Good morning. I am Bang Si-hyuk, Executive Producer and CEO of Big Hit Entertainment’s Label Group. We’ve been having some sweltering weather, so I am that much more thankful that you are here today. The meteoric rise in the popularity of BTS across the world over the past several years, I think, has made Big Hit itself a topic of many conversations. For this, I’m very grateful. But, I’ve also noticed that these discussions include both facts as well as misunderstandings. With the recent series of announcements from Big Hit, more people have begun to wonder what sort of company Big Hit really is, and what the company aims to accomplish. I think this was a reminder that we need pay more attention to letting people know just who we are as a company. So, we’ve decided that we will now work even harder to inform. To take at least two opportunities each year to explain about who we are and what we do. We’ve given to this session the title, “Big Hit Corporate Briefing with the Community”. As the name implies, it’s an opportunity to explain what Big Hit’s core philosophy is, and what we have built upon that foundation and what we aim to achieve. I’m not sure if I’ll be able to answer all of your questions, but let’s begin our conversation today. We’re already two-thirds into this year and September is right around the corner. We went full-tilt through the first half of this year, and Big Hit and Big Hit’s artists have made soaring achievements. BTS took part in the Grammy Awards and wrapped up a stadium tour across LA, New York, Chicago, London and Paris. BTS was also honored with the Billboard Music Award for Top Duo/Group. We were humbled to be called “the Beatles of the 21st Century” by worldwide media. Following their successful debut in March, TOMORROW X TOGETHER completed a six-city showcase tour in the United States, and the reception was enthusiastic. Making an overseas presence just two months after their debut, TOMORROW X TOGETHER has been dubbed “global super rookies” and was recently honored with a New Artist Award. Their new album is awaiting release and they are ready. While our artists have been squarely in the limelight, Big Hit itself has also made solid achievements in a wide range of business fields. Growth has been notable in song and album sales, performances, content and merchandising, and total revenue in the first half of 2019 has already nearly overtaken our total 2018 revenues, at over 200 billion won. Operating profits exceeded 39.1 billion won, already almost two-thirds of last year’s 64.1 billion won. Last July, Big Hit topped a major global performance tour sales ranking chart. There were remarkable changes in Big Hit’s internal organization as well. The number of our employees increased nearly fourfold in a year, and we are planning various organizational changes in the second half of this year. We are also revving up our “multi-label system”, which we have long prepared. We’ve established BELIFT Lab, and brought in Source Music as one of our subsidiaries. In our business group, we are fine-tuning each specialized field and accelerating our reorganization. We recently announced that Ms. Min Hee-jin has joined us as our new CBO, a key example of these efforts. As the first project of this new initiative, Big Hit and Source Music will soon hold a world-wide audition. My music and CBO Min’s creative direction will come together in this new “Plus Global Audition” for a brand-new female group, and I urge you to look forward to it! As our company continues to grow, news about Big Hit is also growing in the media. We are happy and grateful for this attention. But, the story we want to share today is not just about “revenues” or “M&As”. I want to share with you the bigger picture that we are painting at Big Hit. At Big Hit, we have a bigger goal, a larger vision. What will Big Hit do? That’s what we’d like to show you today. What Big Hit dreams of is music industry innovation. “Innovating the Music Industry.” You might think it’s vague and abstract. Let’s think about what innovation really is. Innovation springs from the process of trying to address existing or yet undiscovered customer needs, by transforming existing industry paradigms, improving current systems and ultimately providing a brand-new solution. Big Hit seeks to spur on change in the process of value creation and expansion in the music industry, which will boost revenues, expand the market, and advance the system, and ultimately enhance the quality of life for all employees and all members of the music community. Another industry that achieved explosive growth through business model innovation and dynamic IP development is the gaming industry. Let’s compare these two industries to examine where we are today. If we compare market sizes, the global market size of K-game far eclipses that of K-pop. The Korean music market was $967 million as of 2017, accounting for about 2% of the global music market. The Korean gaming market reached over $10 billion, or about 6% of the global gaming market. That’s a ten-fold different in market size, and K-pop’s share of the global market is also smaller. Now, the amount of music Koreans consume and the amount of games is not very different. Koreans consume an average of 1 hour 18 minutes of music, and an hour and a half of games. Why is it, that people spend about the same amount of time on music and games, yet the market sizes are so different? Is it because K-pop content is inferior in scale and in its ability to inspire? Big Hit does not think so. A more fundamental reason is that the music industry has not