K-POP INDUSTRY WRITTEN REPORT

Group Members:

Edgardo Alinea

Renz Gutierrez

Brigitte Manalo

Grade Level and Section:

10 - Manmohan Singh

HALLYU 1.0

Hallyu 1.0 was influential during the mid-1990s. The Korean Wave has dominated the

entertainment industry. Their first successful TV drama is “What is Love?” which was

aired in 1997 and had reached 150 million Chinese viewers. It emphasized on the

export of local cultural goods to East Asia between the last 1990s to 2007.

HALLYU 2.0

Hallyu 2.0 is a combination of social media and other innovations have made

throughout the years. The technological and music industry dominated Hallyu 2.0. In the

music industry, K-Pop’s growth was rampant across the world. The rapid growth was

significantly represented by Psy’s Gangnam Style. Korea has exported $80.9 million

worth of music in 2010, a 159% increase from 2009. In 2011, the music industry

exported $177 million, a 112% increase from the previous year. The reasons for the

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fleeting growth of these industries are understanding the role of social media, producing

creative content with new technologies, technological innovation and globalization

dynamics.

BACKGROUND OF STUDY OF THE COMPANY

SM ENTERTAINMENT

S.M. Entertainment was founded by Lee Soo-Man. Lee was a former rock singer

who studied computer engineering at California State University. On February 14,1995,

he founded S.M. Entertainment. He learned from the musical revolution known as MTV

that bands should not only be musical but also visual. He saw S.M. as a company that

would create artists and not just sign them.

The agency had a boot camp like training system which produced plenty of notable

artists. The boy band called H.O.T., was the first group that S.M. let out which

popularized the upbeat style of music. S.M. also released the first girl group S.E.S.

followed by other stars such as BoA, TVXQ, Super Junior, EXO, and Girls' Generation.

BIG HIT ENTERTAINMENT

Big Hit Entertainment is an South Korean entertainment company that provides

music production, album distribution, and training. Its founder, Bang Shi-Hyuk, is a

former music producer and composer of JYP Entertainment. He founded Big Hit

Entertainment on February 1, 2005.

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 Big Hit signed a music trio called 8Eight in 2007. They also signed the group 2AM

on a joint management contract with JYP Entertainment in 2010 but their biggest

success came when they formed the group BTS in 2013. The group clinched No. 10 on

Billboard’s end of the year Artist Chart in 2017 and they also have the highest-ever-

charting song by a K-Pop group on the Hot 100 Chart.

Big Hit is still a relatively small agency with BTS currently being its only artists.

Last year, Big Hit generated around $30 million in revenue with the now disbanded duo,

Homme, and BTS.

COMPANY PRACTICES

SM ENTERTAINMENT

COMPANY PRACTICES THAT LED TO THEIR SUCCESS

1. They know who to cast. They pick idols based on their looks, talents, compatibility

and personality.

2. They know how to produce catchy songs regardless of their meaning.

• For example: Bad Boy - Red Velvet

3. They provide amazing fan service. Whenever they produce albums, they include

posters and pictures of the featured artists. SM also built a building where they

feature their artists. It’s located in COEX Mall at Gangnam.

4. They know how to market.

• For example: They produced different album covers for each Girl’s Generation

members.

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 • They collaborated with cosmetic brands such as, Nature Republic to promote

their artists.

COMPANY PRACTICES THAT LED TO THEIR FAILURE

1. Slave Contract — SM Entertainment’s contract lasts for 13 years.

A. EXO’s Kris vs. SM Entertainment

• Ever since Kris was 16 years old, he has already signed a contract with SM

Entertainment. Unfortunately, in May 2014, EXO’s Kris filed a lawsuit against

SM Entertainment. He wanted his contract annulled because he was treated

like a machine.

B. EXO’s Luhan vs. SM Entertainment

• Ever since Luhan was 20 years old, he has already signed a contract with SM

Entertainment. Unfortunately, in October of 2014, Luhan filed a lawsuit

against SM Entertainment. He claimed that he had an unfair profit distribution

and he was not treated properly in company.

C. JYJ vs. SM Entertainment

• A group named JYJ filed a complaint against SM Entertainment because they

had unfair contract agreements. They claimed that they have had health

problems and have reached their physical limits, but SM Entertainment

continued to send them abroad and still planned excessive activities.

D. Han Geng vs. SM Entertainment

• Han Geng is a former member of Super Junior. He filed a complaint against

SM Entertainment because the 13-year long contract was unlawful. He said

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 that the singles were not fairly distributed among members and he was forced

to do things against his own will. He was also refused to take a leave when he

developed gastritis and kidney problems.

