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Earnings Call Analysis
Q2-2024 Analysis
Hybe Co Ltd
In the second quarter of 2024, HYBE achieved consolidated revenue of KRW 640.5 billion, marking a 3% year-over-year increase and setting a new record for the highest quarterly revenue in the company’s history. This growth is largely attributed to the activities of HYBE artists, with direct artist involvement, including music sales, concerts, and advertisements, accounting for approximately 66% of total revenues.
For Q2, revenue from direct artist involvement reached KRW 423.9 billion, while indirect artist involvement (merchandise, licensing, content, and fan club sales) generated KRW 216.6 billion, a notable 17.4% increase compared to the previous year. Recorded music sales specifically were KRW 249.5 billion (up 1.5% YoY), although concert revenue faced an 8.6% decline to KRW 144 billion, reflecting BTS members' military service impacts.
Despite BTS activities being limited due to military service, HYBE artists maintained impressive market presence. SEVENTEEN's stadium tours alone attracted over 1 million fans, contributing significantly to concert sales. The recently held Weverse Con Festival turned a previous loss into profitability, solidifying its status as a global music festival with nearly 40,000 attendees.
HYBE's operating profit for Q2 stood at KRW 50.9 billion, yielding an operating margin of 7.9%. While revenue was robust, the profit fell short of expectations due to initial expenses related to new technology-driven growth initiatives, which negatively impacted margins by about 4 percentage points. Management anticipates improved profitability starting in Q3 as initial costs have been incurred and expects stronger revenue growth driven by upcoming artist comebacks and the Weverse subscription service projected for launch in Q4.
HYBE is embracing a multi-faceted growth strategy termed 'HYBE 2.0', focusing on strengthening its core music business while exploring new ventures in gaming and technology. This includes launching successful games like 'Astra: Knights of Veda' and expanding into AI-powered services. The gaming segment has seen substantial growth, with first-half gaming revenue tripling year-over-year.
Weverse, HYBE's fan engagement platform, reported a 4% increase in monthly active users (MAU) quarter-over-quarter, reaching approximately 9.6 million. The platform experienced user spikes during artist comebacks. Notably, the average revenue per paying user (ARPPU) also surged, with total payments seeing substantial increases, underscoring Weverse's growing role in HYBE's revenue mix.
HYBE plans to capitalize on the anticipated comeback of BTS in 2025, alongside continuous artist activities and an expanding portfolio of talent. Additionally, the company is navigating the dynamic landscape of integrating gaming with music to create innovative fan experiences, seeking to build long-term value for its investors.
As HYBE continues to diversify its offerings and adapt to changing market conditions, both its music and emerging technology sectors seem poised for robust growth. The strategic initiatives under HYBE 2.0 and successful artist engagement outcomes position the company strongly in the global entertainment landscape, presenting a compelling investment thesis.
[Interpreted] Greetings. Thank you for joining us for HYBE's Second Quarter Earnings Call. This is Lim Hyeonjeong, Head of the IR team. I'll be moderating today's call, which will proceed through consecutive interpretation.
Today, CEO, Lee Jae-sang, will present Q2 business highlights and future plans and CFO, Lee Kyung-Jun, will present the quarterly financial results, followed by the Q&A session.
Please note that today's earnings call is based on preliminary consolidated estimates under K-IFRS and subject to change during an external audit.
[Interpreted] Good morning. This is Lee Jae-sang. Thank you for joining HYBE's earnings conference call. On August 1, HYBE sent out a letter to the shareholders to announce HYBE 2.0, which represents our new chapter. It is focused on restructuring our three existing business domains of labels, solutions and platforms into future growth businesses based on music, platform and technology.
For music business, the company will further improve the quality of content, our core competence and fan experience, while expanding business in Korea, the U.S., Japan and Latin America and further accelerating synergy creation across these regions. For the platform business, while we expand genres and advanced service models to facilitate artist activities, which will also enhance fan experience.
In a technology-based future growth business, we will expand the game business in earnest and make preemptive R&D for a futuristic entertainment. We will continue to share with our shareholders how the company is making innovations in the fast-changing industry under HYBE 2.0 strategy.