received the acknowledgement it deserves for its true value and potential for expansion. No one has yet been able to show the real value and future potential of the music industry. As you know well, K-game went through several stages of development to be where it is today. The gaming industry began with titles on CDs, but the technological development of the online and mobile space and the idea of “IP content” led to the creation of the game character, the commercialization of in-game items, and the ensuing rapid growth of related businesses. Big Hit believes that the same innovation is possible in the music industry. And we at Big Hit aim to achieve that innovation and be the main driver of that paradigm shift. We don’t think this innovation is only relevant for the K-pop industry. The global game market is also three times larger than the global music market. As befitting of our global outlook, Big Hit seeks to grow into a world-leading major label to apply our experience in innovating the K-pop market in the global arena. Ultimately, we dream of declaring this as the “de facto standard” as we explore new frontiers of the global music industry. To achieve this goal, we are concentrating our capabilities into two core focal points. First is innovating the customer experience. The second is expanding the value chain and building a customer ecosystem on these foundations, to ultimately create new business. Now, I would like to invite Lenzo Seokjun Yoon, CEO of Big Hit Entertainment and Big Hit’s Business Group, to speak about customer experience innovation. Lenzo, please. Hello. I am Lenzo Yoon. I believe this is the first official event I have a chance to be a part of since stepping into the post of CEO of our Business Group. As the head of our Business Group, I’d like to share with you about how we are pursuing an innovation of the customer experience. How can we innovate the customer experience? As a prime example, I would like to present the enhancement and expansion of the concert-going experience. “Lots of fans attending a K-pop concert spend money and come with high expectations. But the process itself is grueling and painful.” This is a quote from a university student who interned at Big Hit earlier this year. And it is true. The long waiting and discomfort at an idol performance is a reality that can’t be denied. Let’s take a regular fan, “A”. A comes to a concert loaded with things, both hands full with a big backpack. In it will be a light stick, slogan banner, merchandise and all kinds of things. A will be carrying water, beverages and snacks. Hundreds and thousands of fans like A will line up. They will wait in line from dawn to buy limited-edition merchandise. Bit Hit decided to address this inconvenient process first. First, at our BTS fan meeting in June, we used a mix of on- and offline channels for concert merchandise sales. We offered three options: guests could pre-order online and pick up on-site, order online and receive their goods at home, or purchase on-site. They could choose the best method for themselves from these three options. As a result, the merchandise lines on the day of the event were considerably shorter. There was less discomfort and less waiting in line. We are planning to take this a step further by implementing a queue system. For example, a purchaser whose location has been verified will order merchandise through an app, which will then send a message to notify the customer after the items have been packaged, ready for pickup. In the same vein, we are working to provide a more fun and comfortable experience for fans while they wait. For example, a rest area near the concert venue will have chairs and shade, a place for fans to rest. Water, beverages and snacks will be made available on-site in a food zone, so that they won’t have to pack them in. We implemented these plans in our most recent BTS concert, and they were very well received. Big Hit will also continue to work to improve the waiting, discomfort and unfairness sometimes associated with the ticket-buying experience. The ticket raffle system that we adopted for the June BTS fan meeting and the upcoming October Seoul concert will be expanded and applied in stages to overseas tours, vastly improving the experience of our fans looking forward to our performances. These measures so far have focused on “enhancing” the experience. Big Hit will also work to “expand” the customer experience. The “Play Zone” first featured during the recent BTS fan meeting is a prime example. Consisting of a wide range of festivals, booths, quiz show and more, the Play Zone is a place where fans can have fun while waiting for the performance to begin. Simply put, it’s transforming the venue into a fun theme park. But these cases are only the first steps in Big Hit’s effort to “enhance the customer experience”. These initiatives will be modularized for customization and expanded to suit each concert and venue. We will also work to diversify the concert-going experience. Most concerts are like this: There’s an artist who performs at a venue, and only the fans who can enter the venue get to experience the live performance. Big Hit believes that performances of the future must be different. More people should be able to take part in the live experience through a variety of methods. Some fans may choose to enjoy the show with their family and friends in a park adjacent to the venue, like a picnic. Some may cheer with other fans in a theater to soak in the atmosphere, and others may experience the show in the comfort of their own homes through their mobile