2024/08/20 12:16
HYBE 2.0, Racing to the Game
2024/08/20 12:16
Author | Li Qinyu Edited | Fan Zhihui
Recently, Korea entertainment giant HYBE announced a restructuring of its global business, releasing a detailed plan for its HYBE 2.0 strategy.
Under the HYBE 2.0 framework, the company will restructure its existing three business "pillars" – its previous brands, solutions and platforms – and restructure them into music, platform and technology-driven future growth initiatives.
At the same time, former CEO Park Ji-won resigned, and former chief strategy officer Lee Jae-jae took over.
As the core figure leading the HYBE 2.0 strategy, Lee Jae-sang mentioned in a letter to shareholders: "We believe that the gaming sector is expected to play an intuitive and important role in the future of HYBE. HYBE's professional perspective in the music industry can also be effectively adapted to the gaming industry. ”
HYBE also said it will explore new business opportunities, planning to invest in areas such as games, audio technology, generative AI, original storytelling, and integrating online and offline experiences. So, can the new CEO Lee Jae-sang start a new second growth curve under the HYBE 2.0 strategy?
Just days after the launch of the HYBE 2.0 strategy, its gaming subsidiary, HYBE Interactive Media (HYBE IM), received $80 million in funding from Makers Fund, IMM Investmen and parent company HYBE.
It is understood that HYBE has created an "iron army" in the game industry for HYBE Interactive Media, with team members from the world's top game companies such as NEXON, NCSOFT and EA Korea. According to Venture Beat, HYBE Interactive Media currently has 240 employees, compared to 790 employees at parent company HYBE.
In recent years, HYBE's layout in the game field has continued.
Since the launch of the rhythm mobile game "Rhythm Hive" in early 2021 with the theme of K-Pop music and its artist IP, HYBE successfully launched the mobile game "BTS Island: In the SEOM", which is also deeply integrated with the IP of its artists, in 2022. In the same year, HYBE acquired Flint, the developer of the Korea card game Dragon Blaze.
In June 2023, HYBE and its gaming division, HYBE IM, injected $22.7 million into Korea's emerging game developer Aqua Tree.
Four months later, HYBE's first RPG in collaboration with developer Flint, ASTRA: Knights of Veda, was released worldwide.
To be fair, aside from CG animation and character stand-ups, this game is not excellent. Although the arcade style is exquisite, the operation delay is very large, and it is a little boring in terms of combat model and sense of attack, and even obviously borrows from the domestic second game "Genshin Impact" in terms of cultivation system and gacha mechanism.
As a company with music as its core business, when it expanded its business into the game field, although it attracted a lot of attention with its strong brand influence, it also exposed its shortcomings in game development.
But on a positive note, HYBE's performance in ASTRA: Knights of Veda still has a number of positive highlights. As a large-scale game that was released simultaneously on multiple platforms around the world, it required complex technical and organizational skills. As Lee Jae-sang said, HYBE IM did not have any major downtime in the first week of operation, demonstrating the excellent operational ability, strong resource integration ability and brand influence of the HYBE game team.
In February this year, HYBE injected $1.45 million into Action Square, the mobile game developer of Korea's national mobile game "Blade", and signed a contract to acquire the global distribution rights of the company's new game, the third-person extreme escape game "Dungeon Stalkers". The two parties said that they will establish a solid cooperation partnership to improve the service quality of the game. On August 13th, HYBE IM announced the official start of global testing of Dungeon Stalkers.
It is not difficult to see that in the HYBE 2.0 strategy, games have been established as an important investment direction, and IP has become one of the keywords.
Whether it is a mobile game with its artists as the core or a role-playing PC game that has been launched in recent years, HYBE's way to enter the game is to dig out IPs that can be combined with its original business in different game worldviews.
In the future, how to effectively transform music IP into an immersive and interactive experience in games, and how to ensure that the application of emerging technologies will not weaken the brand image of the core music business, are all issues that HYBE needs to deal with cautiously in the next step.
Since HYBE does not separately disclose revenue from the gaming segment on its balance sheet, at last week's earnings call, CLSA's equity research analyst Kim Do-hyung questioned HYBE's "unbusiness".
Lee Kyung-jun, the current chief financial officer of HYBE, responded that although it is not possible to disclose specific data at this time, it can be revealed that HYBE's game sales in the first half of this year increased by 3 times year-on-year compared with the first half of last year. But this strategic shift has not come without cost, as he also confirmed that "gaming-related expenses, as well as those related to technology-driven growth businesses, have negatively impacted HYBE's operating margin by 4 percentage points overall." ”
This response inevitably makes shareholders feel that HYBE's growth space in the music industry has been limited. In this regard, Lee Jae-sang also admitted that the current added value of the global music industry is relatively low, and HYBE is not turning to the game field because of the stagnation of the music industry, but based on forward-looking thinking about the changes in future entertainment consumption patterns.
"When there's a new game update or an artist releases a new album, fans react similarly, and HYBE has a deep understanding of this and is able to meet those needs with effective marketing and campaign planning," he said. Therefore, HYBE is continuing and applying these successful fan management experience to the game field. ”
Indeed, HYBE has accumulated a wealth of experience in IP expansion, such as the aforementioned "Rhythm Hive", which focuses on K-Pop music and targets the fan base of artists such as BTS, TOMORROW X TOGETHER, and ENHYPEN.
