Jin Young Park, founder and head of JYP Entertainment, posted a photo on Instagram in early November of him talking with Chinese President Xi Jinping at a dinner hosted by South Korean President Lee Jae Myung as part of the Asia-Pacific Economic Cooperation summit in Gyeongju, South Korea.
“It was truly a pleasure to meet and speak with President Xi Jinping. I sincerely thank you for listening and sharing your kind words. I hope we can have more conversations to bring the people of both nations closer together through popular culture,” Park, who also co-chairs the country’s pop culture exchange committee along with the culture minister, said on November 4.
The hopeful words about Seoul-Beijing relations were of great interest to investors who had made bets on China opening its doors for South Korean entertainment agencies to do more K-pop business in the mainland. The so-called “big four” K-pop agencies’ stocks ended up dropping sharply, as investors saw a lack of development in the expansion of business in China. The nosedive showcased the volatile nature of these stocks.
Analysts warn the sector’s recovery hinges on cultivating new global acts to rival the successes of BTS and Blackpink.
YG Entertainment suffered the most, with its shares tumbling 31.9% between November 3, the first trading day after the summit, and November 27. JYP’s stock, meanwhile, plunged 19.2% over the same period. SM shares dropped 14.1%, and Hybe stock fell by 12.8%, underperforming the benchmark KOSPI, which lost 5.6%.
K-pop’s global ascendancy, highlighted by recent Grammy nominations for its artists, has cemented K-pop’s status as a cultural and commercial juggernaut. Yet, for investors, this potent soft power is now being weighed against a critical geopolitical landscape.
“This anticipated reopening is now a central pillar of the bullish case for K-pop. However, with China yet to provide formal, large-scale market access, investors are ultimately betting on this untapped potential, a bet that represents the sector’s most significant growth lever,” said Bokyung Suh, an analyst who previously had worked for Netflix and AllianceBernstein.
He added that President Lee, who took office in June, is a critical factor. His commitment to a more balanced China policy has spurred speculation of renewed cultural exchanges.
A significant signal of this shifting landscape emerged in June, with the announcement that China’s Tencent Music Entertainment had acquired a 9.7% stake in SM Entertainment for KRW 243.3 billion (USD 167.9 million) to become the second largest shareholder of the K-pop agency. Kakao, a South Korean internet heavyweight, and its subsidiary Kakao Entertainment are the largest shareholders of SM, owning a combined 41.5% stake.
Unlike typical stocks, K-pop companies are partially owned by a unique type of investor: fans of artists contracted to corresponding agencies. This investment phenomenon is exemplified by individuals including Annaliese Matters, who purchased Hybe shares at their IPO price of KRW 135,000 (USD 93.2) five years ago. The stock more than doubled to close at KRW 297,500 (USD 205.3) as of November 21.
“A friend recommended their ‘Idol’ music video, and when Hybe listed, I bought a few shares for fun alongside my local stocks,” Matters recalled, referring to a song by Hybe-managed BTS. She acquired the shares via a specialized broker, which later ceased operations, necessitating the sale of her stake in 2023.
“Accordingly, the investment wasn’t worthwhile as I was forced to sell. Hybe’s price was very volatile, and I assume most listed K-pop companies are similar. It’s the kind of asset you buy as a fan, not for long-term financial gain,” she added, yet her fandom remains entirely separate from the financial outcome.
Suh stresses that the industry’s paramount challenge is replicating the success of BTS and Blackpink to secure sustained investor optimism. This confidence is underpinned by the sector’s powerful economic engine, lying in a deeply committed global fanbase that demonstrates a proven willingness to spend directly on their idols, thereby fueling the agencies’ financial resilience and growth potential.
“This reveals the unique economics of a ‘fan love’ business, where the top two or three idol groups can generate over 80% of a company’s revenue. This engagement directly shapes the revenue structure, which is typically diversified across sources like music sales (40%), merchandise (20%), commercial endorsements (20%), and concert tickets (20%),” Suh added.
This situation highlights why the industry needs artists who can bridge cultures. Since the K-pop business model depends entirely on fan loyalty, creating that genuine global connection is crucial for long-term commercial success.
This “fan love” model is being systematically optimized, a trend noted by Sebastian Diaz-Gasca, a music industry lecturer at RMIT University in Melbourne, Australia. He observes that the ongoing “K-wave” expansion will create ever more fan-centric opportunities.
