K-pop industry reduces dependence on Chinese market

In this undated file photo, the 2021 the MAMA Awards take place at CJ ENM Content Studio in Paju, Gyeonggi Province. Courtesy of CJ ENM

By Park Ji-won

HONG KONG ― Since the early 2010s, K-pop groups recruiting Chinese members had been a common phenomenon. Most successful idol groups, such as EXO, have at least one foreign member from Greater China ― including mainland China, Hong Kong, Macau and Taiwan ― to target fans from the area. Many of those members led their bands' activities in the region, creating fan bases there and therefore contributing to ticket and album sales.

However, major and middle-sized Korean entertainment companies are now cutting ties with China, amid the industry's global expansion and uncertainties about the market, according to entertainment industry officials and data. They are also reducing the number of members from mainland China, Hong Kong, Macau and Taiwan in new groups or downsizing some of their main businesses in the region, based on the risks involved there.

"Hong Kong had been playing the role of an entertainment hub to lure Chinese tourists from the mainland, hosting multiple concerts by K-pop artists. But due to the unpredictable market and tight COVID-19 regulations tied to Beijing's policies, many Korean companies are pulling their businesses out of Hong Kong," a person with direct knowledge of the industry said.

The individual added that Hong Kong has remained a place that symbolically represents the K-pop market in Asia, despite the fact that it offers only a maximum of 14,000 seats at the AsiaWorld-Expo, its largest indoor performance and exhibition hall, which means it is not a lucrative market from the beginning due to its small size. But as profit margins are getting thinner due to the skyrocketing costs needed to invite popular artists amid the K-pop boom, it is losing its position as the key market, the individual added.

Entertainment conglomerate CJ ENM decided to hold the MAMA Awards ― formerly the Mnet Asian Music Awards, one of the major K-pop and Asian music awards ― in Japan this year. This decision indicates that Japan is replacing Hong Kong, where the event was held fully from 2012 to 2016 and partially in 2017 and 2018.

The Figure HYBE Multi-label Audition is being held in Las Vegas in this April 4 file photo. Courtesy of HYBE

The Poster for the Plus Global Audition / Courtesy of HYBE

HYBE, BTS' agency, didn't include China, Hong Kong or Macau in its recruitment locations for the new member of a girl group during its worldwide auditions held last year.

Data collected by The Korea Times also backs Korean entertainment companies' recent moves to create distance from the Chinese market.

It showed that 31 percent of K-pop artists of the third generation that debuted between 2012 and 2017 ― 10 K-pop groups out of 32 groups ― had a member from mainland China, Hong Kong, Macau or Taiwan, or a member whose native language was Mandarin or Cantonese, but the proportion of such members in fourth-generation groups from 2018 to the present has decreased to 14 percent ― only four out of 27 groups. Among the third-generation groups, up to 27 members out of 238 in total were from Greater China, but the number declined to five out of 191 in total among fourth-generation groups.

Also, it revealed that fourth-generation boy groups tend not to include members hailing from Greater China. Only four girl groups ― ((G)I-DLE, Cherry Bullet, aespa and Kep1er ― have Mandarin-speaking members from Taiwan or China.

The Korea Times collected data on 59 K-pop groups that debuted between 2012 and 2022, which are considered to be the third and fourth generations of K-pop artists. The groups are produced by four major entertainment companies ― SM Entertainment, JYP Entertainment, HYBE and YG Entertainment ― which are entertainment companies that were listed on the stock market or in the Hanteo global ranking chart at some point. The generations were defined based on a recent report published by Yuanta Securities Korea and multiple graduate theses. The number of members was counted based on their information at the time of debut.

The entertainment companies saw similar album sales in Greater China despite the ups and downs of the last few years, following the mainland Chinese government's crackdown on commercial activity via K-pop content in 2016 in response to Korea's deployment of the U.S.' Terminal High Altitude Area Defense (THAAD) battery. However, the proportion of album sales in Greater China out of the total overseas album sales has continued to drop.

Korea Customs Service data showed that exports of albums amounted to $220 million in 2021, up 62.1 percent from $136 million in 2020. Sales have been growing steadily, posting $44.1 million in 2017, $64.3 million in 2018 and $74.5 million in 2019.

Still, the proportion of album sales in China has continued to drop over the last few years. It accounted for 36.1 percent of overseas sales in 2017, 25.7 percent in 2018, 18.2 percent in 2019 and 12.6 percent in 2020, according to Korea's Joongang Ilbo newspaper. For BLACKPINK concerts, audience members from Greater China only account for 2 percent of the total while those from Japan and Southeast Asian countries account for 52 percent and 21 percent, respectively, according to Yuanta Securities Korea.

Figure WayV, a sub-unit of K-pop boy group NCT, managed by SM Entertainment, consisting of members from China, Hong Kong, Macau, Taiwan and Thailand / Courtesy of SM Entertainment

Experts point out that entertainment companies are reducing their dependence particularly on the risky mainland China market amid the country's political uncertainties and the expansion of the K-pop industry into other countries.

Lee Gyu-tag, an associate professor of cultural studies at George Mason University's South Korea campus, says that the decision is political.

"Entertainment companies' efforts to reduce their dependence on China is related to the political situation in the country," Lee said. He said that China chose Korea as a test case, as, "in order to strengthen the dictatorship there, it is necessary to control cultural content coming in from outside the country."

Jung Min-jae, a music critic, said that taking on members from Greater China ― including China, Hong Kong, Macau and Hong Kong ― presents a political risk for the companies.

"During the second and third generations of K-pop, Japan and China have been the main overseas markets for idols and local members helped the bands' activities there. But the more Chinese members there are, as you can see in the cases of EXO and Super Junior, they can cause (political) problems, entertainment companies see the Chinese members as 'risks," said Jung, adding that the sales from the United States and Europe grew and those companies don't need to largely rely on the Chinese market.

Lee said, "Korean entertainment companies have been feeling the urgent need to diversify their markets as they have been depending mostly on the Chinese and Japanese markets, which are neighbors with economic and political risks. The winning of BTS' Billboard award and the COVID-19 pandemic accelerated their pace of diversification."

Lee continued that it is part of their new strategy to produce idol groups directly in local countries with local members rather than embracing members in Korea who could cause political problems. "WayV, Niziu and NCT Hollywood will reflect their strategy of localizing K-pop groups."