I've been entrusted with the important task of implementing HYBE 2.0 strategy and leading a new era of HYBE. Since joining Big Hit Entertainment in 2018, I've been involved in planning and achieving growth together with the management, including Bang Si-hyuk and Park Ji-won and employees of HYBE. I'm excited to take on the important role of CEO as the company faces numerous challenges and embarks on a journey toward a new future, but I also feel heavy hearted.
I would like to ask our shareholders for their continued support and encouragement so that HYBE can achieve its vision. I also promised to take your critical feedback seriously and reflect them in business management.
Let me now turn to the results for the second quarter and the first half of the year. Following last year, HYBE posted more than KRW 1 trillion of revenue for the first half of the year for 2 years in a row and also the largest quarterly revenue in Q2. It is mainly thanks to the performances and activities of HYBE artists that mainly took place in the second quarter.
In the first half of the year, HYBE artists had sold more than 15 million copies of albums, which accounts for about 34% of the total album sales in Korea. Given the declining album sales trend in Korea, since the second half of last year and the absence of BTS Group activities due to military service, outstanding album sales demonstrated the growth of HYBE artists.
We also achieved outstanding results in the streaming market. According to Spotify, in the first half of the year, 8 out of 10 most streamed K-Pop tracks in the world, excluding Korea, were by HYBE artists. They also enjoyed great success on major global music charts. First, HYBE had 5 songs in Billboard Hot 100, 12 albums in Billboard 200, and 3 groups on the list of top 10 albums with most sales in the U.S.
Also in Japan, which is the second largest music market in the world, 5 groups entered the Oricon Albums Chart in the first half of the year. Furthermore, many concerts were held this year, including the ongoing world tours by Seventeen, Tomorrow X Together and ENHYPEN, fan meetings by LE SSERAFIM in Korea and Japan, the first fan meetings in Tokyo Dome by NewJeans and tour concerts in many locations in Japan by &Team. In total, HYBE artists held 90 off-line concerts and fan meetings in the first half of the year, meeting and entertaining more than 1 million fans.
With less than a year left before BTS makes a comeback as a whole, Jin appeared at the 2024 BTS Festa just 1 day after completing his military service, to celebrate the 11th anniversary of BTS debut together and greet the fans. He also carried the Olympic Torch at the Paris Olympics to convey the message of harmony and peace to the world.
RM released the second solo album titled Right Place, Wrong Person in May, and the album was highly praised in the media around the world, landing at #5 on Billboard 200. RM became the first K-Pop solo artist to have two albums to be ranked as top 5 in a row.
Jimin also released a solo album this year following the solo project last year, and the pre-released track, Smeraldo Garden Marching Band, and the title track, Who, entered Billboard Hot 100, and the title song became the highest ranked K-Pop track this year by being ranked at #12 on Billboard Hot 100.
Celebrating the 10th anniversary, SEVENTEEN released their next album on April 29, titled 17 Is Right Here. They sold 2.97 million copies during the first week, making it the best-selling K-Pop compilation album. Also in the first half of the year, SEVENTEEN sold a total of 5.3 million copies, making them the best-selling K-Pop artist in the first half of the year 2024. SEVENTEEN's unit activities have also entertained their fans.
Following BSS' unit album last year, a single album by Jeonghan and Wonwoo, This Man, was released on June 17. Having sold more than 790,000 copies during the first week, they set the world -- they set the record for highest first week sales for a K-Pop unit album.
SEVENTEEN also actively performed concerts. Since last year, they conducted the FOLLOW tour successfully in Korea, Japan and Asia. And this year, they held the Encore tour in stadiums in Korea and four cities in Japan, attracting a total of 380,000 fans.
Nissan Stadium in Kanagawa is the largest venue in Japan that can accommodate more than 70,000 people per show, making it the dream venue for artists. SEVENTEEN became the second K-pop artists to have a solo concert at this location, leaving a big mark on the K-Pop history. Just like last year, this tour was also accompanied by the city project in connection with major landmarks and popular places and the destination, entertaining fans with much to see and enjoy.
