K-pop wealth gap widens: Big agencies boom, small ones struggle

Music video for girl group (G)I-DLE's 'Super Lady' / Courtesy of Cube Entertainment

In the rapidly evolving K-pop industry, the financial disparity between large and small agencies is becoming increasingly pronounced.

A few years ago, a decent music video could be produced for around 150-200 million won ($112,000-150,000), but, today, those costs have soared to 400-500 million won, with some projects even reaching 800 million to 1 billion won, according to entertainment company officials.

Min Hee-jin, CEO of Ador, emphasized the struggle of smaller companies, once telling reporters, "Don't just cover press releases from big companies like HYBE, but also write about smaller, struggling companies like Ador. Truly poor companies can't afford to produce three music videos for a rookie group like NewJeans."

An agency official, identified only by the surname Lee and involved in K-pop group production for nearly a decade, expressed concern about the increasing costs of producing K-pop groups.

"These days, you have to consider the overseas market from the debut, so producing high-quality music videos has become essential," Lee said. "Producing just one music video per album can't compete with groups that produce several, accelerating the 'rich get richer, poor get poorer' phenomenon."

Girl group NewJeans who debuted in 2022 with the unprecedented release of three music videos for a rookie group / Courtesy of Adore

Kim, another member of the production department at a major K-pop agency, said, "Compared to just before the COVID-19 pandemic, music video production costs seem to have risen by over 30 percent."

The steep rise in music video production costs is due to increased material and labor expenses, along with a greater reliance on elaborate sets, computer graphics, and other extra costs.

"Before the pandemic, each set cost around 30 million won. Now, a similar set costs about 50 million won. Using five or six sets for diverse scenes will cost at least 500 million won," said Lee.

In reality, the leader of girl group (G)I-DLE, Jeon So-yeon, revealed that the production of the "Super Lady" music video cost 1.1 billion won.

Promotional expenditures surge

As the K-pop market expands, album production costs have increased sharply. While the expenses for music production, CD manufacturing, and distribution have increased, promotional costs have surged even more.

In addition to music videos, there has been a significant increase in the number of promotional videos, including variety shows featuring members and TikTok content, which have become essential tools for promotion.

Training, management fees, labor costs, and rent for practice rooms and dormitories have also increased by 30-50 percent compared to pre-pandemic levels.

With such rising costs, it has become increasingly difficult for rookie groups to succeed without the backing of a major agency or the promotional boost from TV audition programs.

Industry insiders note that a decade ago, debuting a rookie group cost about 3 billion won, but now it takes at least 10 billion won to even attempt it.

An official at a mid-sized K-pop agency said, "For little-known rookie groups, producing up to four singles or mini-albums often means incurring losses. Even starting with a capital of 10 billion won, it's challenging to sustain that until the fourth album."

The girl group mimiirose, produced by singer and actor Lim Chang-jung, parted ways with their agency just over a year after their debut at the end of last year. Courtesy of Yes IM Entertainment

Success elusive despite huge investments

It's becoming increasingly difficult for new groups to attract attention unless they are backed by a major agency or featured on TV audition programs.

However, even investing over 10 billion won in production or appearing on an audition show doesn't guarantee success.

F&F Entertainment, a subsidiary of the mid-sized fashion company, F&F, invested around 10 billion won to debut the girl group UN1VERSE through the SBS co-produced audition program, "Universe Ticket." Despite this significant investment, the group has yet to achieve notable success.

Similarly, the girl group mimiirose, reportedly produced with an investment of approximately 20 billion won by singer Lim Chang-jung, ended their contract with their agency at the end of last year, just over a year after their debut, due to disappointing performance or results.

"As production costs rise and the K-pop market becomes dominated by large agencies, it is getting more difficult for new or smaller production companies to achieve success," said culture critic Kang Tae-gyu.

The gap is deepening even among mid-to-large-sized agencies.

The revenue of top-tier companies such as HYBE, SM, JYP, and YG Entertainment has surged from the 100 billion to 600 billion won range in 2019 to between 500 billion and 2 trillion won in just four years.

In contrast, second-tier agencies, despite some achieving three- to four-fold growth, have struggled to keep up. Except for Starship Entertainment, which has reached 200 billion won in revenues, the others remain below 100 billion won.

This article from the Hankook Ilbo, a sister publication of The Korea Times, was translated by a generative AI and edited by The Korea Times.