Category Archives: business concepts

I guess I should post about this: The SM and Like Planning scandal

Standard

Recently news came out that SM Entertainment had been paying large amounts of money to Like Planning, a company owned by Lee Soo Man, who founded SM but left the company in 2010.

When the news came out, SM shares took a dive, and there’s been a lot of back-and-forth about what that means and if the company is doomed to collapse into ashes, or alternately is a perfect entity run by benign divine beings.

So, I’m going to put in my former-business reporter two cents. First, though, I should note that I have no special insider knowledge of SM’s situation, or even not-so-special knowledge of Korean securities law.

What it appears SM did is something that actually happens quite a bit, and it’s important to be aware of it if you ever plan to invest in stocks: They put the interests of a company insider before the interests of investors.

This happens all the time, and in fact is one of the great conundrums of corporate management: How do you prevent the people inside the company from running it to benefit them instead of investors? A lot of common business practices, like awarding shares of stock to upper management, are designed to align management’s personal interests more closely with that of shareholders (and then these practices get abused, and new ones are adopted, and then they get abused…).

This is a particularly thorny issue when a company goes from being a private firm (fewer owners, who likely know each other and may even be related) to being a public company (many, many owners, who have no personal connection to the people running the firm). That is a very difficult transition for companies to make, and it results in all kinds of controversies.

For example, Rupert Murdoch founded News Corp, which was long criticized in corporate governance circles for being dominated by him and his familyGoogle is another example of a company where the founders don’t want to give up control (although at least they don’t seem to be using it as a personal piggy bank). Although they didn’t technically found Archer Daniels Midland, the Andreas family’s domination of that company was quite controversial even before Michael D. Andreas went to jail.

As you can see from the above examples, putting an insider’s interest first isn’t necessarily illegal. It also doesn’t necessarily mean that the company isn’t being run well as a business–it might be quite profitable.

What it does mean is that investors are getting the short end of the stick. SM doesn’t pay cash dividends to investors, and it probably never will because it’s paying enormous amounts of cash to Lee Soo Man instead. In addition, because of the high cost of these payments to Lee, SM’s profits are going down the tubes, meaning that the value of their shares is likely to decrease–which, generally speaking, is not what investors want. (What about the artists and all? Well, stuff like this is why you always want a share of the revenues, not a share of the profits.)

So, it makes total sense for investors to sell their shares in SM, even if they don’t suspect that something illegal happened and aren’t worried that regulators are going to swoop in and shut the company down. The simple fact that this arrangement exists is an announcement to investors that their interests are coming in dead last. If you think of the money SM makes as a pie, it’s just become public knowledge that Lee is getting a huge slice–which means investors are only going to get a small helping of crumbs.

Additionally, this arrangement doesn’t really speak well of SM’s management, even if it’s not some company-killing illegality. The money SM’s management is giving to Lee could instead be used to expand the company or just put aside for a rainy day. It’s a bit like Murdoch’s insistence that his sons be his successors, when there were potentially far more talented executives available–this kind of favoritism doesn’t benefit the bottom line. Investors in public companies aren’t interested in whatever sentimental attachment SM’s management has to Lee–they’re interested in making money, and if that doesn’t appear to be high on SM’s agenda, they will take their money elsewhere.

Advertisements

BigHit and big hype

Standard

When I first read that BigHit had had a real gangbusters 2017, my thoughts were, “Good for them! It’s no surprise considering how well BTS has been doing! Awesome!”

But then I started coming across a lot of very enthusiastic (and occasionally financially illiterate) fan translations, and I started to think, Whoa, I’d better do a post about all this.

Here’s the thing: BigHit is planning on becoming a public company, with an initial public offering (IPO) planned for next year. (If you don’t know the difference between a private company and a public company, look here. If you don’t know the difference between revenues and profits, coughcoughPannChoacoughcough, look here.) I was a business reporter during the dot-com boom–believe me, I have seen many IPOs get hyped to fucking moon, and that’s what’s happening here.

Why is it happening? Given the Korean media‘s penchant for printing anything that gets it clicks, it could be pumping up BigHit for that reason alone. But the important thing to remember about IPOs is that they are often an exit strategy for the original investors in the company, and that the original investors plus the banks that handle the IPO want to sell all the shares they have for offer at a good price. That means that right now, we are in the middle of a marketing campaign to sell shares of BigHit to a larger circle of investors.