In June, SEVENTEEN made history by becoming the first K-Pop group to play the main stage at the Glastonbury Festival, the largest music festival in the U.K. In the second half of the year, SEVENTEEN will entertain their global fans through new music and a world tour across Korea, the U.S. and Japan.
Released in April, TXT's sixth mini-album, MINISODE 3: TOMORROW, ranked second in the U.S. Top CD Album Sales chart for the first half of 2024, following Taylor Swift. It landed 3rd on Billboard 200 and stayed high on the chart for 7 weeks. The group is also very popular in Japan.
In July, they released the Japanese single, CHIKAI, which ranked first on Oricon's weekly combined single ranking and weekly single ranking. Following last year's world tour, TXT started a tour in May, titled, Act: Promise, that kicked off in Korea and staged in North America and Japan. The group is the youngest K-Pop group in history to hold concerts in four major dome stadiums in Japan. After performing concerts in Asia, they will conclude this year's tour with the Encore concert in Korea in November.
ENHYPEN is having the best year since debut. The second regular album, ROMANCE: Untold, released on July 12, has sold 2.34 million copies during the first week, up 25% compared to the previous album. The explosive popularity of ENHYPEN with successful album sales served as a signal to dispel concerns over a declining album sales trend for K-Pop artists. The album is also enjoying popularity in both Korea and around the world.
In Japan, the first week sales were 290,000 copies, up 20% compared to the previous album, landing at the first place on Oricon weekly album chart. In the U.S., it landed at the second on Billboard 200, surpassing their previous fourth place. The outstanding growth of ENHYPEN has been partly thanks to more efficient utilization of HYBE infrastructure and better communication since Belift Lab became a wholly-owned subsidiary of HYBE in October last year. Following the successful Fate world tour that ENHYPEN held last year in Korea, Japan and the U.S., the group will carry the Encore tour this year starting from Korea.
This year, LE SSERAFIM hosted fan meetings in Korea and four cities in Japan to meet with their fans closely. The shows at Kobe and Yokohama were sold out. And along with fan meetings in Kobe, Yokohama and Nagoya, the third mini album, Easy, that was released in February, reentered the Oricon daily on top 10 list. Boosted by the successful fan meetings, the group will come back with their fourth mini-album, Crazy, on August 30.
NewJeans made a successful comeback with How Sweet released in Korea in May and the first Japanese album, Supernatural, in June. Even though the two albums were released with only 1 month apart, each of them sold more than 1 million copies so far, posting the combined sales of more than 2.1 million copies. While it was the first time that an album released in Japan was distributed globally, it set the record by selling 1.02 million copies.
Then the group held the Bunnies Camp 2024 Tokyo Dome for 2 days in late June. So it took 23 months since debut for NewJeans to hold an event at the Tokyo Dome, which is the shortest period in history as a non-J-Pop artist. For 2 days fan meetings, NewJeans sold out almost 100,000 tickets, including seats with limited view, thus raising expectations for the global fans for the first world tour slated for next year.
Entering their second year of career, BOYNEXTDOOR came back with the second mini-album, HOW?, in April, which broke their own record of first week sales of -- with 530,000 copies sold. With the continued fandom growth after the first week of release, the first month sales were 700,000 copies, which is 1-point times higher than the previous album. The group made a successful debut in Japan with the first Japanese single And, they appeared on radio and TV shows and performed at festivals to showcase their strong live performance skills to fans in Japan. And the growing fandom is contributing to growing sales of older albums as well, making the cumulative album sales exceed 1 million copies on a year-to-date basis.
Zico, who is the Executive Producer of BOYNEXTDOOR and who had a solo career of 10 years, made a comeback with digital single, Spot!, in April. He demonstrated his global influence by maintaining a spot on the billboard for 11 consecutive weeks, ranking #1 on the World Digital Song Sales chart and achieving 100 million streams on Spotify. His track was included in the 20 best K-Pop songs of 2024 by the billboard. The success of the album well demonstrates his talent as a hit songwriter, and the Billboard praised his album as one of the most dynamic collaborations of the year.
