K-pop music label partners with crypto exchange on BTS digital collectibles

The music label behind K-pop superstars BTS has said it plans to partner with South Korea’s biggest crypto exchange operator to sell non-fungible tokens related to the boy band and generate a new revenue stream.

Hybe on Thursday said in a regulatory filing that it had agreed to buy a 2.5 per cent stake in Dunamu, the operator of the Upbit crypto exchange, for Won500bn ($423m) while Dunamu would buy Won700bn of newly issued Hybe shares or a 5.6 per cent stake in Hybe.

The music agency said it would issue photo cards of BTS members as NFTs, or digital collectibles secured by blockchain, on Upbit, which accounted for nearly 90 per cent of South Korea’s cryptocurrency trading volume.

Hybe founder Bang Si-hyuk is seeking to expand his company beyond music creation and star management into a global entertainment platform. He told an online briefing that the goal of NFT photo cards was to provide secure card ownership, “allowing them to be collected, exchanged and displayed in a global fan community where instead of a single photo, it can be turned into a digital photo card with moving images and sound”.

The move boosted Hybe shares 2.89 per cent on Thursday, as the company also unveiled plans to launch new web comics and web novels featuring BTS members and a video game co-produced by the K-pop sensation.

Hybe said it was seeking a “boundless” business model by creating diverse content using its music intellectual property. “Although we are based on music, we are preparing for diverse works without being constrained by specific business areas,” said Park Ji-won, the company’s chief executive.

Original stories in the form of web cartoons and web novels would be released via Naver Webtoon’s platform in January while a BTS game, developed together with the seven-member band, would be launched in the first half of next year.

The entertainment industry is rapidly adopting blockchain technology as the industry struggles to protect copyright. The rise of streaming services has made it easier for fans to access music but unauthorised copying of songs has also caused difficulties for artists.

BTS will be one of the biggest brands to jump into the nascent trading business based on blockchain technology.

Upbit has survived a series of regulatory measures to emerge as one of South Korea’s dominant crypto exchanges. It is one of the country’s four exchanges that are allowed to offer won-based crypto trading after the country shut down dozens of small exchanges.

Hybe’s latest move comes as regulators in Seoul consider the possibility of taxing profits from digital assets, such as NFTs. The government is planning to impose a 20 per cent tax on capital gains of more than Won2.5m from cryptocurrency trading, starting next year.

Albert Yong, managing partner at Petra Capital Management, a Seoul-based hedge fund investing in the entertainment sector, said there would be demand for NFTs based on BTS because of its strong fan base.

But making the business sustainable in the longer term would be a challenge. “The popularity of BTS will not last for ever,” Mr Yong said.