That’s just how IPOs operate, and there’s nothing inherently wrong with it. What troubles me is the combination of IPO hype and K-Pop fans who are younger and obviously very inexperienced as investors. Remember, good investors have 1. clear financial goals, 2. realistic strategies to meet those goals, and 3. the discipline to stick to those strategies and work the plan.

Not a reason to invest. I’m sad about that, too.

The good news is, there’s actually quite a bit of financial information out there about BigHit, because shares are being traded over the counter. The bad news is…how accurate is this information? In the United States, being an unlisted security means that you don’t have to comply with all those pesky SEC regulations–you know, the ones that protect investors from fraud.

Now, as BigHit nears its IPO date, it is going to have to dot its Is and cross its Ts and get in compliance with stricter accounting standards. But we’re not there yet, which is why breathlessly comparing its results to those of actual public companies is a little naive. BigHit doesn’t have to play by the same rules as a public company, and if reporters are currently getting information about BigHit from anyone with an interest in seeing the IPO go well…you start to see the conflict of interest there. (And don’t get all excited because the people hyping the company are being called economists. The kind of economists who hype companies are the kind of economists who work for the banks that handle IPOs.)

Where does this get especially naive?

Yeah. That 35% (!!!) profit margin sure is impressive, isn’t it?

Of course, BigHit does not yet have to comply with the costs of being a public company (which are considerable), but the main thing there is that seven-year contract timeline: BTS debuted in 2013. BigHit will go public in 2019.

One year after the company goes public, BTS’ contract will be up for renewal.

You want to know a secret about BigHit’s $23 million net profit? It is coming out of the pockets of the members of BTS. They are the ones earning that money, and under their current contracts, they are just letting it go again. They may well decide not to do that any more when their contracts come up for renewal. A six figure salary may seem like a lot–until you realize that your company is running a fucking eight-figure profit off your labor!

The downside of a company hyping a profit margin is that, generally speaking, the talent can read (and hire lawyers) just as well as the investing public. Of course, thanks to this IPO, by 2020 the members’ contract demands will no longer be the problem of BigHit’s original investors–a very fortuitous bit of timing there.

But of course there’s always Option B: Hold a firm line against those BTS punks, so that various members or even the entire group walks!

Ah-ha-ha-ha-ha-ha! Oh my God, can you even imagine! HA! HA! HA!

Yeah, this is the long-term problem with BigHit: They are not diversified. Like, at all.

This graphic made me cackle:

Gee, why did YG have such a slump in its operating income last year? Because BigBang didn’t release a new album in 2017. Investors have long complained about YG’s reliance on BigBang to make money, and the company’s stock reliably takes a beating whenever investors worry about BigBang’s members going into the military or a member has a scandal.

And YG is about a thousand times more diversified than BigHit. Jesus.

Does this mean that BTS and/or BigHit don’t have a bright future? Not at all! But it does means that you might want to hold off on sinking your retirement savings into BigHit’s IPO, even if you really love Suga a whole, whole bunch.

The impact of #StayStrongBlockB

Standard

On March 6, a story came out that P.O had said it was potentially possible that the members of Block B might go their separate ways, maybe, it’s hard to say. While this was far from some definitive statement about disbandment, a lot of fans were understandably freaked out by it, and on March 10 some of them began a hashtag campaign on Twitter, trending #StayStrongBlockB.

This was not uncontroversial, even on Twitter, with other fans complaining that the hashtag–which is usually used only if something quite bad has happened to a group, like a car accident–really upset them when they first saw it. Proponents of #StayStrongBlockB countered that the hashtag trended pretty darned well and got the group attention it otherwise would not have gotten.

So, was it a good idea? Was it a bad idea? The data is in, so let’s look at the weekly visits to BlockB.com over the past six weeks.

Yeah–that’s pretty bad. And those are all full, seven-day weeks.

A look at the daily traffic shows a pretty tight correlation between the fall-off and P.O’s comments (March 6), and the hashtag campaign (March 10).

The numbers fluctuate of course, but I have not seen lows that low since before “Shall We Dance” was released.

I think it’s fairly obvious that #StayStrongBlockB was a pretty terrible marketing tactic and is the kind of thing that should be avoided in the future. (And now you’re beginning to understand why I find it so laughable when Block B’s fans criticize their label for being bad at marketing. If you live in a glass house, don’t throw stones.)