TWS has created a new wave in the K-Pop industry since debut, and the group continued the wave for the second mini-album, SUMMER BEAT!, in June. The first week sales almost doubled the previous result to around 510,000 copies, showing a steep growth trajectory and achieving a cumulative album sales of 1 million copies in just 6 months after debut. The debut title track, Plot Twist, is still loved by listeners, with the ranking still high on major streaming charts after 6 months of release.
&TEAM under HYBE Labels Geffen is showing a rapid growth as well. The first single, Samidare, released in May sold 440,000 copies during the first week or 3x higher than the previous album, demonstrating their higher status in Japan. Today, their second album, Aoarashi, is coming out.
The group's first arena tour since debut is successfully ongoing, starting from the concert in Tokyo in July. The success of &TEAM and their growing fandom in Japan is mainly attributable to the way the group has been carrying out their activities in Japan, which is very much the same way as other J-Pop artists do, involving meeting as many fans as possible through 20 small scale tours in seven cities across Japan since early this year.
Indeed, the popularity of the group in Japan is well demonstrated by the fact that about 80% of the copies of the recent album were sold in Japan 3x higher than the previous album. As a leading example of the multi-home, multi-genre strategy, which is the core of HYBE's 2.0 strategy, &TEAM has shown the possibility that the K-Pop methodology can also work in the J-Pop market.
To introduce the K-Pop methodology to the U.S. pop market, HYBE Geffen Label was established in the U.S. in collaboration with Geffen Records. The label worked on a new group for a long time. And finally, KATSEYE debut in June, with the first single titled Debut. The group started activities in earnest with the second single, Touch, released on July 26.
In just 1 month after debut, the monthly listeners on Spotify exceeded 1.1 million, and the listeners are well distributed across the U.S., Asia, Europe and Latin America, demonstrating that KATSEYE is a truly global girl group.
The group met with fans for the first time at the KCON held in L.A. on July 28, followed by the appearances on multiple TV shows. And it was extraordinary to see that the new group performed on Good Morning America on ABC on August 5, just 1 month after their debut. The group will release the first mini album and a Netflix documentary titled, Popstar Academy: KATSEYE, that has eight episodes.
In the process of leading up to their debut, HYBE was able to learn a lot about the mainstream music market in the U.S., and will leverage the lessons learned and carry out new projects in the U.S., and we ask for your continued support.
Artists of HYBE America also carried out diverse activities in Q2. Ariana Grande signed a long-term partnership agreement with HYBE and opened the community on Weverse. Justin Bieber is working on a new chapter as an artist with new music, and HYBE is continuing to provide support across his entertainment work. We expect another chapter of growth through new music to be produced under his guide.
Artists of the Big Machine Label Group, a country music label, have also produced good results. Thomas Rhett maintained #1 position on the Billboard U.S. Country Airplay chart for 6 weeks, while Tim McGraw and Carly Pearce are going on tours. Lil Yachty of QC Music, a hip-hop label, recorded the highest album sales since debut, with albums such as Lil Boat and Lil Boat 2, and he successfully concluded a tour in Europe in the second quarter. Lil Baby was named the Songwriter of the Year by the American Society of Composers, Authors and Publishers, and he plans to carry out a lot of activities in the second half of the year.
In addition, as we indicated in the letter to the shareholders, HYBE America launched a label service that supports 360 business of artists, and label service for activities in the U.S. will be available for HYBE's Korean artists. And the lineup of artists eligible for this service will be expanded gradually, internally and externally.
Weverse will open a new chapter in the fourth quarter based on the strategy of expanding the fandom service model. First of all, a subscription-based membership service will be launched in Q4, which will be offered as a separate service from the existing fan club membership. The subscription service will include a digital membership card, bonus Jelly charging, ad-free video viewing and download of VOD content. It may also include exclusive access to members-only content and preferential participation in events. Any artists on Weverse can utilize a subscription service.
In addition, we launched the Weverse DM in April of last year, which offers another level of communication experience between artists and their fans. Several HYBE artists, including &TEAM and ILLIT, started to offer DM service, and more HYBE artists and other Korean and foreign artists are expected to utilize DM in the near future.
