The Idol Business Model

A peek into some of the newest and disruptive business models in the KPop industry. 

By Ichha Jain

Korean Pop music, commonly known as K-Pop is a genre which originated in South Korea. It is more of a fusion of different music genres worldwide, ranging from reggae to R&B to Hip-Hop. South Korea has tons of genres of music of its own (like Trot and Traditional music) but it is KPop which has the whole world’s attention today, not just for the catchy tunes but also for the different-than-industry business ideas.


Here’s a breakup of the key components of the K-Pop industry:

Distinctive features of  K-Pop

 

• Idols

When these bands/groups debut, they’re termed as “Idols”; literally meant to be idolised. Idols are expected to be the epitome of beauty standards, always stylish and are the trend setters in the Korean society and are expected to be perfect beings overall. Being an idol is not easy. The marketplace is incredibly competitive and a trainee (someone who is in the process of becoming an idol) has to undergo years of intense training to perfect their singing, dancing and/or rapping.

A perfect stage/performance is one with live vocals, catchy dance moves and coordinated outfits and makeup. Usually groups debut more than solo acts, often of a single sex (KARD, which has two male and two female members is an exception), releasing EPs and on rare occasions a full studio album. “Comeback” refers to an Idol group’s new release, be it a single or an album, since they are “coming back” to show new music.

 

Slave Contracts

The industry has been under fire for years by Western media because of their lengthy contracts and strict, intense training over a long period of time. However, these articles do not take into consideration the fact that Koreans have a different set of values; they believe in making their craft as perfect as they can and as a result, commit a large amount of time to training and preparing. The contract is renewable, subject to the performance of the trainee and is typically of 5-7 years.

 

360 ° style

Korean Entertainment companies follow the 360° approach; from the moment they sign a trainee to their debut-the company funds everything; dormitory, vocal, dance, rap classes and other costs. The companies have their own record label, administrative departments to oversee concerts, merchandise, beauty and fashion departments, legal advisers and much more to support the artist fully and launch them successfully.

 

• Artist-Fan relations

K-Pop fans have a different experience from fans of other artists-they have meet and greets, where one can meet the artists, talk to them, merchandise all year around, attending music shows to see their favorite group only metres away, chatting with the artists on company-backed apps. The relationship between the fan and the artist is on a deeper level, giving the fans a feel of the artist being a part of their everyday lives.

 

K-Pop Industry

Coming to the industry, there were the “Big 3” companies, the key players in the market; YG Entertainment (launched BLACKPINK, legendary Big Bang, iKON) , SM Entertainment (home to popular EXO, girl group Red Velvet and NCT) and JYP Entertainment (home to popular girl group TWICE, rookie group ITZY and Stray Kids).

Business Model

Entertainment companies invest in trainees and once they debut, the company recovers the initial investment through revenue from:

– Concert tickets

– Sale of albums

– physical and digital

– Sale of merchandise

– Membership for fans (for the fan community)

– TV commercials

– Live performances and appearances

– Sale of virtual content

After break-even is achieved, the profits are shared between the artist and the company according to the terms of the contract.

 

A paradigm shift

One must’ve heard of BTS, currently the world’s biggest boyband, surpassing many mainstream Pop artists. BigHit Entertainment, the company that launched BTS in 2013, has transformed the definition and scope of K-Pop worldwide. A disruptor, BigHit has given birth to many innovations with its mission: Music and Artist For Healing.

 

BigHit Winning Formula

BigHit made a breakthrough in BTS; music that spoke about things that people couldn’t speak freely about: mental health, social injustice, oppression and themes like depression as well. Although music had a major part to play in BTS’ global success, BigHit took industry standards to another level.

 

Customer Experience

They focused on improving customer experience and expanding their value chain, making it a less inconvenient experience for fans-from attending concerts to ordering merchandise online. Fans could check the wait time at concert venues, order products and pick them offline, talk to the artists; all on one platform, thus integrating all the activities and making a one-stop platform. (Weverse, an app by the company)

 

The fan is at the centre of everything we do.” 

 Lenzo Seokjun Yoon, CEO, BigHit Entertainment (At the
BigHit Corporate Briefing with the Community 1H 2020)

 

They focused on improving customer experience and expanding their value chain, making it a less inconvenient experience for fans-from attending concerts to ordering merchandise online. Fans could check the wait time at concert venues, order products and pick them offline, talk to the artists; all on one platform, thus integrating all the activities and making a one-stop platform. (Weverse, an app by the company) 

Content 

BigHit’s focus on churning out new content throughout the year has been a very important determinant to their success. They have a freemium model at most places, where the basic content is free and the special editions require a purchase.This continuous flow of content retains the fan/customer, engaging them in the absence of their artist’s promotional period, with entertaining shows and games.

In June 2020, BigHit organised an online concert for fans all over the world. This was the solution to BTS’ world tour getting cancelled due to the coronavirus outbreak. While pleasing the disappointed fans, the online concert also claimed the record for the largest virtual attendance, with 756,000 people across 107 countries.

Artist Indirect-Involvement business model

For most companies, the majority of the profits come from content created through the artist’s direct involvement. A major change that BigHit bought was that during preparation for BTS’ debut, they launched these businesses that removed the need for the artist’s direct involvement; only their image and brand. As they started these indirect projects, yearly profit doubled from 22.3% (2017) to 45.4% (2019).

Using the IP (intellectual property), which is music and the artist’s image, they created spin-off content and merchandise, which served as a way out during the pandemic, which had put a stop to all physical operations. Another point is that it does not involve the artists, making sure they are not overworked and the company can still launch new products and content, diversifying their revenue streams. An example of this is the TOUR 2020 (their official World Tour) merchandise, which was immediately sold out even though the global concerts were cancelled, along with a Samsung Galaxy S20+ BTS edition being launched in early 2020.

 

Above and beyond

However, this is not all. With the global economy slowly reopening, we are bound to witness disruptive business models which could transform entire music industries all over the planet. These were some business models that made BigHit truly, a big hit and join the ranks of the top players in the K-Pop industry.