Will traffic return? Well, if there’s a concert announced in an English-speaking market or a new album, I’m sure it will. But will this really nice traffic BlockB.com has been having even without any especial hook come back before then? That I do not know.

I have written before about how Block B’s international fans could be more effective at marketing the group. I hope this post underscores why we need to strive to be effective: We can indeed do the group considerable harm if we aren’t disciplined when it comes to public campaigns like this one.

The good news for fans is: You have the power! Your work can have a real impact!

The bad news for fans is: You have the power! Your work can have a real impact! Not even Sony Music can stop you!

Let’s talk about what was wrong with this campaign, and what sort of thought process fans need to go through if they are to have effective, helpful social-media marketing campaigns in the future. Which is entirely possible to do, if you are smart about it.

Wrong Thing #1: This public marketing campaign was not crafted with the public in mind.

First things first–you’ll notice that I’m referring to this hashtag campaign as a public marketing campaign. And that’s what it was, whether or not the people who organized it really thought of it that way or not. If you want to get something off your chest in private, you do it in private; hashtag campaigns are public, they happen out where everyone can see them, and they need to be tailored for public (not just fan) consumption.

The proponents of #StayStrongBlockB were right about one thing: Both the story about P.O and the hashtag campaign got attention.

The problem was the kind of attention it got. The story and campaign both caught the eye of existing fans, who promptly freaked out, went looking for more information, and then stopped once they satisfied their need for news. In other words: It drove traffic in the short term among people who already liked Block B. Obviously I’m happy when people who like the group can find helpful information on BlockB.com, but they’re not exactly my target audience.

Who is? Potential fans. The #StayStrongBlockB campaign clearly had a substantial impact on them as well, but not the impact we want: It turned them away. They decided against finding out more about Block B.

This is not helpful.

Here are two marketing principles to keep in mind:  Think about who is going to actually see the campaign, and Do not alienate potential fans while attempting to energize existing fans.

What alienated potential fans?

Wrong Thing #2: The campaign had a negative message.

I’m sure some people will argue that there’s nothing negative about telling someone to #StayStrong. Except that there is–people don’t do #StayStrong unless there’s a big problem. (And it clearly doesn’t matter if the body of your #StayStrong Tweet was just a-brimming with positivity. Nobody reads past the headlines.)

And in this specific case, #StayStrongBlockB amplified the story about the group possibly disbanding, which is a negative story.

Negative messages can work–if you’re selling security systems or insurance. They’re not going to work if you’re selling a K-Pop group. When people go looking for entertainment, they’re not looking to get stressed out or to adopt someone else’s problems. They’re looking to have fun. They’re not looking for the group that’s about to disband or is miserable or is having some terrible #StayStrong-worthy crisis.

This, by the way, is exactly why haters tend to exaggerate or invent crises for K-Pop groups–it’s a deliberate attempt to drive away people who otherwise might be interested.

Here is a marketing principle that you should probably tattoo on your forehead: Do not amplify negative stories. Let me say that again with more emphasis: DO NOT AMPLIFY NEGATIVE STORIES! Is this a story that haters have been peddling since the group’s debut? Is is something that causes you great panic and consternation? Don’t tip off the media about it, and don’t start a marketing campaign centering around it.

I’m not saying that fans can’t discuss negative stories–of course you can! But a hashtag campaign is a public marketing campaign. If you’re doing a campaign for public consumption, you have to think things through. If you are just dying to take action, that’s great! But you also have to take five minutes to craft a message that is positive and will resonate with the public.

Now, did P.O think things through? Obviously not–he is a man of many talents, but marketing isn’t one of them. Presumably someone kicked him in the butt afterwards, because a few days later he came back with a positive story–the news that Block B is doing a new album!

This was an attempt to change the narrative–an attempt that the English-language K-Pop media largely ignored, because of course they did.

The problem is that fans also ignored the positive story when they came up with an English-language hashtag campaign that managed to kill interest in Block B among English speakers. And they shouldn’t have–no one should count AllKPop as an ally, but fans are supposed to help.

Here is what I would like fans to do: Think before you hashtag (or contact the media, or whatever thing people are going to do next). What are you trying to accomplish? Who is going to see this? What will their likely reaction be? Could this help? How? Could it hurt? How?

