YG Entertainment (hereafter referred to as YG) recorded outstanding performance in the second quarter. This is largely attributed to BLACKPINK, the leading artist group under YG's wing. The focus now shifts to whether YG, which heavily relies on BLACKPINK, can devise a new revenue model, especially with the group's contract renewal looming.

On August11, YG announced a provisional aggregation that showed an operating profit of 288.67 billion won in Q2 this year, a 209.3% increase compared to the same period last year. Revenue for the same period increased by 108.2% to 1,582.63 billion won, while the net profit saw an increase of 215.9% to 271.58 billion won.

The impressive performance, despite no major comebacks from its artists, is credited to the large-scale world tour concerts. BLACKPINK has been on a record-setting world tour since October last year, spanning cities in North America, Europe, and Asia. Within just two months of its commencement, this world tour rose to be the highest-grossing concert tour ever by a girl group.

Examining the sales by sector, in the album/DVD segment, BLACKPINK sold 710,000 units and TREASURE 70,000 units, generating a revenue of 62 billion won (+113.6%). Revenue from BLACKPINK's 12 overseas concerts (attended by 390,000 people) and their appearance at Coachella, along with TREASURE's 8 concerts (attended by 86,000 people), amounted to 312 billion won (+681.0%). Additional sales, including overseas concert merchandise from both BLACKPINK and TREASURE and expected revenue from BLACKPINK's upcoming Japan concert in the third quarter, were recorded at 205 billion won (+630.9%).

Earlier in Q1, YG reported a revenue of 1,575 billion won and an operating profit of 364 billion won, showing an increase of 108% and 497% respectively from the same period the previous year. This impressive 'earnings surprise' outdid market forecasts, with BLACKPINK conducting 14 world tours during this period.

However, the challenge lies in YG's heavy dependency on BLACKPINK. The group celebrated its 7th anniversary since debut on August 8. Considering that idol groups typically have a 7-year contract, BLACKPINK's contract renewal season is undeniably upon them.

Securities companies view the potential renewal of BLACKPINK's contract positively. Lee Ki-Hoon, a researcher at Hana Securities, mentioned, "Given that the announcement is absent past their debut date, there's a high possibility of renewal." He further highlighted that continuous performance will be seen every quarter, which will also mitigate the undervaluation of YG's stock price.

However, there's prevailing speculation within the music industry that the members might not stay with YG. Rumors suggest that most members have already been in touch with other agencies. If this happens, while full group activities might predominantly occur under YG, conducting group activities after changing agencies can be challenging, given the logistical and time constraints.

Even if BLACKPINK does renew their contract with YG, a clear subsequent revenue model is essential for continuous growth. Thankfully, TREASURE, which debuted in 2020, has been steadily growing, especially with the recent release of their second album 'Reboot.' There's also high anticipation for the debut of BABYMONSTER, which already boasts a robust fandom.

An industry insider pointed out the risk of dependency on a single group. "While HYBE continuously supported the growth of various artists despite having a mega IP like BTS, for YG, while BABYMONSTER shows potential, it's crucial to see how much time BLACKPINK can buy for their junior groups to rise. Renewing the contract with BLACKPINK is a critical juncture for YG," the insider analyzed.

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