The latest figures - including global charts and album sales - show a decline in demand for K-pop, said Bang Si-hyuk, who is also chairman of the group's agency, HYBE.
"The absence of BTS is the first reason," he noted at a forum in Seoul. "I think it's very clear that the fact that BTS is not active as a band plays a major role in this trend change."
The boy band, widely regarded as South Korea's most important cultural phenomenon, fills stadiums around the world and dominates music charts. BTS bring billions to the country's economy and amass a colossal community of fans known as the ARMY.
But in South Korea, all able-bodied men must serve at least 18 months in the military, and after years of debate over whether BTS deserved an exemption, Jin, the eldest of the group, was the first to submit to it in December.
Insisting that the boy band is the leader of K-pop globally, Bang observed that "the market shrinks considerably if BTS is removed."
His comments come days after HYBE backed by on acquiring rival SM Entertainment, ending a long-running high-profile row over the company's management.
He has been accused of hostile takeover and seeking to monopolize the K-pop industry, but Bang has framed his move as a solution to slowing growth in the sector.
HYBE announced in February that a second BTS member, J-hope, had "begun the conscription process," with local media reporting that he was due to join the army in April.
Since its debut in 2013, BTS has strengthened the image and soft power of South Korea, which has become a global cultural powerhouse.
© 2023 AFP