However, the company’s once-stellar reputation is now faltering due to poor member management and declining performance. This has led to a worsening perception of SM, with a falling market valuation and falling stock prices.
During their peak, SM led the industry by discovering groups like HOT and SES, pioneering the first-generation idol market. They went on to introduce influential artists like 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 many ways.
Currently, SM has successfully launched major artists such as NCT, aespa, and RIIZE. Red Velvet has also consolidated its position in the past decade. SM’s strong fan base further demonstrates SM’s outstanding 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 issues have also emerged, such as contract renewal risks with EXO members Chen, Baekhyun, and Xiumin leaving SM. Rising production costs and continued operating losses at some subsidiaries have hampered SM’s growth. Recently, NCT lead singer Moon Taeil was investigated for sexual assault, which led to his departure from the group and brought management issues to the fore. This incident highlights significant gaps in artist management.
These concerns have impacted SM’s stock price, which has fallen 58% over the past year, nearly double the 32% decline seen by HYBE during a similar period of strife. JYP Entertainment and YG Entertainment have also seen similar declines, but the underlying issues are different. SM’s price-to-earnings (PER) ratio has halved from 23.8 times last year to 12.4 times currently, indicating limited 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 improve profitability. They recently launched the AI ​​virtual idol nævis and are preparing for the debut of the British group Dear Alice. These efforts are aimed at accelerating growth through market expansion. Internally, SM is also seeking financial changes by selling off some subsidiaries such as SM C&C and KeyEast. Typically, the next step in corporate restructuring involves human resources innovations, leading industry experts to predict that SM could undertake a significant personnel overhaul by the first half of next year at the latest.
Source: Naver
