K-Pop’s sudden spurt has brought South Korea into the limelight. But, thinking that it’s the only reason reason behind the country’s strong music presence, would be naive. South Korea has made a noteworthy leap in its streaming market and in its recorded music industry.
The headlines may be dominated by the rise of K-Pop, with BTS in 2018 becoming the first South Korean act to achieve a gold certification in the US. But perhaps even more remarkable is the way the South Korean recorded music business as a whole has grown, more than doubling in size since 2013.
In 2017, South Korea rose two places in the IFPI’s global ranking to sit as the sixth largest global music business. That was thanks to a head-spinning 45.8% rise in recorded music revenue, the kind of blockbusting increase we sometimes see in smaller, late-developing markets.
South Korea is emphatically not one of those, though: it was an early adopter of streaming, with total streaming revenue in 2013 of $89.78mn, accounting for 86% of total digital revenue.
South Korea adopts streaming early on
Streaming revenue continues to increase strongly in South Korea, up 47.0% in 2017 to $281.6mn according to IFPI figures. The vast majority of this was from subscription streaming revenue, which grew 46.8% to $259.6mn, while ad-supported audio streaming fell slightly. Clayton Jin, CEO of Warner Music Korea, says that the streaming market in South Korea “remains buoyant”.
“There were approximately 8.5mn subscribers towards the end of 2018, which is a sizeable increase from 2017. Streaming continues to grow and, unlike in most other markets, the price of subscriptions has increased to reflect inflation,” he added.
Indeed, new regulation came into effect in January 2019 that raised the royalty share from music streaming services from 60% to 65%, a move that Jin calls “great news for artists and those who invest in them”. According to news site The Korea Bizwire, this regulation has led to price rises largely in hybrid streaming-plus-download packages (which remain popular in South Korea), rather than pure streaming plans. Melon, which is operated by South Korean mobile giant Kakao, has increased prices on its unlimited mobile streaming +50 downloads package from 15,500 won ($13.74) to 20,000 won ($17.73), while the price of its Melon Mobile Streaming Club has remained static at 7,400 won ($6.56).
In South Korea, what Melon does is important. Data from 2018 showed that Melon remains the most popular music streaming service in South Korea, with 5.69mn users in March 2018, up from 5.29mn in March 2017. Genie Music, operated by local carrier KT, was second with 2.06m users, followed by Kakao Music, Naver Music, Bugs and M-net, in what was a clear sweep by local platforms. Spotify isn’t available in South Korea, although Apple Music is.
Despite Melon’s popularity, YouTube remains the most popular place to listen to music in South Korea. A 2018 study from the Korea Internet Corporations Association found that YouTube was the main app that 43% of respondents used to listen to music, followed by Melon on 28.1%, Genie Music on 7.7%, Naver Music on 6.5% and Apple Music tied with Samsung Music for fifth place with a 4.6% share. And yet music revenue from YouTube remains low. In 2017, video streaming brought in $19.39mn to the South Korean music business according to the IFPI, a notable increase on 2016 ($9.28mn); but still not enough to pop champagne corks over.
Rise in physical revenues
South Korea has also seen a massive increase in physical music revenue over the past few years. The IFPI says that South Korea recorded the largest relative and absolute growth globally in physical revenues in both 2016 and 2017, with CD revenue up 47.6% and vinyl up 124.5% in 2017. This was thanks to a raft of blockbuster releases, many of which came in special editions to appeal to the hardcore K-Pop fans.
“Fans, especially those of K-Pop idols, have re-embraced the physical format as a way of showing their support for their favourite artists. Some people even buy multiple copies of albums if there are different versions to collect. We’ve seen strong physical sales for local artists such as MXM [Brand New Boys], Kim Hyun Joong [SS501] and Jun Jin [Shinhwa],” Jin explained.
Interestingly, the growth of physical music is not across the board, with Jin explaining that physical revenue from international repertoire as a whole is decreasing in the Korean market.
This, perhaps, best sums up the South Korean music industry in 2019. It is a market that other music businesses would dearly love to copy, although it is hard to shake the idea that South Korea is something of a one-off in today’s music business.
Jin expects physical sales to remain strong in South Korea and believes that other markets could learn from this success.
“Fans everywhere want to show their love for artists, so it’s possible we could see this trend in other markets. The Korean music industry has done a great job of adding an element of fun and collectability, such as adding collectible memorabilia or prize-winning games, to its physical products and I think other markets could adopt that approach,” Jin signed off.
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