’s artists from Korea, Japan, and Latin America.

Those artists’ entry into the US is “expected to become more efficient with HYBE’s in-house label service,” added Lee.

Last week’s announcement about HYBE 2.0 includes an additional element that makes the label services announcement even more interesting.

The company confirmed that has been “exploring new business opportunities” and plans to make “discreet investments” in various areas.

Areas highlighted by HYBE as sources for potential investment targets include generative AI, audio/voice technology, gaming, ‘Integrated online and offline experiences’ and ‘Original Story Business (OSB).’

Although HYBE didn’t specifically say it was planning to invest in a distribution and services company, what’s stopping it from doing so as it looks to build out and compete with other players in the services sector in the coming months?

Elsewhere in the US market, HYBE’s new CEO noted last week that the performance of its HYBE America Inc.’s label divisions, Big Machine Label Group and QC Media Holdings or Quality Control, “has been steadily growing”.

Scooter Braun led HYBE’s acquisition of Atlanta rap powerhouse QC in February 2023. The label is home to acts such as Lil Baby, Migos, Lil Yachty and City Girls.

BMLG, meanwhile, is a long-established country music label that was acquired by HYBE when it acquired Braun’s Ithaca Holdings for $1.05 billion in April 2021.

HYBE noted last week that “both labels have solid catalogs”, with BMLG and QC Music’s streaming revenue accounting for approximately 50% of HYBE’s total streaming revenue in 2023.

“As such, we expect the US label business to continue its solid growth through the ongoing expansion of activities by existing artists and the recruitment and development of new artists,” said CEO Jason Jaesang Lee, in the letter to shareholders last week.

Elsewhere at HYBE, as part of the new HYBE 2.0 structure, the company will reorganize the existing three “pillars” of its business, previously encompassing Label, Solution, and Platform — into Music, Platform, and tech-driven future growth initiatives.

HYBE has also launched a new division called HYBE MUSIC GROUP APAC, which oversees all of the company’s music label businesses based in Korea and Japan.

Meanwhile, the new strategy also sees HYBE double down on the superfan business with its global Weverse platform, by adding new subscriptions and advertising to the app.Music Business Worldwide