K-Pop’s Dominance in Merch Sales
For anyone involved in the music business industry, it is impossible not to have noticed the massive impact K-pop has made on the global entertainment scene in such a relatively short period of time. As a result, the last decade has seen an unprecedented boom in the popularity of K-pop and all things Korean, contributing to an astounding rise in South Korea’s national GDP. The undeniable proof can be seen in the success of BTS, a single K-pop group currently responsible for around half a percent of the country’s entire economy, bringing in an estimated $5 billion a year.[i] Even more fascinating is that K-pop garners the bulk of all its revenue through the sales of physical albums and other related merchandise, a facet of the South Korean music craze that seems entirely at odds with what is typical of pop artist revenue streams in the West.
A Comparison of Two Major Record Labels
When conversing about the effects of K-pop, the first entity that comes to mind is the international phenomenon known as BTS and the giant corporation behind them: HYBE Labels. As it is one of the most prominent K-pop labels in the World, HYBE will be used as a point of reference for comparing sales and revenues to another equally renowned music corporation: Universal Music Group.
Boasting one of the most impressive statistics in the industry, HYBE has experienced a significant increase in physical sales since the pandemic hit.[ii] Their total annual revenue in 2020 came out to $673.24 million, of which $276.06 million came from albums alone (which accounts for 41% of gross revenue), $219.03 million from merchandise, and $27.86 million from fan-club and other platform-specific products. This brings HYBE to a total of $522.95 million in revenue from overall physical albums and merchandise.[iii]
In direct comparison, Universal Music Group’s total annual revenue for 2020 was $8.9 billion.[iv] Only $217 million was from merchandise (2% of gross revenue), a direct hit to their merchandise sales when pulled up alongside UMG’s previous 2019 earnings of $381 million.[v] This was expected, as the majority of UMG’s physical merch sales rely on their live music events, which have become an impossibility since the advent of the pandemic. Unfortunately, this complication has become the norm since most music labels have been rendered incapable of hosting live events considering pandemic precautions, thus leading to a drop in physical album and merchandise sales.
So why has this not proved to be an issue for K-pop? What drives K-pop fans to flock after every new album release and purchase new merch? Some might say it’s simply infatuation, but a large part of the secret lies with savvy company marketing and brand packaging.[vi] Let’s take a closer look at what makes K-pop merch so irresistible and, in the same vein, such a lucrative source of revenue.
Global Group or Not, K-pop Albums Sell Well
Unsurprisingly, BTS has been leading the charge in physical sales. Their last album, Map of the Soul: 7, sold over 4.6 million copies—to say nothing of their previous four albums, all of which have achieved over 3 million copies sold.[vii]
Even newer groups like YG Entertainment’s TREASURE—a boy group that debuted in August of 2020— sold over a million albums in under five months. Not to be outdone, HYBE’s latest monster project of a rookie group ENHYPEN—which has only been active for fifteen months—sold half a million copies of their newest full-length album, Dimension: Dilemma, on the very first day of its release and are coming in at around 2.9 million total albums sold in under a year.[viii]
What is driving the massive consumption of K-pop’s merchandise and physical album sales?
Physical Album Content
Western albums come in the usual CD cases or vinyl sleeves — often included are booklets with liner notes and artwork folded neatly behind discs — but that’s about all most customers will get. Of course, there are exceptions to the rule, like Taylor Swift’s studio album Lover, which highlighted the inclusion of four different booklets containing actual diary entries, snippets of her psyche plucked from her teenage-to-adult years.
But K-pop makes it a mission to create an entire ‘album experience’ for the fans. So more often than not, albums feature innovative graphic and packaging designs, usually in-line with the group’s established concept (see WayV’s Awaken the World – Volume 1 album design).[ix] But what sets K-pop apart is the sheer amount of physical content-packed away inside each product.
- CDs – Besides coming with excellent graphic designs and the occasional holographic print, the CDs themselves are perhaps the least exciting aspect of K-pop albums.
- Photobooks – These make up the bulk of K-pop albums in weight. As the name suggests, they contain printed photos of the group(s) from their concept-specific photoshoots. These can range anywhere from 10 to 50 pages depending on how large the group is.
- Posters – The standard is one poster per album. They come in a variety of sizes but usually run large.
- Photocards – Every album will include a small selection of palm-sized, laminated photo cards starring selfies of individual group members. The photos themselves have different versions, and each member provides a handful of selfies per album, themes ranging anywhere from casual to fully costumed. Because of the entirely randomized nature of photocard distribution, fans will open albums with bated breath in hopes of getting a photo card of their favorite member: the K-pop equivalent of playing the lottery. Over the years, fans have created one of the most zealous collecting subcultures around these limited-edition cards. Some have even gone as far as to liken this phenomenon to Pokémon or Yu-Gi-Oh! trading cards, both having become undeniable monoliths in the collector-sphere. The rise in the value of older or rarer cards, especially limited-edition versions, is similar to brand-name items.
