As of 2022, South Korea ranks seventh globally in recorded music revenue.[1] This success is almost entirely due to the expansive reach of K-Pop. While the rigorous training and selection process to form K-Pop groups is becoming common knowledge, the artist management system post-discovery is equally intriguing. In the Korean agency model established by SM Entertainment in 1995, every facet of an artist’s brand is controlled in-house by one “agency.”[2] The agency will host auditions, select candidates for their training program, and sign successful trainees to manage the entirety of their career until their contract term ends.[3] Compare this to the “360 deal” used by major labels in the U.S. Once an artist is discovered—usually as a developed brand with a following and published original content—a record label signs them to a 360 deal. A 360 deal refers to the full exclusivity between an artist and the label, with the label taking a portion of revenue from touring, merchandise, publishing, etc., in addition to music sales.[4] Although the record label funds the artist through advances, they traditionally will not execute in-house booking, merchandising, publishing, and other services. Rather, the artist’s management will act as an intermediary, registering the artist one by one with every ancillary company needed to release and promote music. Think - contracts galore!
Similar to Universal, Sony, and Warner Brothers-Discovery in the U.S., Korea’s top three agencies (SM, YG, and JYP) are referred to as the “Big 3.”[5] South Korea’s “Big 3” have a proven history of artist success and management.[6] These agencies supply everything for the artist, from wardrobe to written songs, social media post schedules, and cosmetic appearance guidelines.[7] In the decentralized agency model, the artist executes a predetermined brand agenda. Conversely, the American music industry asks artists to bring more to the table. To even garner major label attention in America, an artist must be a talented songwriter with a unique style, a personal story to share with the public, and a likable persona online. Once signed to a label, the American artist is largely tasked with their own content creation and public image development.
From the legal perspective, the U.S. thrives on the fragmentation of rights in a free market, while the agency model acts as a one-stop shop. At an in-house agency, service prices are fixed, and contracts are fewer in number, amongst other conveniences of a one-stop shop, but the artist has no leverage to partner with other companies. For example, in South Korea, songwriters are paid semi-regular royalties (typically 16% of song revenue) as in-house employees as opposed to being freelance writers.[8] American songwriters might not have this steady income stream, but they can shop around as they please to different artists and genres throughout their careers.
In the agency model, artists enter the industry knowing they are merely a public persona and aren’t expected to know or negotiate the intricacies of business. For this, they relinquish some freedoms and creative control. However, in America, where artists sign life-changing agreements at a young age without business sense or access to counsel, artists often feel blindsided by the reality of their careers. Like all decentralized systems where you cut out the middleman, trust is the basis of the South Korean music business.
[1] Global Music Report 2023, IFPI, March 21, 2023, https://ifpi-website-cms.s3.eu-west-2.amazonaws.com/GMR_2023_State_of_the_Industry_ee2ea600e2.pdf. [2] The Business of K-Pop, Charlie Zheng, Feb 22, 2021, https://crzheng97.medium.com/analysis-of-kpop-agencies-9a2fd99c891a. [3] Id. [4] What is a 360 Deal?, Indie Music Academy, https://www.indiemusicacademy.com/blog/360-music-deal. [5] Supra, note 2. [6] Id. [7] The K-Pop Agency System: How Groups Are Formed and Managed, K-Pop Life, Feb 2023, https://kpoplife.com/kpop-agencies/. [8] How Korean Musicians Earn From Music Royalty, Fairlane Raymundo, May 28, 2023, https://spinditty.com/industry/How-Musicians-Earn-From-Music-Royalty.