devices or PC. Each person will be able to choose their own favorite method but still share the dynamic and exciting experience of the live performance. Through these interactions, the artists and fans around the world will be brought closer together. Adding VR and other devices that provide new experiences, 5G communication and AI technology will bring about a true “innovation” that will bring the concert-going experience to life. . This will the moment “enhancement” leads into “innovation”, and what Big Hit will strive to achieve. There’s more we can do to expand the concert-going experience. Let’s take a step outside the concert venue. For weeks before and after a show, pop-up stores and exhibitions will spring up across the city hosting the performance. There will be online and offline events for the fans to enjoy. It will be a real festival with the concert as its core theme. During the recent BTS stadium tour, pop-up stores ran for a week in LA, Chicago, New York, London and Paris, with over 100,000 visitors. Fans who had previously engaged with each other online now came together in these cities to sing, dance and share their experiences before large LED displays. A city will host a performance, these diverse events will then spring up, which will bring more people together and turn the city into a festival. For the BTS Final concert in October, these pop-up stores will also appear in Seoul, cities across the world and online. People will be able to experience more, well beyond their expectations. These cultural events will also provide an economic boon to the hosting cities and locations. The numbers provide ample proof. In July, a Korea University Business School research team headed by Professor Pyun Ju-hyeon conducted a study of the four-day economic effect of BTS’s fan meeting. The results are interesting. The study showed that the two days in Busan created 130 billion won in economic benefits, and the two-day event in Seoul another 350 billion won. This is the equivalent of six days of all household and business economic activities in Busan, and three days of all economic activity in Seoul. This ripple effect is not just restricted to what happens at or around the performance venue. When BTS has a show, fans buy tickets, buy merchandise on site, stay in local lodging, and look for the best local restaurants, which gives a boost to local incomes that in turn fuels additional consumption, leading to a ripple effect that creates added value. This is the economic theory this analysis is founded on. Four days of performances, then, injected 481.3 billion won into the Korean economy. The research team noted in the report that this is “enough to create four global unicorn companies.” But now let’s look at this from the fan’s perspective. Fan “A” comes to city “B” for a performance. A buys a ticket, visits the pop-up stores and attends an exhibition. A finds lodging, dines out and tours the city. This mean that, for A to enjoy the artist’s performance, A must also make the effort to find information about transportation, lodging and sightseeing. Here, Big Hit asked another question. Is there a way to deliver all of this at once? And here was another area ready for innovation. It’s the platform. What role can the platform play in the expansion and innovation of the music industry? I would like to invite CEO of beNX Steve Seo for his insight. Good Morning. I am Steve Seo, CEO of beNX. I think it was last winter, when Mr. Bang said something to me. He said, “We have the plans for exploring the universe, so make us the spaceship.” The market was ready, the strategy was set, but there was no “means” for liftoff. He was talking about creating a company that can make the most innovative rocket, a company that can blast off and grow. The members of beNX have spent the past year working on this launch vehicle. What sort of rocket can we make that can innovative the experience of our customers, our fans? We put the “fan experience” at the forefront of our exploration. We experimented and improved constantly. From this process emerged Weverse, launched in June. Existing fan communities and fan sites use mass platforms developed by IT companies to mount their content. Weverse, in contrast, is a service and platform developed by a company that pays the closest attention to artists and fans. From the beginning the platform was designed with the artists and fans at the center, with a variety of devices that allow close communication between them. Dedicated functions for artists is another unique Weverse feature. From the UX design stage, we thought hard about how artists can feel they are truly communicating with the fans. For example, if RM tuns on the app, a message will tell him that, “Fans are waiting for you.” As you can see here, Weverse is not a fan cafe that is “managed” by the label, but is a tool through which the company “supports” the communication between fans and artists. It’s been two months since we launched Weverse in June. Weverse is making it clear that a service developed with “fan and artist” as its core value can grow into a viable and revenue-generating business. Take a look at membership numbers. Over the past six years, the BTS official fan cafe collected 1.5 million members. In the past two months, over two million fans have signed up to Weverse. Weverse has transcended the limitations of the traditional fan cafe, appealing to fans across the world immediately and quickly. Now, over 800,000 users from 229 countries around the world visit Weverse each day. The future of Weverse is not bound within the confines of