Revenue splits & corporate structures

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There’s been a bit of a hoo-ha about the fact that KQ Entertainment (which clearly gets the vast majority of its revenue from Block B) spends money on KQ Produce (which does not benefit Block B).

While part of me is just like, Ugh, haven’t we been down this road before? Like, very recently? another, more-pedantic part of me is like, Yay! I get to do another business-y post!

So, I thought I’d explain how it is that KQ Entertainment can spend money on KQ Produce without ripping Block B off. In doing so, I get to talk about both corporate structure and how artists get paid, so obviously I’m as happy as a clam right now.

A very dweeby clam.

Anyway, to understand what’s likely going on here, you need to first understand the concept of a revenue split.

What is a revenue split? It is the way money made from an artistic product is split between the artist and the label/publisher/studio/whatever.

Must there be a revenue split? No. You could be hired on a per-job basis for a flat fee, or you could be a salaried worker.

But if you are doing creative work, you often get paid via a revenue split.

A revenue split can be very simple: When I sell books on Amazon, for example, Amazon gets 30% of revenues and I get 70%. Easy-peasy.

In that case. More often than not, revenue splits are really complicated and there are many factors to consider. You might get a different split depending on where you’ve sold or what you’ve sold (CDs vs. digital downloads vs. endorsements vs. concert tickets). Your split may increase if your sales exceed a particular target. What gets split may vary–is it before expenses or after?–and you have to be careful about that one.

If your split sucks, then you get no money. If your split is awesome, then you are Dok2!

However the split is calculated, once the split is made, unless it was calculated fraudulently, the money belongs to whoever receives it.

That person or entity can spend the money as they see fit, because the money belongs to them. Zico can buy designer clothing, U-Kwon can buy Bearbricks, and Kim Kyu Wook can put money into KQ Produce.

To say that Kim should stop funding KQ Produce and put more of his money into promoting Block B is really no different than saying that Zico should stop paying for fancy cars and nice apartments and put more of his money into promoting Block B. If the whole narrative where Zico is a greedy bastard who doesn’t support his fellow Block B members really annoys you (and it certainly annoys me), then you should feel the same way about the whole narrative where Kim is a greedy bastard who doesn’t support Block B.

Kim can spend his money however he wants: fast cars, loose women, or–as the case may be–KQ Produce!

But hey! you say, Wasn’t it a problem when Stardom took money for Block B and spent it on other groups?

Yes, it most certainly was a problem! But Stardom took money that had been loaned to them specifically for Block B and spent it on a different group. There was a legally-binding loan agreement, and Stardumb dumbly breached it, because they were dumb.

But what about the issue of a label spending too much on Group A rather than on Group B?

For starters, I have point out that this is most often an issue only to fansoften it makes perfect business sense for a label to ignore Group B in favor of Group A.

But of course, sometimes it doesn’t: It didn’t make a hell of a lot of sense for Stardumb to violate the terms of its loan agreement, nor did it make much sense for Stardumb to so starve the members of Block B of funds that they left the company and refused to work for it ever again.

I think that, given their experience with Stardumb, the members of Block B were aware that there could be a problem with having all the revenues they made (plus money stolen from their parents, let’s not forget that) siphoned off and spent on God knows what. Furthermore, I think that, since they were armed with this hard-won knowledge, they took steps to protect themselves against this kind of abuse when they signed with Seven Seasons. I think they not only wanted to protect themselves from not being paid, but they also wanted to protect themselves from being neglected if their label added other groups.

Why do I say that? What am I looking at that makes me think this?

I am looking at KQ Entertainment’s corporate structure!

Notice how it’s kind of complicated. Why make Seven Seasons a subsidiary? Why create KQ Produce as its own subsidiary, and KQ Entertainment as an umbrella company? Why didn’t they just expand Seven Seasons to include other groups? Wouldn’t that be simpler?

Because this structure likely guarantees that a certain percentage of resources go to managing and promoting Block B.

I would not be AT ALL shocked to discover that Seven Seasons get its own slice of the revenues that Block B makes, separate from what Kim gets. Those revenues would be reserved for promoting the group and its members alone–not for any other act.

This way, every time money comes in, the members get their cut, their dedicated management gets its cut, and Kim gets his cut–which he can spend on KQ Produce if he wants, because it is, after all, his money.

I realize that Block B might be your “idols” or “gods” or whatever, but they don’t actually have legal rights to every last dime floating around, and their support staff are not their slaves. Some performers do have that attitude–Prince was fairly notorious that way–but the rather predictable result is that not a lot of people will work with them twice!

The members of Block B are, in my estimation, pretty damned savvy. They learned the hard way that the whole notion that K-Pop labels are big friendly families that will always take care of you is a big, fat lie. Instead, it’s the contract, the contract, and always the contract….

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8 responses »

  1. It’s impossible to know how fair the setup is without seeing the actual contract terms, but I think you’re spot on in saying Block B is probably too contract savvy to let themselves get ripped off. That being said, I can understand the perspective of those opposed to KQ’s non-Block B investments – even though KQ has no legal obligation to reinvest its share of profits back into Block B, many fans probably think there *should* be. I guess there is a difference between having a good relationship with your label vs. having your label devote everything to you alone? Of course, as a business decision it suits the label (and Block B in the long run) to diversify its talent.

    I think biggest gripe fans have is that there is pretty noticeable difference in the amount of Korean fan content vs. Japanese fan content. Obviously their Japanese label is way bigger, but it’s understandable that Korean fans are salty that a Korean group is putting out more stuff aimed at Japanese fans. Nevermind the fact that Japan is a cash cow in ways Korea isn’t — people still think KQ should be increasing its Korean fan output to match. This sentiment trickles into the i-community because the fan content i-fans can access online is mostly limited to korean fan content made available through collabs with k-fans. Of course, it wouldn’t be fair to j-fans who paid access fees for exclusive content if that content just gets circulated around the internet for free. But K-fans obviously would pay for that content (fan cafe), and i-fans don’t care about copyright in general…

  2. Pingback: Boycotts and the impossibility of financial separation | My Other Blog

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