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BTS made Bit Hit a huge success. They're also why its IPO is so risky

October 15, 2020. Summarized by summa-bot.

As the label behind K-pop megastars BTS prepares for a public listing, some analysts are cautioning that the company is still over reliant on the boy band.

The group accounted for 97% of Big Hit's sales last year.

But BTS has a unique complication that could threaten the business: South Korea mandates more than a year of military service, and the group's members are fast approaching the deadline to enlist.

The group that fueled Big Hit's rise

Before their rise, South Korea's music industry was dominated by three music labels — JYP Entertainment, SM Entertainment and YG Entertainment — that turned out K-pop's biggest acts, including Girls' Generation, SHINee, GOT7, Big Bang and PSY.

Last year, Big Hit reported 587 billion won ($512 million) in sales — nearly double the previous year's total.

"Ninety percent of Big Hit Entertainment's revenue is from BTS, so the risk is there," said Park Ju-gun, a business analyst from corporate analysis firm CEO Score.

Big Hit also launched a platform called Weverse where fans can see exclusive content and message their favorite artists — a service that sets the company apart from the other major labels, according to Ji In-hae, an analyst from Hanwha securities firm.

"Now is the time we must discuss how these proud young men could better serve our nation. " The country's parliament is considering a bill that would allow K-pop groups to delay military service for two years beyond the current deadline.

Big Hit also noted the group's reputation as a potential risk in its filing.

Last year, YG Entertainment's stock plunged after a member of one of its acts, Big Bang, was investigated for a range of allegations, including allegedly violating South Korea's prostitution law.

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