Earlier this year, we introduced advertising partially to Weverse, and we plan to expand it fully within this year. It will mark a new milestone for Weverse as a global super fan platform and a major turning point in exploring next steps of the music industry and turning it into a sustainable business.
Along with music and platform business, HYBE has been preparing for diverse technology-based future growth businesses for a long time, and they have started to produce actual results. First of all, ASTRA: Knights of Veda is the first game that HYBE IM has published. The title was released simultaneously on multiple global platforms, including Google Play, Apple App Store and Steam in April.
This type of global simultaneous release and launching on multi-platforms require sophisticated technological and organizational capabilities, and I like to emphasize that HYBE IM successfully demonstrated excellent operational capabilities and reliability by servicing the game during the first week without any major downtime.
In addition, HYBE IM succeeded in attracting strategic investment led by Makers Fund that invest in innovative companies related to global interactive entertainment. With the funding, we plan to strengthen competitiveness in the global gaming market and diversify business in terms of game publishing and the development to secure capabilities as a full-service game company.
Supertone released Shift, an AI-powered real-time voice changing technology on April 15. Developed as a solution to support content creation and creators' activities, Shift is gaining traction not only in Korea but also in other countries, including Japan and Russia.
In June, Binary Korea launched a creator fandom platform, Theus, which is an all-in-one platform that supports communication between creators and fans as well as online and offline events. Currently, 25 influential creators are on the platform, including DDotty and Yell sister, and we plan to increase the creator portfolio.
Finally, the light stick business that was mainly used for concerts of HYBE artists has recently been expanded to external parties. Starting with light bands for T1 team, one of the most popular e-sports teams, we have provided more than 5,000 light sticks for Team Korea athletes and fans during the Paris Olympics. We're also pursuing business with diverse partners.
The second half of 2024 will mark a new beginning under the new leadership. It will be a period where we reinforce our foundation for medium and long-term growth by promoting future growth businesses based on music, platform and technology. Our next steps do not signal a pivot from our existing business, but rather a doubling down on strengthening our core competencies, while designing future IP and fandom business models in consideration of the changing market environment.
I'd like to thank shareholders for their unwavering support and encouragement, and we will do our best to surprise the shareholders and the market through continuous growth and concrete results.
Now CFO, Lee Kyung-Jun, will report on the financial highlights.
Good morning. This is in Lee Kyung-Jun. Let me report on HYBE's consolidated financial results for Q2 2024.
The consolidated Q2 revenue posted KRW 640.5 billion, up 3% year-over-year, which is the highest quarterly revenue in history. Revenue with direct artist involvement, including recorded music sales, concerts and advertisements, was KRW 423.9 billion, accounting for about 66% of the total revenue. While revenue with indirect artist involvement, including merchandise, licensing, content and fan club sales, recorded KRW 216.6 billion, taking up the remaining 34%. In Q2, many HYBE artists entertained their fans with comebacks, concerts and fan meetings.
Let me give you more detail by revenue category. In the second quarter, with most HYBE artists making comebacks, revenue with direct artist involvement was similar to the prior year quarter when the company posted the largest quarterly revenue.
Recorded music sales were KRW 249.5 billion, up 1.5% Y-o-Y, and concert sales were KRW 144 billion, down 8.6% Y-o-Y. In the first half of the year, HYBE artists sold 15.3 million copies of albums. And even though album sales declined overall and all BTS members were in the military in the first half of the year, the company was able to maintain a similar top line level as last year, which demonstrates the growth and popularity of HYBE artists.
In particular, more than 1 million fans went to SEVENTEEN stadium tours and the world tours by TOMORROW X TOGETHER and ENHYPEN driving concert sales. Weverse Con Festival posted slight loss until last year, but it made a turnaround this year with the participation of 24 Korean and overseas acts and diverse events. With nearly 40,000 fans attending the event, Weverse Con Festival has become a representative global music festival.
