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The Economics of K-pop

Published on 8 March 2021 at 14:13

"In the 21st century, culture is power."  - Park Geun-Hye, Former Korean President.

 

K-pop is one of the global trends in music, generating a staggering $12.3 billion for the South Korean government. K-pop refers to South Korean pop culture; many outside of Asia, when thinking of K-pop, think of what is known as 'Idol' music. 

 

Because of its economic power, the Korean government has developed the idea of exporting culture, which has borne tremendous financial success, with a ministerial budget of $5.5 billion and a 20-30% sponsorship investment worth $1 billion. 

 

The rise of K-pop, or the Korean wave (Hallyu), as it is known, is as much a planned event as it is a coincidence. Everything happened at the right time, both internally within Korea and externally with developments in technology and consumer habits around the entertainment industry. 

 

In 1988, South Korea became a democracy. Liberalisation seeped throughout Korean culture. With censors gone, television and entertainment were free to experiment. Many Idol music practices started with Korean music's television production, where artists were selected, directed, and their music was written and produced for them.

 

Korean popular music began in the 1990s, with widespread television coverage and the internet not for in the future. As a result, Korean music landed straight onto the produced image of music videos. Media companies enforced strict rules and entertainment organisations developed ‘star’ systems around them.

 

Star systems are schools for pop stars. They are contracted by entertainment management companies to organise training for future pop starts and select whom to put into  Idol bands. Some of the biggest entertainment companies in Korea include S.M. Entertainment, Y.M. Entertainment and JYP entertainment. Many of these companies practice the in-house model of music production.

 

Some K-pop stars must follow specific rules set out in their contracts by the entertainment companies. Artists Hyuna and E'Dawn were both fired for having a relationship with each other. As part of their employment contracts, many K-pop stars must be seen as single, be heterosexual, and always ‘available’ in their fans' eyes. Artists are expected to continually rehearse and follow diets to stay in shape and sometimes go under the knife to match the anticipated beauty standards of the westernised aesthetic (South Korea has the highest per capita ratio of plastic surgery).

 

Entertainment companies can take anywhere from 30-90% of revenue generated by groups and solo artists. It is not uncommon for aspiring idols to live in dormitories on their way to stardom, have regimented days, and be signed to an entertainment company from a young age. A member of pop group JJCC said that, of the gross revenue from touring and sales, their employer kept 80% and that they received 20% of the earnings among the group of seven (now six) performers.

 

Many idols and artists chase awards and milestones to boost their income. A first win is one of the most critical milestones for a K-pop artist. A first win is when an artist wins an award for consistent scores on weekly music TV shows. Achieving this comes with a rise in prestige for the act and increases their popularity. Many Idol stars chase such awards for years throughout their careers.  

 

Globally, pop music purchases have been switching to singles over albums. As a result, companies decided to intensely work on image, music production, choreography, and create mini albums (a collection of singles) after 2000. These works would be accompanied by stylised music videos with extraordinary budgets, later to be re-released as an album of more songs, sold near exclusively as merchandise or ticket lotteries today. The lottery-style setup is filled with concert tickets, prints, weaving kits and mini easels among other merchandise.

 

The experience of purchasing an album is on par with other tangible merchandise, with fans buying multiple albums to support their favourite boy/girl bands and solo artists. The innovation in marketing and driving sales has allowed K-pop and Korean music in general to cast a wide net to boost revenue and become one of the most profitable areas for music and cultural exportation. 

 

Art director of studio Normallogic, who has worked on album cover designs, said "K-pop albums boast splendid and unique designs, and fans who purchase them have a discerning eye for that." Bohuy Kim, the founder of Odd Hyphen, adds, "An album plays a completely different role for those who consume K-Pop idol culture and music. It's not a mere object that contains songs but carries within itself a commercial value."

 

In the first half of 2020, there were over 18.08 million album sales in Korea. Of those sales, 16.89 million were of K-pop artists, with BTS accounting for over 22% of those sales. BTS has been nominated for Grammy awards and has been the first Korean group to perform at the event.

 

Because of its cultural export and use in Olympic and World Cup hosting and performing for the North Korean Leader,  K-pop became a political tool. As the government provides budget supports, it sees K-pop as an industry fit for export.  South Korea continues to develop its soft-power in the political sphere by adding K-pop to domestic economic exports. K-pop joins the ranks of Samsung, Hyundai, L.G., KIA and many others. 

 


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