SM Entertainment, Poor Member and Performance Management “Can They Regain Their Glory?”
However, the company’s once-great reputation is now faltering due to poor member management and declining performance. This has led to a worsening perception of SM, with decreasing market valuation and a drop in stock prices.
During their peak, SM led the industry by discovering groups like H.O.T and S.E.S, paving the way for the first-generation idol market. They continued to introduce influential artists such as BoA, TVXQ, Super Junior, Girls’ Generation, SHINee and f(x), establishing themselves as central figures in K-pop history. These artists remain legends, shaping the industry in various ways.
Currently, SM has successfully launched major artists like NCT, aespa and RIIZE. Red Velvet has also solidified its position over the past decade. SM’s strong fanbase further demonstrates SM’s exceptional production capabilities.
Despite these successes, SM has faced challenges including governance issues surrounding founder Lee Soo-man and difficulties stemming from acquisition battles with HYBE and Kakao. Internal problems have also emerged, such as contract renewal risks with EXO members Chen, Baekhyun and Xiumin leaving SM. Rising production costs and ongoing operational losses in some subsidiaries have hindered SM’s growth. Recently, NCT’s main vocalist Moon Taeil was investigated for sexual assault, leading to his departure from the group and bringing management issues into the spotlight. This incident highlights significant gaps in artist management.
These concerns have impacted SM’s stock price, which has dropped by 58% over the past year, a decrease nearly double that of HYBE’s 32% drop during a similar period of conflict. JYP Entertainment and YG Entertainment also saw similar declines, but the underlying issues differ. SM’s price-to-earnings ratio (PER) has halved from 23.8 times last year to 12.4 times currently, indicating reduced growth potential. In comparison, YG and JYP’s PERs are around 14 times, suggesting lower growth expectations for SM among major entertainment stocks.
In response to these crises, SM is pursuing changes to create new markets and enhance profitability. They recently debuted the AI virtual idol nævis and are preparing for the debut of the UK-based group Dear Alice. These efforts are aimed at accelerating growth through market expansion. Internally, SM is also seeking financial changes by selling some subsidiaries like SM C&C and KeyEast. Typically, the next step in corporate restructuring involves human resource innovations, leading industry experts to predict that SM may undertake a significant personnel overhaul by the first half of next year at the latest.
Source: Naver
