What is a business model?


The K-Pop idol Lizzy has expressed her displeasure with her label, Pledis Entertainment, and that story got me thinking about a concept that–like assets–I think many people (both fans and artists) often find both confusing and upsetting about the business of the arts (and other businesses as well).

What is this concept? A business model.

What is a business model? Well, as Wikipedia will tell you, the concept itself is actually kind of hazy and hard to define. Personally, I think of a business model as the strategy a particular business uses to make money.

Here’s a famous example: The company Apple makes software that is highly respected. But Apple doesn’t sell very much software. Instead, it uses its software to sell hardware–devices like phones and whatnot. Selling devices is Apple’s business model.

Here’s another famous example: The company Google makes software that is highly respected. But Google doesn’t sell very much software. Instead, it uses its software to sell advertising to other companies. Selling advertising is Google’s business model.

Notice something about Google and Apple: They don’t have the same business model! Their approach is kind of similar–both make darned good software and then basically give it away–but their business models–the ways they actually make money–are very different! Apple is very involved in manufacturing, while Google is very focused on attracting eyeballs to the advertising it sells.

Notice something else about Google and Apple? They are both phenomenally successful companies.

Doesn’t that strike you as odd? Wouldn’t you think that one business model should be better than the other? That one should succeed and the other should fail?

Nope! Two companies with two very different business models can both succeed. Likewise, two companies with the exact same business model can have very different trajectories, with one becoming Google and the other becoming AOL.

I should note that, just as it is difficult (but not impossible) for a person to change all their habits, it’s difficult (but not impossible) for a company that has been following Business Model A to switch to Business Model B. That’s why new technology can be so disruptive: It’s really hard for, say, a brick-and-mortal retailer to suddenly become an online retailer. Instead, companies like Amazon crop up–companies that have followed the new business model from the start.

What that means if you’re Lizzy or just some normal person looking for a job is that all your different potential employers are likely using different business models–even if they are in the same field. If you want to have a stable career, it’s helpful if your interests and your expertise align with your employer’s business model. (Are you super-interested in manufacturing and supply-chain management? Google is probably not right for you.)

The problem I see for Lizzy is that I think it’s pretty obvious that Pledis follows kind of a shotgun business model, where they throw a whole bunch of idols in front of the public and see who the public gloms onto. Then they discard the rest and find a new bunch of idols.

This was certainly the case with After School–the group was overtly established as Korea’s answer to the Pussycat Dolls. That notion was kind of funny to me, because the Pussycat Dolls weren’t successful until their management briefly hit upon a winning line-up. Then they changed that line-up, and the group failed.

But like I said above, different companies can follow the same business model and have different results: The fact that idols in Korea can become all-around entertainers opened up the possibility that Pledis could winnow down After School to Orange Caramel and then to Nana. Which they did.

Pledis is still following this business model. With the exception of N’UEST, which I would assume Pledis regards as something of a failed experiment, the label’s groups are very large. They’re throwing these big groups out there in hopes that one of those idols becomes Nana II.

Will this work? I don’t know! But it is Pledis’ business model. It’s what worked before, it’s what they know, and it’s what they are likely to stick with.

That is not good for Lizzy, because she is not Nana II.

Does this mean that she can’t have a career? No. However, I think it definitely does mean that she is not a good fit for Pledis.

Lucky for Lizzy, her contract is expiring, and if she’s smart, she’ll stop acting like she expects Pledis to change business models and will start looking for a company with a business model that can actually help her.

And those do exist! It’s a big world out there, and there are many, many business models, even within the same industry.

Do you remember that post I did where I compared Dok2 to a normal K-Pop idol group? That’s a really good example of two very different business models both operating in the Korean music industry. Likewise the business model that focuses on selling physical CDs is different than one that focuses on digital or CFs. All these can work–even though you can’t gage the success of one business model by the measurements you use to determine the success of the other.

Different business models can and do succeed in the arts–just like Google and Apple’s different business models succeed in technology. And that’s good news for just about everyone.


15 responses »

  1. They want Nana II and REN II. REN brings in a ton of endorsement money as well – in China and Japan. Also, while Nu’est was not active in Korea, their IGs showed nonstop overseas activities. (I know bc I followed REN and, off and on, the others.) and they were constantly doing shows, but outside Korea in Japan, SE Asia, and some in Latin America. Similar to UKiss that way, actually, where they’re all earning well and working plenty, just not in their small home market.

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