Don’t just run with the first idea you have–really think it through. Did you think the #StayStrongBlockB campaign was necessary because it gave fans something to do when they were feeling helpless? Did you think the #StayStrongBlockB campaign was necessary because it might hearten the boys?

Would any of that not have been true of, say, a #BlockBNewAlbum hashtag campaign? Would that have not worked every bit as well for existing fans, and been less harmful to interest from potential fans? Would another sort of campaign, like trying to get Block B radio play, had the same (or even more) benefits?

Fun with tails

Standard

Since just making long lists of numbers is not quite geeky enough for me, I wanted use the data of Zico’s digital download sales to illustrate some points about business models and costs.

First I went back to my favorite chart-making Web site, the National Center for Education Statistics’ Kids’ Zone, and made line graph of all the data I had. Each dot represents one song.

graph

Now, even though I arbitrarily left out the songs that sold less than 100,000 downloads, you can see what in statistics is called the long tail–relatively few songs sold a whole lot, and many more songs sold far less.

Indeed, if you add it up, Zico’s top-selling song, “Boys and Girls,” sold almost as many downloads as the 11 least-well-selling songs on that chart combined.

graph1.png

To put that in numbers, “Boys and Girls” sold roughly 1.8 million copies, while those 11 songs sold a combined total of roughly 1.9 million.

So, here’s a question that gets hotly debated, especially these days: Is the long tail worth pursuing?

It might seems like the answer to that question is really simple: Either, no, those songs are flops; or yes, those songs sold 1.9 million downloads, do you really want to leave that money on the table?

But the answer to that question actually relies on a lot of factors we can’t see. One element is diversification–if a song in the long tail was performed on Show Me the Money, for example, Zico was paid to appear on the show. In addition, he got public exposure from that show, which tends to lead to even more appearances and endorsements. So even if the song didn’t sell enough in digital downloads to pay for itself, it still could have made quite a bit of money other ways.

I’m going to focus on another element in this post, however. This element is also somewhat–but not entirely–invisible to outsiders: cost structure.

Let’s say, for the sake of argument, that the cost structure of Zico’s label is such that every time he releases a song, it costs them and him the equivalent of 100,000 downloads. So, if 100,000 downloads makes the label, I dunno, $10,000, the label has to pay $10,000 in order for Zico to write, produce, and release the song.

See what that starts doing to your long tail:

graph2.png

Those two numbers are no longer remotely equal. “Boys and Girls” now generates revenues equivalent to 1.7 million downloads instead of 1.8 million–not a huge catastrophe. But the 11 least-selling songs lost 100,000 downloads each. As a result, instead of losing of 100,000 downloads, they lost 1.1 million downloads, and now they’ve only cleared the equivalent of 800,000 downloads.

Yup–just by fiddling with the costs, we’ve turned our long-tail songs from a group of songs that made more money than the best-selling song to a group of songs that made less than half as much money.

Let’s make them completely worthless! Now we’re setting our per-release cost at the equivalent of 500,000 downloads!

graph3.png

If that’s the cost structure, Zico needs to really focus on the crowd-pleasing tunes, and if he won’t, his label needs to find someone who will!

You know who tends to have high costs like that? Large companies. They have lots of employees and investors, both of whom want cash in return for helping the company out. If a company is a public company, they can have millions of investors, plus the not-insubstantial cost of complying with the regulations that govern those types of companies.

Not shockingly, large companies tend not to give a crap about the long tail. In fact, large companies don’t usually want any kind of tail; they want nothing but the products that are the most profitable.

As a result, they tend to have very stringent performance requirements–and if a product doesn’t meet those requirements or stops meeting them, it’s gone. (This a big part of why larger K-Pop labels will ignore or disband older groups that are seen as somewhat played out in favor of new groups that can generate more excitement.) I remember reading about some large consumer-products firm that was shedding a brand because it “only” pulled in $100 million per year.

Of course, the vast majority of businesses would be delighted with a product that sold $100 million per year (and I think every individual would be thrilled to have $100 million just as a one-time payment). This is why the virtue of pursuing the long tail is something that can be debated–is something of zero interest to Ginormous MegaCorp actually of tremendous interest to you?