BIG HIT ENTERTAINMENT

COMPANY PRACTICES THAT LED TO THEIR SUCCESS

1. Their company uses social media to advertise their artists. Their only group, BTS is

the most tweeted artist on Twitter in 2016. Today, they have 13.7 million Twitter

followers, 10 million Youtube subscribers and has 6.2 million likes on Facebook.

They also won Top Social Artist during the Billboard Music Awards this 2018.

2. They have a Success Formula. Bang, Big Hit Entertainment’s President kept this

formula a secret, but Bloomberg believes that their formula revolves around using

social media.

3. BTS members are granted a chance to give inputs to the visual elements and

storytelling once the basic concept is set up.

4. They are open to new changes in all aspects. Whether it be form, genre and length.

5. They hold auditions to find the next global star.

COMPANY PRACTICES THAT LED TO THEIR FAILURE

1. They were not able to monitor their clips during their performance at the 6th GAON

Chart Kpop Awards. Their intro clip was similar to Big Bang’s T.O.P performance.

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2. Glam’s Dahee and Lee Ji Yeon was involved in a blackmail controversy. They sent a

blackmail to a Korean actor named Lee Byung-hun. Their threat stated that they will

release the video if they are not given 5 million won.

ADVANTAGES AND DISADVANTAGES THAT EACH COMPANY HAS

SM ENTERTAINMENT’S ADVANTAGES

1. They know what their consumers like and they take note of their interests to entice

people to like their company.

2. They produce catchy songs that have the same repetitive beat so that it can easily

be remembered by people. Catchy songs are influential because people will tend to

share it with their peers, meaning they will have more consumers.

3. They have fan interactions by doing what the fans want. Doing this will make their

fans feel special because they the company cares for them.

4. They follow what their fans want and will make their fans want to buy their products.

5. They know their target market. This gives them advantages on how to market and

advertise and persuade them to buy their products and songs.

6. They have rigorous training. This training will make their artists prepared for

performances on stage.

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SM ENTERTAINMENT’S DISADVANTAGES

1. K-Pop artists who are complaining about the company’s practices will create a huge

issue making fans go against the company. The more haters the company has,

there will be a decrease in consumers.

2. Fans are loyal to the artists and not the company itself. When the artists switch

companies, the fans will switch companies as well.

3. K-Pop artists well will then turn away from the company and may cause a huge

controversy which may lead the company’s downfall

4. Having many groups and artists will lead to having more work and money spent to

maintain them.

BIG HIT ENTERTAINMENT’S ADVANTAGES

1. Using social media for advertising is an advantage since this gives them less effort

to advertise. Their fans themselves are their advertisers (Generation Like). •

Since they have many fans globally, their advertisements reach all around the world

and not only in South Korea.

2. Their artists get chances to contribute to their works, they get to show their true

selves more

3. More innovations in their songs will help prevent repetition of tunes and avoid claims

of copying other songs. It also prevents fans from thinking that their songs are

redundant.

4. They are only focused on one group so they are able to prevent mistakes from

happening and also able to make this group “almost perfect”.

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5. They entice Western listeners by collaborating with Western artists.

BIG HIT ENTERTAINMENT’S DISADVANTAGES

1. Only having one group means that they are only a small company. If that one group

fails, the company also fails since it is the company’s only shot.

2. Usage of competitions to find their next big hit will mean that there is a chance the

people they got aren’t really trained for performing in stage.

WHAT CAN ONE COMPANY LEARN FROM THE OTHER

WHAT SM CAN LEARN FROM BIG HIT ENTERTAINMENT:

Creating a strong bond with its artists

With complications regarding contracts and leaving members, we can see that artists

that belong to SM are not comfortable with their environment. Leaving after their

contracts expire shows us that there isn’t a strong bond between an artist and his group

or SM. On the other hand, some artists extend their contracts with Big Hit which

indicates that Big Hit treats their artists well and there’s a good relationship between the

company and the artist.

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WHAT BIG HIT ENTERTAINMENT CAN LEARN FROM SM:

Having more artists

BTS is currently Big Hit’s only artist. SM, on the other hand, has multiple artists which

explains why Big Hit earned $30 Million in 2017 while SM earned around $300 million. It

would be better for Big Hit to sign more artists to produce more income.

WHAT CAN WE LEARN FROM THESE COMPANIES

1. We have to create value proposition. In business, value proposition is defined as to

what makes the product appealing. In the music industry, value proposition is giving

value to the music and products that they produce.

2. Content is key. We have to create lyrics that have depth. Our albums should also be

produced with the intent to promote music and not just the artist.

3. We can also apply the rigorous training that K-Pop artists go through. This will make

our artists perform better live. Talent agencies should also learn to thoroughly select

their artists and provide them training in all aspects to improve their craft.

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