Big Hit’s multi-label organization. We hope other artists from other companies who share our core vision and philosophy will join us in the near future. Weverse is also planning to roll out a variety of services that can support the communication between fans and artists. For example, the BTS light stick “ARMY BOMB” will become more than a device for cheering at a concert, being linked via Weverse to flash and pulse when the user listens to a song, just like at a concert. Fans around the world will be able to connect in brand-new ways. We are also making plans to expand Weverse into a communication platform. We will provide a wide variety of free, paid and exclusive content. These innovations will drive the evolution of Weverse from a media-based platform into a true communication platform that will help artists communicate with fans. Ultimately, all of these will provide new experiences to fans and new value for communicating with fans for artists. Next, I’d like to talk about another key pillar of our customer experience innovation, Weply. Briefly put, Weverse is the community, and Weply is the commerce. Weverse and Weply will be linked with a common membership to provide even more services in the future. I will talk more about this. As a commerce service platform, Weply was developed with the vision of enabling our customers to enjoy the same service at the same price, no matter where they are in the world. Both online and offline. Fans want to experience everything about the artists. They want to buy albums, buy merchandise, watch a performance, attend a fan meeting. But to experience all of these, fans had to use several separate services. It was not easy to even figure out where I bought something, how much I paid, and for pre-orders, when it might actually ship. Our data shows us that customers from 142 countries used Weply’s previous incarnation, Big Hit Shop. For many overseas fans, buying BTS merchandise was a difficult process, and everything ended up being “limited edition” for them. Not only are internet connection speeds different, but very high shipping costs made many customers hesitate. Weply is breaking down these barriers and solving these inconveniences. After Weply launched, overseas buying rates of a particular index product rose from 20% before launch to 48.6% after. This means that shopping is now much easier for overseas fans. Weply will eventually ship every product to every destination around the world, and slash shipping costs for major market locations. We are building our logistics system in Japan and the U.S., and we will maximize cost efficiency through data-based demand forecasting. We have plans to provide even better membership benefits through Weply. Members will be able to purchase limited-edition merchandise at their leisure, before anyone else, and at more attractive prices. These membership benefits will not just be limited online, but will be expanded to include the offline buying experience. I think I can tell you that in the near future, everything will be possible when you turn on Weverse and Weply, a “music business one-stop service.” Weverse and Weply’s convenient services will equally shine for the concert-going experience. Until now, fans visiting a performance venue had to apply for and purchase each ticket, merchandise and events separately. IDs had to be produced each time, verified, and there were the inevitable lines. Soon, fans will be able to use Weverse and Weply for the entire process, from ticket purchase to identity verification, special event participation and merchandise shopping. We plan to add even more to the customer’s on-site experience through members-only rest areas, coupons, rewards and more. That’s not all. By linking with locations and services in various ways, fans will be able to choose and purchase everything from tickets to lodging and local transportation from these apps. We will work with various partners to create such a brand-new ecosystem. We will begin unveiling a variety of services from the second half of this year, and I think you can look forward to some new and unprecedented experiences. These changes will ultimately enable the realization of a part of Big Hit’s vision of music industry innovation, that is, platform-driven enhancement of the customer experience. We will do our best to make sure that Weverse and Weply can deliver the same level of excellence which we aspire to reach through our core values. Thank you. Now I would like to invite Mr. Bang back to the stage. So far, we’ve heard about our first mission for music industry innovation, which is innovating the customer experience. I will continue by outlining our second mission. Big Hit’s mission for innovation is the expansion of the value chain and the creation of a customer ecosystem, on which will be built new fields of business. Big Hit is looking to IP branding and IP storytelling as the new businesses that will make this a reality. First, I’d like to talk about IP branding. Some of you may be very familiar with the term “IP”, and it may be new to others. It stands for “Intellectual Property”. The core of Big Hit’s IP business vision is to enhance the brand power created through artists and secure powerful impact and influence, which can then be expanded into a sustained brand business. Indeed, we at Big Hit thought carefully about this brand expansion even before our artists debuted. This led to a new IP branding business model in the form of BT21, widely hailed as the most successful model for music business expanding into the character business. This success was made possible