Revenue with indirect artist involvement recorded KRW 216.6 billion, up 17.4% year-over-year. MD and licensing and content sales in Q2 showed a solid upward trend, posting KRW 109.1 billion and KRW 83.8 billion, respectively. MD sales were driven by tour merch and light sticks related to tour activities, and BTS merch sold additionally during BTS Festa. Content sales were driven by the concert movie and content by SUGA and the travel content by Jimin and Jung Kook titled, Are You Sure?. In addition, sales from ASTRA: Knights of Veda that we published in the second quarter were newly recognized as content sales.
Operating profit in Q2 posted KRW 50.9 billion, with the OP margin of 7.9%. Operating profit was lower than expectations, despite posting the largest quarterly revenue in Q2, mainly for two reasons. First, in our music business, we achieved the top line growth year-over-year despite military service by BTS members, but other HYBE or X did not yet have economies of scale like BTS, thus a slightly lower margin. However, considering HYBE artists schedules and plans for the second half of the year, we expect larger top line growth, which is expected to improve the bottom line as well.
Second, with full-scale operation of the new technology-driven growth businesses, the initial impact of costs was about negative 4 percentage points on the operating margin. For instance, the initial marketing expenses for Astra: Knights of Veda published on April were all recognized in the second quarter. And other expenses also incurred related to Binary Korea's launch of a creator platform, Theus, on June 22; and Supertone's launch of Shift, a voice creation service.
Going forward, as the initial marketing costs for game publishing were already recognized, starting from the third quarter, we expect improvement in earnings. Following the introduction of Weverse subscription service later this year, in 2025, BTS will make a comeback, and our new businesses will start to contribute more to the bottom line. And we believe that the market will be able to see how our earnings fundamentals have been strengthened.
Moving on to KPIs of Weverse. Q2 average MAU was up 4% Q-o-Q to approximately $9.6 million. MAU growth was driven mainly by comebacks and increase in the number of artist communities. With many fans returning to Weverse in June, when Jin was discharged and the BTS Festa was held, the MAU in June was, once again, more than 10 million. As more users utilize DM service, the amount of charging on Jelly, our digital currency on Weverse, has increased as well.
We also saw an increase in our ARPPU, which measures the average monthly revenue per paying user and total payments on the platform, driven by the increase in our list activities. In Q2, total payments on Weverse reached a record high since launch, thanks to the significant growth of HYBE artists.
In the first half of 2024, artists under HYBE's multiple labels produced remarkable results, and our new businesses became more visible and substantial. SEVENTEEN was able to conduct the stadium tours in Japan, TXT achieved the second largest album sales in North America, ENHYPEN's album sales continue to grow and NewJeans held fan meetings at Tokyo Dome.
Like this, HYBE artists are growing their popularity and influence around the world. TWS and ILLIT debut this year and their tracks remain high on the streaming charts. KATSEYE successfully debuted in late June in the U.S. And as a game publisher, HYBE IM successfully handled the global launch of the first game on multiple channels. Binary Korea launched Theus, a creator fan platform, and Supertone released Shift, a voice creation technology.
Building on these achievements in the first half of the year, HYBE artists will continue to wow the world with new music and hold larger scale concerts to entertain their fans in the second half of the year. Also, many of the future growth businesses that we have been working on will be able to continue to produce tangible results.
HYBE will strive to expand its influence in the global music market through HYBE 2.0 strategy. So we ask for your continued interest and support. Thank you.
[Interpreted] Now we would like to begin the Q&A session. We would first like to take the preregistered questions.
The first question is to provide more detail on the breakdown between album sales and streaming sales in the first half of the year. And second question has to do with more elaboration on the new long-term strategy of HYBE.
[Interpreted] Let me take the first question. When it comes to the breakdown between streaming revenue and album sales in the first half of the year, the share of streaming revenue was about 35% of the total recorded music sales, which represents a Y-o-Y growth. Even though there was a decline on the physical album sales, we were able to defend our profitability, thanks to the increase in the streaming sales revenue.
[Interpreted] I'd like to thank Kyung-Jun Lee Kim from [indiscernible] for your question. Let me give you more elaboration on HYBE 2.0 strategy. I'd like to approach this question by breaking it into music business, platform business and technology-driven business.
