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Hey! 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

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:

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. 2022, nearly 80 million physical units were sold, with seven K-pop artists ranking in the top 10 CD album sales alongside well-known names like Taylor Swift, Harry Styles, and Beyonce.

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.

To read the full piece on our Trapital website here!

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.

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!

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