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With 'Gangnam Style', everybody gets a piece of the action

2012/09/11 | 554 views |  | Permalink | Source

With singer Psy's "Gangnam Style" garnering more than 131 million YouTube views yesterday with its catchy tune and silly, but easy-to-follow "horse-riding" dance, the stock price of Psy's agency, YG Entertainment closed yesterday at 62,500 won ($53.35).

Before the July 15 release of Psy's music video on YouTube, the share price of YG hovered around the 47,000 won mark. After CNN did a report about the video on Aug. 2, it jumped to 49,800 won, and it has been going up ever since.

"The global popularity of Psy's 'Gangnam Style' shows that K-pop's appeal is not confined to idol groups and that the quality of K-pop does not fall short of Western standards", said Jin Hong-guk, an analyst at Hyundai Securities.

"With product diversification coupled with quality improvement, K-pop's foray into overseas markets has become easier via YouTube or SNS [social networking services], even without special promotional activities, and that warrants our attention".

Jin set his 12-month target stock price for YG to 73,000 won from 65,000 won and maintained a "buy" recommendation.

YG reported 22.8 billion won in sales and 4.1 billion won in operating profit in the second quarter, down 13.7 percent and 25.1 percent, respectively, compared to a year earlier. And analysts predict significant growth for YG in the second half of this year.

"Revenues from domestic concerts by 2NE1 and Psy and Psy's album containing his runaway hit song 'Gangnam Style' will be booked in the third quarter", Jin said. "The release of G Dragon's new album and 2NE1's concerts in Japan, scheduled in the fall, should add to earnings momentum as well".

Market watchers said Psy's addictive song has attracted more foreign investors than ever to buy Korean entertainment business stocks.

Currently, foreign investors make up 7.43 percent of YG shares, up from 5.37 percent on Aug. 2.

In the case of SM Entertainment, Korea's largest talent agency, 18.28 percent of the stock is owned by foreign investors, up from 17.65 percent over the cited period.

Local investors also flocked to buying shares of a semiconductor tester manufacturer, DI Corporation, where Psy's father is chairman. Park is the largest shareholder of DI with 10.11 percent of company shares, according to analysts at securities firms.

DI's stock price closed yesterday 34.3 percent higher than it did on July 13, two days before Psy's music video hit YouTube.

Kim Si-woo, an analyst at Korea Investment & Securities, said YG Entertainment's sales attributed to Psy is estimated to be about 9 percent this year, given that he's a scouted artist.

"His profit contribution will increase on active overseas promotions and expanded merchandise sales", Kim said. "Furthermore, earnings may climb with the promotion of Psy in the U.S. and Japanese markets".

Kim maintained his buy recommendation for YG Entertainment and retained his 12-month target price at 69,000 won.

"Recent stock movements of the entertainment industry show it can grow despite lingering uncertainties in the global economy", said Kwon Yoon-gu, an analyst at Dongbu Securities. "The size of the digital music market will grow in tandem with rising global penetration rates of smartphones. Stocks of entertainment agencies may become a good alternative investment in slowed economy".

Meanwhile, "Gangnam Style" has inspired a flurry of parodies in advertisements and TV commercials for retail companies.

While corporate sectors actively utilize social media as a means of promotion and advertising, they began parodying the most popular video on such social networking services to piggyback on its popularity and maximize the effect of advertising.

The Psy syndrome took place in major advertising in TV commercials of mobile carriers, refrigerators and department stores.

The Korean mobile carrier LG U+ has produced a commercial featuring Psy and his hit song for the first time as a TV commercial by accompanying him on his promotional visit to the United States.

The addictive melody and lyrics were reborn as an easy-to-follow "U+ Style" song in the commercial, in harmony with the advertising message of LG U+.

Not to be outdone, Samsung Electronics has also cast Psy as the main model for its refrigerator brand Zipel, together with Lee Seung-gi, a popular singer and actor who has been promoting Zipel for four years.

Besides TV commercials, other retailers are advertising by producing music video parodies of "Gangnam Style" on the Internet.

Shinsegae Departmnet Store's branch in Masan, South Gyeongsang, uploaded a video dubbed "Masan Style" last month, in which all of its employees participated in the filming to mark the 12th anniversary of its grand opening.

The video clip hit 450,000 views in just two weeks because it was posted on a personal blog.

The Samsung Lions professional baseball team, the nation's largest discount chain store, E-Mart, and the world's largest and fastest growing tire manufacturer Hankook Tire also disseminated their own "Gangnam Style" inspired music videos on YouTube.

By Kim Mi-ju, Kim Jung-yoon [[email protected]]

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