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The commercial power of K-pop and the torque created by its domestic and global fan base are a thing of exquisite late-stage capitalist beauty. South Korea has bred an adaptable, remorseless apex predator to feed on and propagate through social media, its metabolism evolved to turn singing and dancing into leverage and profit.
The market is sure there is a catch; Goldman Sachs is convinced the market is wrong; Japan, through scandal and susceptibility, could ultimately settle the debate.
Without having to look too hard, evidence of K-pop’s might and reach abounds. Activities of the musical megalodon, BTS, are suspended while its members perform their military service, and the long-awaited comeback of the Blackpink behemoth remains in the works. But, in their absence, the world cannot seem to get enough of NewJeans, Stray Kids and Seventeen.
In its survey of the state of the global music industry in 2023, the International Federation of the Phonographic Industry (IFPI) reported that six of the world’s top 20 best-selling artists last year were South Korean. K-pop commanded all top three positions in the roster of the year’s best-selling albums. K-pop concerts collectively drew audiences in the millions. When other countries now think about lab-culturing an exportable, enchanting music monster, K-pop is the only genotype worth emulating.
And that admiration remains solid even as — or perhaps precisely because — K-pop cannot stop showing everyone the line where profitable symbiosis between fans and stars crosses over into baying, googly-eyed coercion.
In February Karina, the lead singer with the all-female group aespa, became the latest K-popper forced to apologise for her relationship with a male actor after the fans on whom the band so heavily depends drove a truck up to her management company demanding to know, via giant digital billboard, whether “the love given to you by your fans is not enough?”. Karina’s relationship ended this week, reminding the country with the world’s lowest fertility rate and a supposedly panic-stricken government of what happens when state-endorsed corporate priorities explicitly require romantic dysfunction.
At the same time, K-pop’s capacity to exert force outside its immediate operating environment is endlessly impressive. Earlier this week, the Korean industrial mammoth Hyundai Motor backed out of an aluminium supply deal with one of Indonesia’s biggest coal producers after an army of K-pop fans piled into an online campaign against the plan. Several big, powerful industries come out of this U-turn looking flattened; the K-pop entourage emerges as the steamroller.
Investors, meanwhile, have chosen to treat all of this as markers of a peak. The best times, the market seems to be saying, may be behind K-pop. Or at least its prospects look less rosy now than they did a year ago. Some point to the diluting proliferation of new bands, others to falling domestic album sales. Whatever the exact trigger, shares in Korea’s four biggest K-pop management companies — Hybe, JYP Entertainment, SM Entertainment and YG Entertainment — have fallen over the past nine months in an across-the-board derating of the sector.
Goldman Sachs sees this as a significant mistake and thinks that the shares of the three largest Korean management companies should be between 85 and 137 per cent higher than where they were in mid-March. In a hefty research note the US investment bank argues that investor sentiment on K-pop is “ripe for a turnaround”.
The mainstream mindset, it said, was wrong to focus on album sales because the really important metric for measuring the strength of the fan base was offline concert audiences. The global appetite for K-pop, said Goldman, remains huge and the fan base will grow at a compound annual rate of 26 per cent over the next three years.
But the growth potential in Japan, argues Goldman, will be the most immediately big and decisive: it is already very fond of K-pop, it has a strong idol culture of its own and its pockets are relatively deep when it comes to paying for music. In 2023, a huge sexual assault scandal caused an implosion at Japan’s biggest boy band agency, Johnny & Associates, and its downfall has handed K-pop companies ever greater bargaining power. Japan, according to the IFPI, is the world’s second biggest recorded music market. Acts run by Hybe, JYP and SM already command 7 per cent of Japan’s live music market, and Goldman expects that ratio to double by 2026.
The market, in its close but Korea-centric scrutiny of K-pop, has completely overlooked the vast opportunities sitting on its doorstep. The market may be right, but Goldman tends to know a predator when it sees one.
leo.lewis@ft.com