“Platforms including Bubble and Weverse are pivotal, monetizing intimacy through subscriptions,” he said. “Merchandise, light sticks and online meetings are no longer just extras, but they are core revenue streams, commodifying the group’s brand to a level that often rivals the music itself,” he said.
Diaz-Gasca mentioned that parasocial relationships, the one-sided emotional bond made with idols, generate in fans a connection and sense of responsibility for the idol’s well-being and success.
“This lucrative expansion has fortified the entire Korean ecosystem. Privately, a sophisticated infrastructure of labels and publishers expertly disseminates the genre, while fans amplify the content, performing invaluable grassroots promotion. Publicly, the government leverages K-pop as a central soft power asset for national tourism campaigns. The next frontier may see fans transitioning from promoters to active participants in the creative process itself,” Diaz-Gasca added.
Elly Lau, a behavioral analyst at Canvas8, a market research firm, mentioned that it’s important to keep on evolving, because even though merch staples like K-pop albums and photocards are here to stay, album sales have declined by 19% due to factors like the lack of artistic innovation and weakening domestic interest amid the industry’s globalization push. As such, fans’ purchase motivations may shift in the near future.
“The era of bulk buying was about passive accumulation as a signifier of loyalty, but fan consumption may shift towards active, strategic investment as a means of guardianship. Entertainment companies will need to evolve accordingly. It’s no longer just churning out IP content or products, but really making sure fans feel like they have the power to influence the K-pop story,” Lau said.
“Fans are turning to investments as a more active form of fandom. When you own stocks in the label, it’s a way to assert total ownership over your idols, something you can’t really get from simply purchasing an album or merchandise. When you’re a shareholder, it’s almost like you get to be the boss of the agency, and companies become accountable to you. In this way, it subverts the conventional artist-idol dynamic, where fans, not necessarily artists, occupy central positions in celebrity spheres of influence,” she said.
The financial commitment of these fans is quantifiably substantial. According to the 2023 annual report from Luminate, a US music market analytics firm, the average K-pop fan spends USD 24 a month on merchandise, which is 2.4 times more than the average US music listener and about 33% higher than J-pop fans.
This growth potential is emphasized by starkly divergent financial performances among the leading agencies.
SM Entertainment generated KRW 321.6 billion (USD 221.9 million) in sales and KRW 48.2 billion (USD 33.3 million) in operating profit in the third quarter of 2025. Compared with the same period last year, its revenue rose 32.8%, while its operating profit rocketed 261.6%. YG reported an operating profit of KRW 31.1 billion (USD 21.5 million) in the third quarter, reversing a KRW 3.6 billion (USD 2.5 million)) operating loss for the same period the previous year.
By contrast, JYP Entertainment’s operating profit fell 15.7% versus 2024 to KRW 40.7 billion (USD 28.1 million) in the July to September quarter.
When contacted on their business performance and future strategy, YG, Hybe, and SM declined to comment, while JYP had not responded by publication time.
The financial vigor of K-pop energizes the advertising agencies, software and software-as-a-service platforms that enable monetization and fan engagement, while also creating new opportunities in sports, live events, and experiential media. This interconnected ecosystem, from integrated telecommunications to publishing and entertainment networks, is now seen as a cohesive growth bet, supercharged by South Korea’s cultural exports.
The market’s momentum is further highlighted by high-profile deals involving individual superstars. Galaxy Corporation, the management company of K-pop icon G-Dragon (Kwon Ji-yong), is planning a 2026 IPO that could value the firm at approximately USD 1 billion. This ambition was recently validated by a strategic investment, with Jay Chou’s associated company, Star Plus Legend, acquiring a 7% stake for USD 8 million in 2025. These moves highlight the intense market interest and the premium being placed on top-tier artistic brands.
Despite the optimistic path, Suh, the analyst, expressed caution over the inherent volatility of the K-pop market, as valuations are heavily dependent on celebrity brands and are therefore susceptible to risks such as scandals, mandatory military enlistment, and shifting public sentiment:
“This [situation] creates a highly correlated market. The [K-pop] sector often moves as a single unit, driven by its collective global brand perception. A negative event at one major agency, like Hybe, can trigger a sell-off across peers such as SM, YG, and JYP. Conversely, positive macro news, such as a thaw with China, can lift all stocks in a widespread rally.”
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.