- Stickers – Exactly what you would expect: stylized stickers depicting group members and customized graphic designs for fans to slap onto their phones, textbooks, or other personal effects that may come to mind.
- Lyric Books – While this may seem unnecessary to people accustomed to western artists, lyric books are a common component of K-pop albums for one apparent reason: they contain both the Korean and officially translated English lyrics for all tracks. The attractive presentation and insightful song descriptions are bonuses.
Naturally, there is some variation in content for every group. For example, some albums offer simple tracklists instead of full lyric books. Others feature subunit photobooks to accommodate larger groups, namely Pledis’ Seventeen and SM’s NCT, consisting of 13 and 23 members. Supplementary miscellaneous items may include miniature stand-up figures, postcards, special edition holographic cards, special ‘thanks’ notes from individual members, and lore-driven content such as the conceptual “slave contract” from VIXX’s album Chained Up or the “golden ticket” from Gugudan’s album Chococo.
K-pop companies take full advantage of the fact that fans have made a habit of collecting merchandise — as illustrated by the aforementioned fan culture surrounding photocards, a simulation of the very same practice but on a smaller scale. [x]
Many groups offer multiple versions of each album as well. One prime example is the initial release of BTS’s “Love Yourself: Her” album. It was offered in four different versions, with four different photoshoot concepts for the photobooks and posters. The catch? Fans would have no idea which one they were getting from the album cover alone, inciting gambling mania.
Of course, after the pre-orders and first-week sales, fans usually figure out which album gives them what, but this strategy remains one of K-pop’s most glorious new-release marketing tactics—and the fans themselves seem to adore the thrill of it.
Girl’s Generation’s (also known as SNSD) album “I Got a Boy” boasted ten different versions, one for each of the nine members and the tenth for the group. Their label, SM Entertainment, was transparent about which album would feature which member. However, this separation of members still encouraged many fans to buy more than one version, if only to possess the merch of their second and third favorite girls, or “biases.”
Frequent Comebacks and Rebranding
K-pop takes its album releases and comebacks very seriously. While the release rate of western artists varies widely, ranging from a new song every few months to a single full album over several years, K-pop pumps out music like time is running out.
Most K-pop groups average out at around two to three comebacks a year. Rotating through different aesthetic concepts, musical genres, and promotional tactics is one of the most tried-and-tested methods for groups to gain traction and attract new fans. Older and more successful groups eventually slow down once they’ve accumulated a fanbase loyal enough to wait for yearly releases. Other groups never slow down at all. [xi]
Dubbed Korea’s national sweethearts, TWICE of JYP Entertainment are a well-established girl group and widely recognized as one of the hardest working K-pop groups in the industry. They continue to be one of the highest-grossing, most popular K-pop groups in South Korea. In 2018 alone, they topped Korean charts with seven comebacks and a belt full of Japanese singles.
K-Pop Specific Media Platforms and Games
Social media platforms made explicitly to facilitate increased K-pop artist and fan interactions are also substantial sources of income. They encourage fans to develop stronger emotional bonds with their idols and include the constant peripheral presence of K-pop merchandise and digital products.
Naver’s V-live, a live video-streaming service not unlike Twitch, essentially hosts all K-pop artists on its platform. While there are thousands of hours of free content available in K-pop celebrities broadcasting their travels, dance practices, and daily life, V-live also offers subscription services for company-endorsed events and professionally-produced game shows that allow many groups to participate.
Weverse, one of the newer apps introduced by HYBE, places a greater focus on artist-to-fan interaction by delivering a closed space for artists and fans to chat with each other. Usually, this also requires a set membership fee. Outside of chat rooms, Weverse also features a posting function similar to Facebook’s, official announcements provided by HYBE, and, most relevant, constant references to the accompanying app: Weverse Shop, which is HYBE’s central hub for purchasing artist-related products and merchandise.
Similar platforms offered by other K-pop labels, like JYP Entertainment’s Bubble and SM Entertainment’s Lysn, operate along the same lines. For a monthly subscription fee, fans can send direct messages to their favorite K-pop artists and receive videos or messages in return. Some groups even sell separate subscription fees by member, offering package deals should fans want access to the social circle of more than one member from the same group.
K-pop games have also become a wildly successful business venture. With an emphasis on rhythm games featuring label-specific artists and music, apps like SuperStar SMTown, SuperStar JYPNation, Rhythm Hive, and BTS World have garnered substantial international attention. In addition, drawing fans into the habit of spending their free time playing K-pop games creates an environment for seamless product placement.