Although Rhythm Hive has been out for 3 years, according to the latest data from Sensor Tower, the game still has 200,000 downloads and $300,000 in revenue in the App Store in K-Pop popular regions such as Korea, Japan, and United States in the last month. In the App Store Korea region in the "Games/Music/Free Downloads" category, this game is ranked 5th.
This kind of IP expansion ability and fan operation experience may be the confidence of HYBE to actively explore new growth areas now.
In addition, in the conference call, Lee Jae-sang also proposed a new strategic concept - "The Next Entertainment" based on HYBE's music, games, technology and other forms of entertainment, in an attempt to create a cross-media entertainment ecosystem.
This concept is similar to the "One Sony" strategy proposed by Sony Group President Kazuo Hirai in 2013, and its core is to maximize synergies and break the "silo phenomenon" within the group through resource sharing, technology integration, and content collaboration between various departments and subsidiaries.
The "One Sony" strategy has had initial success in 2019.
Sony Interactive Entertainment released the triple-A action game "Death Stranding", the exquisite picture quality and high-quality soundtrack in the game, as well as the "connection" and "symbiosis" emphasized in the world view, let many players play the philosophy of life in the game, and won the PC Gamer 2020 Game of the Year Award, and the domestic Douban game also has a high score of 9.2.
The game's official soundtrack album "Death Stranding: Timefall" was released by RCA Records, a subsidiary of Sony Music, and Sony Music's artists Khalid, Alan Walker, and Bring Me The Horizon participated in the recording of the game's music part and soundtrack.
In 2022, Sony United States established a subsidiary in Los Angeles, Sony Immersive Music Studios, to create a new immersive music experience through close collaboration between Sony's technology research and development, hardware equipment and film and television content production departments.
Although HYBE and Sony Group have similar playstyles, the layout path is slightly different. Compared with the Sony Group with its technological genes, HYBE's "The Next Entertainment" concept focuses more on opening up new markets and growth points through diversified entertainment forms.
While HYBE tries to make up for its shortcomings through investment and collaboration, technical prowess and innovation are still the key to success or failure in a highly competitive gaming market, as evidenced by the aforementioned experience of ASTRA: Knights of Veda.
Whether HYBE can lead this convergence trend is measured by whether IP, music, and games can achieve each other and outline a deep and artistic worldview. At the same time, these elements can also "gather as a fire, scatter as a star", and take charge of themselves in various fields, truly realizing the cross-border montage effect of 1+1 greater than 2.
In fact, HYBE is not the only music company that has set its sights on the "cake" of games.
All three major records and music companies are actively involved in various cross-media collaborations, especially in popular virtual world games like Roblox and Fortnite.
In 2023, Universal Music Group partnered with virtual world developer Supersocial to launch Beat Galaxy, a virtual music experience project embedded in Roblox. In March of this year, Republic Records, a record label owned by Universal Music Group, launched Boombox, the first music player for Roblox, which allows players to listen to songs in the game and publish and monetize music content through playlists.
During Universal Music Group's Q2 earnings call, its chief financial officer, Boyd Muir, noted that as the advertising economy continues to shift to digital platforms, monetization opportunities for music content are expanding into new areas, such as gaming, health, and more. As these new areas continue to grow, Universal Music Group's diversified revenues will continue to grow.
On the other hand, Warner Music has partnered with game music service STYNGR this year to launch the music product "Batteries" in Roblox, which players can purchase through in-game digital currency to get a selection of stations updated weekly. Allan Coye, vice president of Warner Music, said that games and music are a match made in heaven, and Warner Music has not stopped looking for ways to expand the influence of music, and has been looking for new opportunities for artists and songwriters.
More and more music companies are realizing that gaming is not just a part of entertainment, but also a huge business opportunity for the music industry, with consistent revenue and a large user base. The two major sections of music and games are also showing a trend of "two-way running", not only music companies are actively exploring the field of games, but games themselves are also evolving towards a more immersive music experience.
The prime example of this is GTA5, where the radio system is one of the highlights of the game. Each station has a unique musical style, DJ hosts, and track lists, providing players with an immersive audiovisual experience spanning the 60s to the 21st century. GTA5 has sold more than 200 million copies worldwide, earned more than $8.5 billion worldwide, and continues to attract players around the world through constant content updates and in-app purchases of virtual currency.
In this context, HYBE's strategic layout undoubtedly conforms to this trend. Despite the challenges, HYBE is expected to capture a larger market share in the future entertainment industry through the implementation of "Music + Gaming" and other cross-media strategies.
Although music and games seem to belong to the two branches of the same entertainment system, in terms of technical form, they are evolving from a single experience dimension to multiple experiences. For music companies, it is not only an opportunity to explore new markets, increase revenue models, and enhance brand influence, but it is also a huge challenge for technology and resources.
Gifted artists are often born at the wrong time and only gain fame after death, but the cruelty of business does not allow one wrong step.
Just like the rise of short video must be accompanied by the popularization of 5G technology, the short video community that was born early can only turn into a wave on the beach. Cross-border is a business means to seek a breakthrough in the business map, but if you fail to step on the BUFF of the times and can't make a combo in your hand, you can only become an elegy when the building collapses.
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