Another wrinkle is that, if you can get the costs down far enough, the long tail actually is of interest to large corporations–and modern technology has drastically brought down the cost of production and distribution for many entertainment products. This PracticalECommerce article says “Amazon Doesn’t Do Long-tail,” but that is true for physical goods only. When it comes to digital goods–which have extremely low costs–Amazon sure as hell does “do long-tail,” and other large companies do, too!

Boycotts and the impossibility of financial separation

Standard

So apparently the boycott thing has come up again, le sigh–although thankfully it doesn’t seem to be having much impact.

If you ask why it’s happening, you’ll be told many rather nonsensical reason why some K-fans are boycotting–“bad” marketing that somehow sells tons of music and the like.

So, here are the actual reasons why this sorta-boycott is semi-happening.

1. This took place in Japan at the end of May:

2. This is going to take place in Japan in July:

Yup, J-BBCs got a new song and some concerts. That’s the entirety of the issue this time around–last time, it was this kind of thing plus Zico dating.

There aren’t deep minds or great moral thinkers behind these boycotts. These campaigns are coming from the kinds of K-fans who go: WHAT ABOUT MEEEEEEEEE?

* * *

Anyway, I thought I’d back up for a minute and talk about boycotts. Obviously I think they’re a really bad idea with regard to Block B and their current situation, but this actually isn’t due to some blanket dislike for all boycotts.

Let’s start out with the question: What is a boycott? It’s when people refuse to buy something they would normally buy. Why engage in a boycott? Let’s ask Wikipedia:

The purpose of a boycott is to inflict some economic loss on the target, or to indicate a moral outrage, to try to compel the target to alter an objectionable behavior.

So a boycott is essentially punitive: You go after a company’s ability to make money because you think they’ve done something wrong.

But what do we mean by “a company”?

Remember that in K-Pop, the talent is typically paid via some kind of revenue split. So, if something pulls in $100,000, that money is split between the group members and the company.

In theory.

What you get, of course, for many K-Pop groups (even if there is no dodgy accounting) is really craptacular revenue splits. For example, it came out in court that the members of Exo received a lousy 3-5% of profits for promotions in Korea.

Let’s say you’re an Exo fan in Korea, and you are upset about something SM Entertainment is doing to the group, which you are pretty sure is harmful to the members. But you would like to damage SM’s take without hurting the finances of the group members themselves.

Given what you know about Exo’s profit distribution, boycotting promotions in Korea would be a pretty solid idea. For every dollar you don’t spend, SM loses 97-95 cents, while the members only lose 3-5 cents. The members take only 3-5% of the damage because they were only ever getting 3-5% of the profits.

Block B was in a similar position back when they were with Stardom, and Stardom wasn’t paying them anything. Back then, there was no real point in paying for anything that came out of Stardom, because none of that money would end up in Block B’s pocket!

Then the lawsuit happened.

Whatever people’s complaints about Seven Seasons/KQ, nobody denies that the boys are living pretty high off the hog these days. Expensive clothing, foreign travel, fancy cars, costly watches, nice apartments, enormous rooms dedicated to fish–to all appearances, they’re doing quite well for themselves.

What does that tell you? It tells you that the members are getting a decent hunk of the revenues.

How much? Is it perfectly fair? Who gets exactly what? I have no way of knowing.

But I do know that, if the boys are getting a healthy revenue split, it effectively makes it impossible to punish Seven Seasons through a boycott without also punishing the members of Block B.

Why? Because a boycott makes the pie smaller. So instead of splitting $100,000, they’re splitting $70,000. Instead of splitting $50,000, they’re splitting $20,000. Everybody–including your bias!–gets less money.

If you cut Seven Seasons’ revenue by 30% with your boycott, you are probably also cutting the members’ revenues by 30%–and that likely makes a significant difference to their take-home pay, because they weren’t getting nothing to begin with.

The difficulty of targeting punishment–of inflicting damage on a label alone–is why I even argue against boycotting the Stardom albums these days. I think there’s a chance that when Block B settled with Stardom, part of that settlement involved having some third party handle the royalty accounting. (At least, that’s what I would have wanted had I been them.) So I say, you can’t punish the label without punishing the boys!

And that goes a million times more for Seven Seasons, because there’s really no question with them that the boys are getting paid. Their current label is not taking all the money, and that means that when you boycott the group, you hurt the group’s members.

Not just financially, either–I mean, Jaehyo kind of jokingly pointed out earlier that if you want to see him in more things, you need to watch the things he’s in now. That’s very true: If your concern is that all the focus goes on members that are already successful, like Zico, then the best way to help the other members is to support their projects, not to boycott them.

