SM's Q1 Operating Profit Drops 14.9% Due to Multi-Production Setup Costs

SEOUL, May 8 (Yonhap) -- SM Entertainment revealed on the 8th that its consolidated basis revenue for the first quarter of this year amounted to 2.201 trillion won, with an operating profit of 155 billion won.

Compared to the same period last year, revenue increased by 7.9%, while operating profit decreased by 14.9%. Net profit also decreased by 45.9% to 124 billion won.

The operating profit for this quarter fell 34.6% below the market forecast of 238 billion won, as compiled by Yonhap Infomax.

SM stated, "The expansion of concert scale and an increase in MD (merchandise) sales drove revenue growth," and "With increased revenue from advertising and dramas, major affiliated companies also saw revenue growth."

▲ An undated file photo of SM Entertainment's headquarters in Seoul (Yonhap)

The slight decrease in operating profit was attributed to the establishment of a multi-production system introduced in the second quarter of last year, which led to an increase in personnel and initial operating costs for new subsidiaries.

Looking at the business sectors, new album sales in the first quarter totaled 2.76 million copies, including the double million seller NCT Dream, surpassing last year's figure of 2.15 million copies.

Furthermore, large-scale concerts by NCT 127, SHINee, and TVXQ! contributed to a 20.9% increase in concert revenue.

Affiliated companies such as Keyeast turned a profit with expanded drama production revenue, while SM C&C reduced its losses with increased revenue from advertising promotions and travel business. SM BM, engaged in MD business, contributed to revenue growth, and revenue from Japan business handled by SMC also increased due to expanded activities of affiliated artists in Japan.

SM announced active expansion of overseas fandom, with NCT Dream and aespa embarking on world tours, and RIIZE opening their first global fan concert.

New releases from SM artists will continue vigorously this year, with aespa releasing their first full-length album at the end of this month, followed by Suho's third mini-album and RIIZE's first mini-album in June.

In the second quarter, Red Velvet and WayV will each release a mini-album, while Super Junior and Mark will release singles. NCT Dream and NCT Wish will also release singles in Japan.

In the third quarter, NCT 127 and Taeyeon will each release full-length albums, while Key, Chanyeol, Irene, Jaehyun, and NCT Wish will release mini-albums. WayV, Key, aespa, and RIIZE will release singles in Japan, and NCT Dream will release a single in the United States.

Especially in the third quarter, SM's first virtual artist, nævis, will debut. In the fourth quarter, SM will debut a new British boy group in collaboration with British entertainment company Moon&Back.

SM will continue to expand its secondary IP (intellectual property) business through collaborations with its parent company Kakao in webtoons, web novels, mobile games, and other areas to enhance synergy.

Jang Cheol-hyuk, co-CEO of SM, stated, "By diversifying our portfolio through virtual artists, new IP debuts, and secondary IP businesses such as web novels and games, we will enhance our global competitiveness."

Tak Young-jun, the other co-CEO, said, "This year, we will strengthen the overseas lineup of artists such as NCT Dream, aespa, RIIZE, and NCT Wish, and expand global activities to broaden our fan base worldwide."

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