Implementing these Strategies in the States
K-pop’s fandom culture, which is centered around buying overwhelming amounts of merchandise to bolster their favorite artists’ popularity rankings, has long been something other music labels have attempted to emulate and foster in their target demographics. These attempts have been met with varying levels of success. However, none have come close to the fanaticism and single-minded devotion characteristic of K-pop consumers regarding purchasing power.
However, this may soon change as Universal Music Group is bringing the source of it all straight to its home base. Last year, HYBE and UMG—arguably two of the most prominent powerhouses in the global music industry as of 2022—announced their intentions to collaborate in a joint venture to form a diverse new girl group.[xii] Combining the resources and techniques from two completely different, hyper-successful business models. The upcoming HYBE X Geffen Girl Group will make for an unprecedented experimental pop group backed by these two industry powerhouses’ capital, expertise, and resources. We can only wait to see how this historic new act will perform in the revenue and profit aspect.
[i] Smith, Stacey Vanek. “How BTS is Adding an Estimated $5 Billion to the South Korean Economy A Year.” NPR Economy and Music. August 6, 2021. https://www.npr.org/2021/08/06/1025551697/how-bts-is-adding-an-estimated-5-billion-to-the-south-korean-economy-a-year.
[ii] Ingham, Tim. “BTS Helped Bighit’s Annual Revenues Jump 36% to $676M in 2020… Despite the Pandemic.” Music Business Worldwide. February 23, 2021. https://www.musicbusinessworldwide.com/bts-helped-big-hits-annual-revenues-jump-36-to-676m-in-2020-despite-the-pandemic/
[iii] Big Hit Entertainment 4Q FY 2020 Business Results. Digital Music News. Seoul, Korea. February 23, 2021. https://www.digitalmusicnews.com/wp-content/uploads/2021/02/Big-Hit-Financial-Q4-2020.pdf
[iv] Universal Q3 and 9M 2020 Revenues Prepared Under IFRS. Vivendi. October 20, 2020. https://www.vivendi.com/wp-content/uploads/2020/10/2020-10-20_VIV_Pres_Q3-2020_ENG_version_finale.pdf
[v] Ingham, Tim. “In Tough Year for Merch Sales, Bravado CEO Exits Universal Music Group.” Music Business Worldwide. October 23, 2020. https://www.musicbusinessworldwide.com/in-torrid-year-for-merch-sales-bravado-ceo-exits-universal-music-group/
[vi] Hye-min. “A Study on the Capitalization of Fandom Through The Commercialization of Idol Fan Products.” Master’s Thesis, Seoul: Korea University Graduate School. Korea University Library. 2016. http://www.riss.kr/search/detail/DetailView.do?p_mat_type=be54d9b8bc7cdb09&control_no=ffab3a3550084470ffe0bdc3ef48d419
[vii] Casco, Angela. “Million Sellers: 5 K-pop Groups Who Sold Physical Albums in Record-breaking Numbers.” Lifestyle Asia. July 29, 2021. https://lifestyleasia.onemega.com/million-sellers-5-k-pop-groups-who-sold-physical-albums-in-record-breaking-numbers/
[viii] Herman, Tamar. “Millions and Millions: Physical K-pop Album Sales Stay Strong in 2020.” Forbes: Hollywood and Entertainment. October 12, 2020. https://www.forbes.com/sites/tamarherman/2020/10/12/millions–millions-physical-k-pop-album-sales-stay-strong-in-2020/?sh=7798d7f7baaa
[ix]Assis, Tassia. “CD Sales are Booming in the K-pop World Where Album Design Takes Center Stage.” Eye on Design. Design + Music. October 20, 2020. https://eyeondesign.aiga.org/cd-sales-are-booming-in-the-k-pop-industry-where-packaging-design-takes-center-stage/
[x] Hye-min. “A Study on the Capitalization of Fandom Through The Commercialization of Idol Fan Products.” Master’s Thesis, Seoul: Korea University Graduate School. Korea University Library. 2016. http://www.riss.kr/search/detail/DetailView.do?p_mat_type=be54d9b8bc7cdb09&control_no=ffab3a3550084470ffe0bdc3ef48d419
[xi] Lee, Hyo-Jung and Oh, Ingyu. “K-pop in Korea: How the Pop Music Industry is Changing a Post-developmental Society.” Cross-currents: East Asian History and Culture Review Volume 3, Number 1. University of Hawai’i Press. Project Muse. May 2014. https://muse.jhu.edu/article/548545
[xii] Universal Music Group. “HYBE and Universal Music Group Announce First-Ever HYBE X Geffen Global Girl Group Audition.” Universal News. November 2021. https://www.universalmusic.com/hybe-and-universal-music-group-announce-first-ever-hybe-x-geffen-global-girl-group-audition/