Assets

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No, B-Bomb, not that kind of asset!

Kpopalypse has a good post up about understanding why certain business decisions get made in K-Pop, and I wanted to talk about one of the concepts that underlies a lot of decisions that get made not just in the business of K-Pop but in the business of the arts in general.

Kpopalypse’s first example is JYP’s failed attempt to make the Wonder Girls popular in the United States, and how that failure didn’t really hurt JYP because the company had another popular group, 2PM, which it could count on to make money.

K-pop fans are one-eyed and struggle to get with this kind of thinking. JYP on the other hand is looking at it like a business, not like a fangirl scared that their bias group is under threat.

It’s not just fans who struggle to understand these kinds of decisions; it’s artists as well. Which makes sense: Fans pretty much by definition feel personally invested in the success of a particular artist. If you happen to be that particular artist, then you feel REALLY invested.

But in the business world, if you have a stable of talent (be they singers or actors or writers or circus clowns–it really doesn’t matter), what you have is a collection of assets. And because they are assets, you’re going to treat them a little differently–it’s not like you’re not invested in their success, but your approach is going to be a bit more hard-nosed.

What are assets?

Quoth Wikipedia:

In financial accounting, an asset is an economic resource.

What’s an economic resource? Something you have that’s worth money. It could be worth money only if you sell it, but for many people, the really desirable assets are the ones that make you money all the time.

For example, if you own a stock that pays dividends, you get the dividends every quarter. If you own real estate that people rent, you get rental income every month. If you own a taxi medallion, you get the fares people pay to ride in your taxi every day.

Apply that to K-Pop: If you own copyright to a popular song, you get royalty payments every time the song is sold or performed. If you own a label with a popular idol group, you get money from music sales, appearance fees for events and commercials, fan club dues, and admission fees to fan meetings. You also typically get a cut of the monies that group members get for doing things that your label doesn’t cover, like acting. If you’re a touch dodgy, even your failures are valuable assets.

That last example, although extreme, shows how much economic interests can differ between a label and its talent. It’s pretty much never in an artist’s interest to fail, but the failure of an individual artist can be no big deal to a label.

Even if the label is completely ethical in the way they treat their talent, that disconnect exists. Let’s say you run Stringently Moral Records, a company lauded throughout K-Pop for its fair and just treatment of artists. You have seven active groups. Two of your groups are wildly successful, and they earn 80% of your revenues. Your least successful group accounts for 0.2% of your revenues.

Where are you going to put your time, energy, and money?

If you answered, “Into the least successful group! If only I really gave them a chance, real chance, they could make it big time!” then you obviously have never had to make a payroll. What you’re going to do is to plow those resources into the groups that are currently allowing you to keep the lights on. If the members of your least successful group get frustrated and walk, it’s not the end of the world. But if one of your most popular groups walks, then you’ve got a serious problem.

What often happens to artists who join big labels (or publishers, or whatever) is that if they aren’t really popular right away, they go on the back burner. That makes perfect sense for the label. Even if an artist is successful, but is less successful than someone else in the company, they will almost always get second-class treatment–especially if they’ve been around for a while. A rising star might get pushed more because the company wants to see how far they can go, but if a group is seen as pretty much having tapped their potential market, then they’re going to get less attention. No one wants to waste a gazillion dollars pushing someone who’s always going to be a niche player.

Needless to say, this can be frustrating to fans, and it can be extremely frustrating to artists. This is why artists go indie: They want to be the only asset.

But large companies can offer things that going indie cannot precisely because they have a large stable of assets. A company can parlay its more-popular assets to get exposure for its less-popular ones (Taeyang appears on a Mino song). A younger, less-experienced artist can have opportunities to meet and learn from more-established players. If a company is really clever, they can pit fans of one asset against the other, ensuring that both fanbases shovel even more of their money into the company pocketbook (YG is brilliant).

The main benefit of having many assets from a business perspective is that it reduces risks, because if one asset fails to perform (the Wonder Girls, in Kpopalypse’s example) another can take up the slack (2PM). In investing, this is called diversification, and it’s considered to be very important; one reason YG is so diversified is because it depends on the investing public for money, and it’s a lot harder to attract outside investors if you’re betting the farm on a single group. Even a company like Seven Seasons that isn’t public and that does bet the farm on a single group tries to diversify by promoting solos and sub-units, pushing into the Japanese market, and getting members into non-musical work, like acting, modeling, and variety shows.

Diversification has a lot of ramifications that can confound fans. Kpopalypse talks in his post about how Red Velvet is marketed differently because SM is trying to diversify its groups, and how fans perceive that as Red Velvet being discriminated against. A fan complaint you often hear about YG is that they don’t release music often enough. Meanwhile YG is sure to let investors know that only about a quarter of its revenues come from music sales–they don’t prioritize music sales because they’ve diversified away from that, and now music sales just aren’t that important a source of revenues.

None of which is to say that groups can’t be badly managed as a result of the asset mindset–it’s just that this mindset is always going to be there. Artists need to be realistic about what signing with Huge-O-Conglom-O-Corp is likely to mean. And fans need to be realistic about their place in all this–remember, a fanbase is just another asset.

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21 responses »

  1. I suppose the same must apply to which members get promoted. But, then you have members of groups who leave and have huge careers, ahem, Kris and Luhan, after being kept in purgatory, so there is something to the plaint, “Give my bias a chance!”

    • A competent company treats its valuable assets well. I mean, despite what people say, G-Dragon is not YG’s pet or favorite–he is a major earner at his firm, and he is treated as such.

      But not every company is competent. Luhan specifically complained about the fact that he wasn’t receiving what he was worth–he was doing more endorsements but not getting more money–so in that case you could argue that SM knew he was a more-valuable asset and should have treated him better. That’s was the problem with Stardom and TSE as well–they treated their earners like shit, and they paid the price for it.

      There’s also the very real possibility that a company just isn’t seeing the potential in someone–that’s a big complaint you hear from people who work for big corporations. Whether they’re willing to actually do something about it is another question entirely–some people just prefer to think of themselves as eternally unrecognized geniuses, since that’s easier and more gratifying than actually striking out on their own and seeing where they get.

      • I think companies see the potential in employees with talent. But other factors go into whether they want to treat that person like a valuable asset, and those factors can be extremely personal. Kris’s huge success outside of EXO suggest severe underutilization when he was with SM, which made no sense considering everything he had to offer them in the Chinese market. So, like you said, being willing to do something about the situation helped him.

  2. I wonder why Rainbow flopped as much as it did? The last album was really good, the girls are all stunning and talented, and before that last album, it was all the candyish music that region likes.

    • I don’t know of course, but it’s really difficult to predict whether a specific album will be a hit or a miss. Even successful players have their flops. That’s where diversification comes in handy….

      • They seem to have been consistently flopping, though. Maybe it’s just that there are so many groups.

        OT 24K has teased a comeback where one person is styled like Zico. Although that annoyed one kpop writer on Twitter, Zico is a Fashion King, anod thus sets trends that others follow.

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