Watch: SM Entertainment Details IP Monetization Strategy And Goals Under SM 3.0 In New Video Statement

Feb 20, 2023

SM Entertainment (hereafter SM) has released a new YouTube video detailing their IP (intellectual property) monetization strategy for SM 3.0.

On February 21, SM released a follow-up YouTube video titled “SM 3.0: IP Monetization Strategy,” which is part of their second strategy to implement SM 3.0.

SM Entertainment CFO (Chief Financial Officer) Jang Cheol Hyuk explains, “SM’s IP monetization model largely consists of ‘Primary IP business’ and ‘Derivative IP business.’ Primary IP business refers to the foundation of the entertainment business such as digital music, physical albums, concerts, and artist management. Derivative IP business refers to business that provide additional profit source from the outcome of the Primary IP, namely, MD (merchandise), IP licensing, fan platform, and video content business.”

He continues, “SM’s growth has been centered on the Primary IP business thus far. The unparalleled identity of the market leader and the competitiveness in the main business has served as a driving force behind the 30 percent growth rate per annum despite the rapid change that took place in the market during the past three years as well as the structural limitations within the company. We plan to take another leap forward in the age of SM 3.0 based on such unique driving force.”

CFO Jang Cheol Hyuk states, “The sales target for 2025 under SM 3.0 is 1.2 trillion won (approximately $926 million), with 35 percent operation profit. These goals will be reached by resolving the issues from SM 2.0 and the IP monetization strategy.”

They list the following goals:

Immediate improvement in operating profit by overcoming the structural limitations of SM 2.0.
Increase of revenue/operation profit through Multi-Production Center—the sales for Primary IP is projected to have an annual growth rate of 26 percent.
Expansion of high-profitability Derivative IP and strengthening of distribution capability—the MD/IP sales from Derivative IP business will be increased to 300 billion won (approximately $231 million) by 2025.
“Fan platform” integration/internalization
Increase profitability from video contents under SM 3.0 to 150 billion won (approximately $116 million) by 2025.

Watch the full video below: