Lessons Learned from K-Pop

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Dan Runcie

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Today we have a brilliant deep dive to share on K-pop as a business model. The western music industry can still learn a lot about fandom and engagement, and our guest writer, Wooseok Ki did a fantastic deep dive.

It’s an honor to feature his story as one of our four guest posts while I’m on pat leave. You can read an excerpt of the piece below or read the full piece on our website.

Lessons Learned from K-pop

Currently, HYBE is the largest Korean music-focused company, only behind the likes of the Big 3 (UMG, WMG, Sony Music) and Tencent in the music space. As K-pop has surged globally in the past decade, there has been much speculation about whether its exponential success can be replicated in the years to come. Naturally, this leads to questions: Where are the market opportunities for K-pop labels, especially since BTS will not be back until 2025? Will they continue to engage in strategic partnerships and acquisitions with global labels? Or are there plans to shake up the status quo long dominated by existing industry practices?


Let’s take a look at the market capitalization of the Big 4 K-pop labels as of December 2023:

– HYBE Corporation – $7.23B
– JYP Entertainment – $2.34B
– SM Entertainment – $1.53B
– YG Entertainment – $800M


HYBE & Bang’s Approach

In early 2023, Bang Shi-Hyuk—the founder and chairman of HYBE—noted an apparent stagnation in K-pop sales and streaming. He also spoke against rumors surrounding a monopolization of the K-pop industry and emphasized the lack of K-pop exposure compared to Latin or Afrobeats markets. HYBE has previously taken expansion steps: It launched HYBE America in 2017 and acquired key U.S. players in Ithaca Holdings in 2021 and Quality Control in 2023. However, a recent acquisition of a Latin music label further amplifies HYBE’s steps to address the void. That’s a lot of corporate action recently, right?


This led to August 2023, when Bang proposed ridding the “K” in “K-pop” for mainstream success in the Western market. It’s important to clarify that HYBE’s position and concern do not necessarily equate to those of other K-pop labels. But notably, Bang, alongside JYP Entertainment’s founder Park Jin-Young, admitted further concern on a Korean interview program in November 2023: “K-pop fans’ vigorous engagement and consumption may limit K-pop’s expansion. There is a lack of ‘light’ (casual) fans and thus the structure must support both the superfan and the light fan.” 


For example, one superfan may buy 50 albums and related merchandise instead of having 50 casual fans buy one each. With the abundance of K-pop idol groups that depend on a sustained fandom, the barrier to entry for a layperson to commit to the superfan consumption behavior must be lowered. Consequently, Bang’s statement was met with many negative online comments in light of increasing concert prices and merchandise


According to JYP’s Park, K-pop labels have developed time-tested production and fan engagement strategies that can predict the labels’ annual earnings estimates. As U.S. major record labels increasingly grapple with cultivating superfans and effectively monetizing their support, they can gain valuable insights by further partnering with the K-pop industry to employ such successful approaches.


However, this is a valid concern since the superfan dynamic is finite. With constant global inflation and the abundance of paid entertainment content, consumers become comparatively limited in how much they are willing to spend for their favorite artists. In the U.S., government efforts are underway to address rising ticket prices, as touring is a huge part of artist revenue. As K-pop artists derive a substantial percentage of revenue from physical album sales and merchandise, there is only so much an average fan can keep up with.


This reality brings us to another question: How to appeal to casual fans when K-pop heavily relies on superfan dedication? 


This dilemma seems contrary to issues in other markets. According to Luminate’s 2023 Mid-Year Report, 15% of the US population are superfans, and K-pop fans spend 75% more money on music categories per month than the average U.S. music listener. Despite declining physical album sales, K-pop artists have achieved significant success in that area. In 2023, more than 100 million physical units were sold, with six K-pop artists dominating the top 10 CD album sales (U.S.) alongside the only other non-K-pop artist in Taylor Swift.


An outlier example prompts food for thought for the East and the West. Fifty Fifty, a rookie K-pop group from a small label, lacked an initial global fandom but launched the viral TikTok hit “Cupid,” accumulating 1.2 billion on-demand global audio streams. Unfortunately, the group subsequently encountered legal issues with its label, which was under much scrutiny by the Korean media and public. When considering Warner Music Korea’s bold offer to purchase Fifty Fifty’s label amidst the scandal, the substantial value of this potential investment becomes evident. The golden business opportunity here was focused on the audience and fan engagement rather than the established credibility of an artist. Perhaps next time, maybe.


The data and current events exemplify K-pop’s successful business model coupled with the fandom-driven strategy, and we are about to see shake-ups in the paradigm as this model is exported. 


Understanding K-pop’s layers 

A discussion of K-pop already encompasses the music and artists, the Korean industry, and the broader global sociocultural phenomenon. However, since defining K-pop can take various approaches, I’ve drafted a basic diagram of K-pop’s elements. It’s crucial to acknowledge that there’s no universal definition, as K-pop continuously evolves with technological advancements and cultural shifts. But numerous resources and music critics may discuss variations like the one depicted below:

Streaming platforms and music award shows frequently categorize K-pop as a genre to conveniently organize music originating from Korea. But whether K-pop possesses a uniform sound is a topic open to debate, prompting consideration of business strategies like the training system, PR practices, and social media strategies. 


Successful K-pop artists often follow comparable patterns in achieving breakthrough performances, supported by an engaged and active fandom culture. Understanding the global K-pop phenomenon requires considering the complex sociocultural dynamics that weave the above triangle together for success. 


K-pop business, exported

Our focus is on K-pop’s business strategies, specifically the exportation of the business model and the increased label-level collaborations. But this also requires considering K-pop’s music and culture.


Now, HYBE’s Bang and JYP’s Park advocate further localization of K-pop by exporting the current business model to other countries to create local artists that sing in the local language. 


I spoke with veteran pop music critic WooJin Cha, who suggests it’s time to accept K-pop as a business model for cultivating superfans instead of an artist training production system. The K-pop industry is heavily company-centric, where crucial rights like intellectual property (IP) are typically delegated to the label instead of the artist. Therefore, global labels are increasingly attracted to the K-pop model as it inherently mitigates risk even if the artist becomes too big to manage. Cha emphasizes that the growing interest from major global labels in the K-pop industry is a consequence of its adeptness in leveraging fandom engagement as a business strategy rather than a narrow focus solely on individual music or artists.


Consequently, we are seeing increasing collaborations of this business model via Korean labels’ collaborations with international counterparts: 

– HYBE and Geffen Records’ girl group KATSEYE
– JYP Entertainment and Republic Records’ girl group VCHA
– SM Entertainment and UK-backed Moon & Back’s British boy band


Notably, girl groups KATSEYE and VCHA explicitly target the U.S. market, featuring predominantly non-Korean members who sing English tracks. This complements the traditional K-pop artists produced in-house at HYBE and JYP, such as TWICE and Le Sserafim.


Music critic and ethnomusicologist Youngdae Kim predicts that soon, in addition to existing traditional K-pop artists from Korea, we may also witness 1) groups co-produced by Korea and other countries and 2) localized groups independently produced by following the K-pop business model all competing in the same global market.


As HYBE and other K-pop labels prioritize exporting a localized business model, it’s expected to shift existing notions about K-pop’s cultural identity and the “K” in K-pop.


For example, BTS member Jung Kook’s album “Golden” featured an all-English tracklist created by global songwriters and producers specifically targeting the international market. Its success blurs the line between K-pop and international pop, showcasing Jung Kook’s ability to perform music akin to solo pop stars like Harry Styles and challenging the conventional artist expectations imposed on K-pop. Through localization, the K-pop industry exports its successful artists and productions. Conversely, by looking at the K-pop business model, Western artists and labels may benefit from newer approaches to garnering superfans and cross-cultural collaborations.


As K-pop artists and labels increasingly engage in global collaborations and promotions, they confront the challenge of maintaining K-pop’s unique essence while pursuing commercial success. Amid debates over what defines a “K-pop” artist or song, the focus should shift from defining K-pop as a genre category towards expanding its influence through its business model.


The past decade largely focused on audiences and the global music industry understanding what to make of K-pop. Now, with the diversification of the global talent pool, evolving production approaches, and long-term expansion concerns, K-pop labels are poised to produce another generation of stars that may no longer be bound by mere categories and superficial genres.


Wooseok Ki is a New York City-based attorney and the author of K-POP: The Odyssey. He has worked in the tech, music, and gaming industries and publishes original analysis on the intersection of media, culture, and tech at WooskiWrites. Connect with him on LinkedIn or social media @wooskiworks.

1 Kakao and Naver are tech companies that have subsidiaries in Kakao Entertainment and Webtoon Entertainment respectively, which have projected market caps higher than these 4 companies.

2 K-pop fans are also 69% more likely to buy vinyl.

3  To be clear, localized K-pop groups have been produced before, in which Korean labels would provide the training for an artist active in another country (i.e. Japan, Philippines).

4 Fellow BTS members and the media heralded Jung Kook as a “pop star”, a title Jung Kook acknowledged himself.  Jung Kook had previously covered Harry Styles’s “Falling” on YouTube, generating over 69 million views.

Chartmetric Stat of the Week

K-pop is known for its superfans, and the data backs it up. On Spotify, both BTS and Blackpink have a fan conversion rate (followers over monthly listeners) that’s well over 200%. Meanwhile, artists like The Weeknd and Dua Lipa have conversion rates below 70%. This says a lot about whether it’s fans, passive listeners, or algorithmic plays that drive the playlist!

Dan Runcie

Dan Runcie

Founder of Trapital

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