by the planning and strategy of the IP holder, Big Hit. In the first half of this year, we leveraged BTS’s IP branding to release the BTS World mobile game and Mattel BTS dolls, to enthusiastic reception by not only fans but consumers around the world. BTS World reached the top spot in 33 countries around the world, offering a new paradigm for the gaming industry. The fashion dolls created jointly with Mattel fanned a new cultural phenomenon of “dolls for adults”. Big Hit’s IP branding will not only be limited to the music industry, but will expand into licensing, characters, games, publishing, pop-up retail and more to create new opportunities to meet with fans. Licensing and collaboration with top brands in each category will lead to a wide range of IP-based merchandise, from luxury goods to household products, allowing anyone to enjoy all kinds of lifestyle goods without having to turn to illegal counterfeit goods. In other words, the brand created by music and artists will expand into the consumer goods, content, digital and offline commercial industries to offer new lifestyles and new experiences for fans. This is the essence of Big Hit’s IP branding business. Continuing to study the needs of our fans, our customers, Big Hit will develop exclusive brands with reliable partners, which will then segue into new artist collaborations. This will be the formula for success of our IP branding business. Creating more value above and beyond what was before. That is the core tenet of Big Hit’s IP branding business, a key engine of our future growth. Another field of business for driving innovation is IP storytelling. If we have a character, its backstory and temporal, spatial and ideological background is called its “universe”. The narrative expression of this background is “storytelling”. Big Hit’s character universe is integrated with its artists. BTS and what we call the BU (BTS Universe) has also inspired a number of different works. These illustrate seven young people who overcome their own pains and dark days as they grow together, touching the hearts of young people around the world. People can related to BTS as a part of this BU as well as artists. HYYH the Notes, a novel based on this backstory, was published in Korean, Japanese and English earlier this year and became a best-seller with over 200,000 copies sold just on Weply. This success has recently continued with a new Spanish edition. Naver’s Webtoon based on the BU created a following not just in Korea but in North America, Japan, China, Thailand and Indonesia. With over 30 million views just in North America, it became the biggest-ever Korean Webtoon hit in that market. TOMORROW X TOGETHER also has its own unique “TU” (TXT Universe), and a part of that story was unveiled through the “Nap of a Star” music video. Big Hit will continue to create new ways for people to understand and relate to our storytelling IP, meeting fans and the public across the entire transmedia spectrum from Webtoons and novels to games, animation, graphic novels, dramas and full 3D CG movies. We will plan and develop rich scenarios with top writers, and find the best medium through which we can tell these stories and ensure they live and breathe together. Storytelling will be expanded in stages to include artists in our multi-label organization. Big Hit is currently preparing a drama series together with a leading Korean production company based on the Bangtan Universe, slated for release in the second half of 2020. It will be a story set in the BU about how the seven boys first met. Here is another sneak preview. We are also preparing a new game project with Netmarble utilizing the BTS IP. Set in a new genre, this new work will provide another encounter with the BU rendered through lush, emotion-filled art. Let’s take a look at a concept art video. As you saw, the artists in Big Hit’s multi-label organization will be recreated as living and breathing characters through IP storytelling, which will engage with fans to provide a wide range of new experiences. Big Hit’s IP storytelling business; I think you can look forward to it. So far, you saw how Big Hit aims to innovate the music industry. We seek to expand boundary-less business models, create high-quality content, and deliver the best experience to our customers and drive industry-wide innovation to ultimately extend positive influences across our society. Achieving this efficiently will require continuous systemic improvements to our organization. Bit Hit will continue implementing these changes, which will serve as powerful engines to drive these music industry paradigm shifts. Ladies and gentlemen,
today we talked about “industry” rather than “business”. As we noted when we began our talk today, Bit Hit will strive to change music industry paradigms and improve the quality of life for every member of the music community. To do this, we will always adhere to our core fundamentals. We will constantly strive to create high-quality content, and spare no effort to support this endeavor. As you know, BTS recently went on an extended vacation. They wanted to design the next stage of their development as creators and artists, outline their vision and also spend some quality personal time. Big Hit will always support their vision. Big Hit’s eyes always point to the future. A vision is only meaningful when it goes beyond being an idea, turning into reality and then blazing new paths. Big Hit promises that we will strive to better ourselves in all areas and all endeavors. Thank you for your presence here once again. See you next year. Thank you.