By Peter S. Kim
Korea has been known for its industriousness on the global stage for decades with its manufacturing prowess and hard-working culture. Making a jump from the traditional image is the Korean entertainment industry led by wildly popular K-pop, which has swept the world within a few years. K-pop used to be focused on Asian audiences until recently. Now it is expanding its platform to the U.S. and globally. Korea is seeking its next global consumer brand after Samsung handsets and Hyundai cars, and if K-pop stays on track, it could be the third consumer brand to make it in developed markets. However, some skeptics compare K-culture to the Japanese entertainment industry, which enjoyed brief success during the 1980s and 1990s.
While Japanese food is now part of the global culinary mainstream, the Japanese movie and music industries are primarily domestic industries for Japan. There are many reasons cited for the failure of the Japanese entertainment industry to go global. The first reason cited is the failure to break the language barrier. Language presents the most significant barrier for foreign entertainers to penetrate mainstream English-speaking markets. Japanese music and movies have a reasonable presence in Southeast Asian countries like Thailand and Indonesia, but in English-speaking countries, the only penetration is seen in animation (mostly English-dubbed) and manga (comics). Interestingly, South Korea is also making inroads into “webtoons,” an online manga. Even the Japanese are integrating the webtoon business model from South Koreans into their manga model. Recently, the Japanese government has been trying to emulate the success of K-culture via a campaign called “Cool Japan,” without much success.
Another reason for Japan’s failure is the inability to market effectively after initial successes. Japan has been criticized historically for its conservative approach to marketing and its growth strategies in many industries. There are many incidences of Japanese companies failing to capitalize on first-mover advantage into sustained dominance. South Korea has consistently overtaken industries where Japan was initially successful. We see Samsung’s current dominance in DRAMs, LG’s dominance in electric vehicle batteries and South Korea’s prominence in global entertainment. Once upon a time, Japanese companies had unrivaled dominance in battery technology. The Japanese auto industry, led by Toyota’s Prius, pioneered the hybrid electric vehicle industry. However, its desire to protect its existing internal combustion engine vehicles and the Japanese government’s slow support relative to other nations has quickly turned an advantage into a handicap.
The consistent difference between Japan Inc. and Korea Inc. in these industries has been South Korea’s aggressive growth strategies, swiftly catching developing trends and executing expansive marketing and funding. Japanese companies prefer a slow, cautious route that mitigates risk but ultimately at the cost of ceding market share or even losing the entire business to latecomers from South Korea and, now, increasingly from China.
In recent years, Korean K-pop management companies have shown marketing savviness in digital platforms, which helps them catch the trends forming at an early stage and analyze their fanbase. K-pop’s first global revelation, which went viral, was “Gangnam Style.” It became a global sensation on YouTube with over a billion views. Until then, the YouTube platform was underutilized not just for Asian acts but other international acts. Gangnam Style’s success was a lightbulb moment for the South Korean entertainment industry to the power of social media. Digital platforms allowed South Korean acts to reach a global audience without millions of dollars in marketing and distribution or partnerships with foreign agents. Since then, K-pop entertainment companies have developed a distribution model using YouTube and other social media to market new artists and music. The platforms allow for direct interaction with fans and cheap distribution of music. K-pop fans regularly use social media to give feedback on music and concerts, which allows companies to better gauge market demand.
Also, by focusing on digital marketing, South Korean acts have their fingers on the pulse of rapidly changing trends and fads of the generation of young followers. Historically, South Korean companies have been known for their “fast copy” business models, which gives them a low-risk and low-cost model. By watchfully waiting for the first mover to achieve initial success and then quickly following the innovator, many Korean products did not require huge R&D expenditure and reduced the risk of failure. For Korea Inc., the cost often comes in the form of ceding leadership, but a decent business is still available, being second place to the industry leader.
One of the biggest entertainment companies, SM Entertainment, is known for its role in pioneering the global expansion of K-pop. One of the keys to SM’s success is its invention of the “cultural technology” approach. Cultural technology (CT) is a business strategy developed to incubate K-pop expansion overseas and raise its global appeal. It is, in essence, early recognition of the past failure of J-pop, which did not sustain its global brand. Many large K-pop acts release albums in multiple languages, with Japanese and Mandarin being the most common. They apply customized product offerings to each member of the group. Performers within the group are often from different nationalities or speak different languages.
As K-pop’s global popularity grows, the Korean K-pop model is incorporating more and more foreign singers from strategic markets. Those performers are responsible for promoting their acts to their respective home countries. More recently, with the global footprint of K-pop, management companies now source artistic talent all over the world.
The true test for K-pop as a global consumer product begins with the U.S., and its foray since the pandemic has opened an opportunity to establish what used to be an Asian-focused product into a global one. It is now up to individual companies to capitalize on the growing popularity of Korea’s pop culture and lifestyle to create a sustainable business model.
Peter S. Kim is managing director of the KB Financial Group.