First of all, on our music business, our two priorities are, first of all, focusing on our core competence in music and secondly, expanding our multi-home, multi-genre strategy. This is basically about enhancing our understanding of the characteristics of fandoms by regions and by music genre and develop business models accordingly.
As for the multi-genre strategy, I'm sure you can understand it easily because HYBE already has a coverage for K-Pop, J-Pop, pop music, hip hop and country music.
Moving on the second part of the strategy, which is about multi-home, you may want to know more about it. When you look at the top 10 music markets globally, the share of the imported music is very small. And the only market that has a higher imported music is Germany, which means that if you -- even though you maybe have some success in all these overseas markets, there is a cap on imported music in that market. Therefore, if you do not have the mindset of approaching each of these markets with a local perspective, you won't be able to grow your business in these respective markets. Therefore, we would like to make investments in Korea, the U.S., Japan and Latin America as a local player in these respective music markets.
Moving on to our platform business strategy. It is expanding refers to a third-party platform and moving away from our core competency of music. Initially, we had some success in our first phase of growth where we focused on domestic artists and to grow our business based on traffic. Now we will continue to expand our business models and also more service strategies for artists in other markets, including the U.S. and Japan.
And finally, on our technology, which is going to be the future driver of growth, you may now have a good understanding of our gaming strategy, but we will continue to explore and understand technological trends, how they are changing and how our society is changing. And we believe that the patterns of consuming entertainment content will continue to change. Therefore, it is crucial to explore new business opportunities and prepare for what we call the next entertainment. And already, we are engaging in discussions to form partnerships with leading players in each of these domains.
[Interpreted] [Operator Instructions] The first question will be provided by Kim Dohyoung from CLSA.
[Interpreted] I'm Kim Dohyoung from CLSA. I'd like to ask questions regarding your gaming business strategy. So first of all, can you give us the actual amount of gaming-related revenue in the second quarter that you recognized as part of your content sales? And how much marketing expenses did you recognize for the second quarter?
I understand that you are pursuing your gaming business rather aggressively. But in consideration of the maturity of the gaming market and the very fierce competition taking place in the industry, what kind of capabilities do you think HYBE has in order to produce meaningful results from this business model?
Currently, HYBE IM is posting a loss. And when do you think it will be able to make a turnaround?
And is it correct to understand that you are pursuing other businesses, such game business, because you see that there are limitations on the room for growth in your main music business because of the market situation? Is it right to understand that way?
[Interpreted] To respond to your first question on the amount of game-related revenue, we have not disclosed this figure yet. So we won't be able to give you any number at this point in time. But what I can say is that compared to the first half of last year, the game sales was tripled for the first half of this year on a year-over-year basis.
And moving on to game-related expenses. As was mentioned in the presentation, the impact of game-related expenses and expenses related to technology-based growth business altogether had a negative impact on our operating profit margin by 4 percentage points.
[Interpreted] As CEO, I'd like to respond to your second and the third question. So your second question had to do with our own HYBE capabilities in responding to the gaming industry, which is mature and has high competition.
And we were able to demonstrate our live operation capabilities as we launched Astra: Knight of Veda this time, and we continue to utilize our global gaming network to continue to source good titles. And you know that there's a lot of competition in Korea, but we were able to secure good titles based on our capabilities. These will not just include AAA titles, but also other titles that may serve as a foundation.
So it is basically about creating a good portfolio of game titles down the road. And we not only need good AAA games, but also the other titles that can serve as a foundation, and we can continue to utilize our marketing capabilities to meet the needs of gaming fans.
And at the same time, we'll expand to game development because publishing itself will not be a profitable business in the long term. So we will continue to carry out activities to develop our games so that they can carry on and contribute to the bottom line. And we are preparing for the pipeline starting from 2026, which when we will be able to show more results.
Moving on to the third question on why we are aggressively pursuing gaming business? Is that because the music industry is stagnant. Well, it is a valid question. And when you look at the music industry, they're still low value-added globally. So there's much headroom for growth from the industry perspective. And I'd like to also mention that gaming and music are all based on IPs. And HYBE has good capabilities and know-how in utilizing IP-based businesses.
