SM Entertainment has reported a sharp drop in third-quarter profit, as a quiet domestic release schedule weighed on album, digital music and concert revenue. The company disclosed on November 4 that consolidated revenue for the third quarter came to 291.1 billion won, down 9.5 percent from a year earlier, while operating profit fell 26.4 percent to 35.5 billion won. Net profit swung to a loss of 1.1 billion won, which the company linked in part to foreign-exchange losses as the won strengthened.
On a standalone basis, the picture was weaker still. Revenue fell 22.8 percent year on year to 173.4 billion won, operating profit dropped 29.2 percent to 28.4 billion won, and net profit declined 65.7 percent to 11.1 billion won, according to the filing reported by Korean business outlets including The Korea Herald and NewsPim.
SM attributed the slowdown to a deliberate shift in focus during the quarter. The company said it concentrated on overseas performances to expand its global fandom and on smaller-scale fan events, which meant fewer domestic promotional activities for new releases. The result was felt most directly in recorded music: sales of new releases fell to 1.67 million copies in the quarter, down from 5.5 million copies a year earlier, while headquarters revenue from recorded and digital music dropped 51.3 percent to 47.1 billion won and concert revenue fell 34.2 percent to 34.5 billion won.
Not every part of the business moved in the same direction. Revenue from artist appearances rose 21.3 percent to 29.2 billion won as advertising and event activity increased, and merchandise and licensing revenue climbed 23.5 percent to 62.1 billion won, helped by intellectual property collaborations. Among subsidiaries, fan platform Dear U grew operating profit 5.6 percent to 9.2 billion won on rising subscriptions, while concert promoter Dream Maker and KeyEast returned to profit. SM C&C and SM Life Design Group, by contrast, saw profitability weaken on higher costs and lower album printing volumes.
The results landed roughly in line with what analysts had braced for. Ahead of the announcement, securities firms including SK Securities and Daol Investment & Securities had forecast a weak quarter, with operating profit estimates in the mid-30 billion won range, citing the absence of major album releases beyond NCT 127 and a concert calendar built around smaller fan events rather than large arena shows. The actual revenue figure of 291.1 billion won came in slightly above some of those estimates, while operating profit matched them closely.
SM is now betting on a packed release calendar to restore momentum. In the fourth quarter, NCT WISH, Yesung and Red Velvet’s Irene and Seulgi are releasing Japanese mini-albums, while NCT DREAM and Taeyeon are set to release full-length albums, EXO’s Kai and Sehun are releasing a unit mini-album, and Yunho is releasing a Japanese single. The first quarter of next year brings a full-length album from RIIZE, a mini-album from rookie girl group Hearts2Hearts, solo full-length albums from Seulgi and Jaehyun, a Super Junior unit single, a Japan single from NCT’s Jeno and Jaemin, and a China single from Chenle.
Touring is central to that rebound plan as well. aespa, having completed a tour of the Americas, is set to visit nine European cities, while NCT 127 begins its fifth world tour. NCT WISH is also preparing a concert at the Gocheok Sky Dome, where the group previously recorded its first sold-out show at the venue, and WayV is scheduled to perform in major cities in China.
An SM official said the company plans to sustain growth through new releases from its major artists and an expansion of the regions where they are active, balancing established acts with newer artists entering new markets to build what the company called a balanced intellectual property portfolio. For investors, the message is that the third quarter was a pause for breath rather than a change of direction, with the verdict on that claim set to arrive quickly once the fourth-quarter releases land.