But if all this is true, why doesn’t it bother those K-fans who keep trying to organize boycotts?

Because they are angry at the members.

If you think Zico is your future husband, and he dates someone else, then you’re going to try to punish him. If you think B-Bomb is your future husband, and he premieres his song in front of a bunch of Japanese girls, then you’re going to try to punish him. If you think Taeil is your future husband, and he’s had three solo concerts in Japan but won’t do music shows in Korea, then you’re going to try to punish him.

These people are totally fine with punishing the members along with the label–that doesn’t bother them one bit.

Revenue splits & corporate structures

Standard

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….

What’s up with Block B? SO glad you asked!

Standard

A not-too-terribly bright individual posted this question on OneHallyu:

Block b ? what’s up with them?

screen-shot-2017-02-13-at-1-57-33-pm

The person goes on, but needless to say they do not like Block B, and their theory regarding the group’s current success is–of course–sajaegi.

My point is not: Look at this idiot! Instead, I want to note that 1. it has been almost six years since Block B’s debut, and 2. the person is completely correct in saying that debut didn’t do very well.

So–let’s take this question seriously: What is up with Block B? What did Block B do in those six years between their not-particularly-successful debut and songs like “Toy” or “Yesterday“?

They persisted.

Now, persistence isn’t just a fun political meme these days or even just an admirable personal quality. Persistence is something that is completely necessary if you wish to pursue a career in the arts.

Persistence is very much needed on a personal level, because there are a lot of people who think they want to work in the arts, but many fewer people who want to cope with the realities of it. (Such as the need to, you know, actually generate some form of artistic content. You would not believe what a stumbling block that is for certain artistes. I mean, they’ve got the clothes, they’ve got the hair, they’ve got the attitude, they’ve even got the drugs–you expect more?)

So in order to enter pretty much any artistic field, you have to endure what is essentially a hazing process designed to weed out the posers. Once you’re in–well, even very well-established creative artists will see crazy and unpredictable responses to their work. That’s why Park Kyung was so philosophical about the sales of “When I’m With You”–I’m sure he’s seen these kinds of sales swings before (anyone with any professional experience has). So, instead of curling up into a little ball under his bed, he put out another song, and lo and behold, “Yesterday” was a big hit!

Even if your very next release isn’t some big hit, you can still make a decent living in most areas of the arts if you are persistent. The Dok2 approach of creating oodles of songs works in many fields–even if no one work has monster sales, you can basically make it up on volume (and recycling is a low-cost way to help generate that volume).

So persistence is really helpful! Or at least it is if–and this is a big if–the industry will let you be persistent.

How could an industry player prevent you from being persistent? That’s easy–through a contract!

What makes a contract a total piece of shit? Well, I would say a lousy revenue split doesn’t help, but I think the more important terms are:

  • The contract is a long-term contract
  • The artist has no power over new releases
  • The contract is strictly exclusive, so that the artist cannot do any other work outside of the contract

How bad can these terms be? VERY, VERY BAD. There have been publishing contracts that contain so-called non-compete clauses that make it a breach of contract for the writer to ever write anything in a genre similar to the (most typically just one) book written for that particular publisher.

Ever.

(You see why people go indie!)

A bad release is a setback. A bad contract can be a career killer. (And you can not only fuck over yourself for your entire lifetime, but you can fuck over your heirs financially as well. Like, literally generations of your family will be wondering how you could be so dumb as to sign that thing!)

The thing to remember is that any largish publisher/label/studio/whatever has a bunch of talent waiting in the wings. Their method of being persistent is to keep releasing different things from different artists to see what takes off. They don’t want to waste time and money doing release after release from someone who’s not currently a hit-maker, so they’re going to focus on whoever in their stable is the most profitable.

That approach doesn’t necessarily benefit a given artist in the stable. In fact, it usually means that the career of the individual artist is quite fragile: One failure, and you vanish from the public eye for the duration of your contract.

It’s not like artists can’t possibly be persistent in that situation, of course. In K-Pop, where shit contracts are the norm, people jump ship when their contracts (finally) expire, or they sue to get out of their contracts, or they convince another label to buy their original contract out. But obviously that’s not the easiest thing to do, and it requires even more (you guessed it) persistence.