And you may see that fans for games and fans for music may behave differently. But when it comes to the new release and their demands and needs, there is a lot of commonality. For instance, when there's a new game update and when there's a new album released by artists, fans will behave in certain ways, and HYBE has a good understanding of fan needs and how we can respond to their needs through marketing and other events. So we will apply the same capabilities for games as well.
And moving on, when it comes to conceptualizing next entertainment, I believe that there will be a lot of merger and integration between music and game down the road. So it's not just about collaborating with artists or game titles, but rather it is more on the integrated level.
When we carry out conversations with global players, they see that HYBE he has good competitiveness because we do both game and music business. So while we continue to pursue game as an independent pillar of business, we will continue to utilize our capabilities in other areas and combined gaming capabilities together.
[Interpreted] In the interest of time, we will take the next and the final question.
[Interpreted] The following question will be provided by Lee Eun-Hyung from Hana Securities.
[Interpreted] I'm Lee Eun-Hyung from Hana Securities. First of all, I initially thought that Weverse subscription service was going to be integrated with other existing services, including membership and DM and so on. But you mentioned that subscription-based membership will be offered as a separate service, apart from the existing fan club membership.
So I'd like to understand the background behind that decision because if it were to combine with other existing services, such as membership and DM, then this would be positive in driving up the conversion rate and increasing the ARPU and also add service triggers when artists make comebacks.
The second question has to do with some of the concerns that investors have over HYBE's initiative on the gaming business. It is because there are some concerns that this business model may not be realized in an intuitive way that investors can understand.
We would very much like to see more integration between your gaming projects with other business models, including music, for instance, when BTS was releasing music. They had this world view that was integrated with other services, including benefits that fans can enjoy in Weverse.
So if there is a higher level of integration between your games and other business models, including the platform and music, then this would create more synergies. So I'd like to understand whether it is correct to say that your gaming business is pursued separately or will further pursue integration with other business models?
[Interpreted] I'm the CFO. Let me respond to your question regarding our subscription membership service, whether it will include DM or other existing features. Well, to be brief, the membership services will be offered as multiple classes, and these classes will be offered in a consecutive manner. And the decision on whether these world classes will include DM or other services or not, we are going make decisions on them as we continue to unfold this membership service down the road going forward in consideration of conversion and other factors.
And we will soon finalize our UI upgrade effort for Weverse. And in the end, we would like to give more options and choices to artists who are on Weverse so that they can decide to include certain features and services and decide to use certain services available on Weverse. So the membership aspect will be the same, and there will be multiple options that will be available for artists and fans.
[Interpreted] So as CEO responding to your second question. As you pointed out correctly, it is very hard to use the existing modeling to predict what will happen in the future when it comes to music and content and game industry. It is mainly because technology is changing rapidly and people's lifestyles are changing rapidly as well.
So to sum up, the market and the industry is changing, and HYBE is very good at detecting future trends and prepare in advance a proactive manner for new business models. HYBE has been doing that in the music business as well by developing and exploring and advancing new business models.
Likewise, if we were to just connect gaming with music in a more conventional way, we would not need an in-house game development capabilities because we could utilize third parties and do outsourcing. However, that is not what we want to do. We have been utilizing our music IP for gaming businesses, including Rhythm Hive and In the SEOM. And such collaborations have been successful, but that's not our ultimate goal, but rather, our ultimate goal is to have more independent gaming capabilities and produce meaningful earnings results for HYBE.
And it is basically about understanding the fandom needs and building communities for the gamers, so that we can satisfy their needs and continue to build next entertainment business in the next 5 to 10 years.
In the music industry, we have been building a very strong global network with major labels, DSPs, promoters and agencies, and likewise, we would like to continue to expand our network in the gaming industry and the global content producers so that we can create and be a leader in the next entertainment community globally.
[Interpreted]. This concludes the earnings conference call for HYBE for the second quarter of 2024. Thank you.
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]