When prospective U.S. partners ask music mogul Jin-Young Park where he's from, he has a conversation-stopping answer: "I'm from the future."
It's a deft riposte that opens up space for Park, who discovered and managed Asian pop phenomenon Rain for many years, to spool out a string of facts that make record execs weak in the knees. "In meetings with music labels here, they talk to me about releasing albums," says Park. "They can't accept that there's no such thing anymore. Where I come from, CDs are nothing--they're just souvenirs. I tell them, 'Wake up!'"
In South Korea, where Park is building a new kind of music-business model, 80 percent of households have a broadband connection; downloads via both PCs and cell phones make up an overwhelming share of the nation's music market. Download revenue there has soared 422 percent since 2000, to $366 million, while CD sales have declined 83 percent over the same period to just $70 million in 2007. And because almost all digital music is purchased on a song-by-song basis, to the general South Korean consumer, albums have become an irrelevant--even alien--concept.
Ironically, South Korea is in many ways like America--America 40 years ago when rock was big and labels were booming. Back then, like South Korea now, the U.S. music industry was heavily focused on live performance, the release of hit singles, and the active cultivation of loyal fan bases through direct promotional activity. It's the artist as brand: In Korea, consumers don't buy music; they buy a product relationship that reaches across every media platform and entertainment genre.
Take Park's most recent phenomenon, the Wonder Girls--a quintet of winsome teens whose addictively breathy vocals and synchronized dance steps have taken Asia by storm (their song "Tell Me" was one of the bestselling singles in Asia last year, and the band has generated about $5 million so far for Park's company, J.Y.P. Entertainment, with only half of that coming from music sales). Fans of the group can buy tickets for their live concerts at $110 a pop; purchase a growing array of their merchandise (the names and faces of top K-pop stars adorn everything from $5 phone cards to $500 cell phones and music players); download ringtones featuring their songs ($2); and even make bids on a charity auction for a dinner date with the girls on the popular social-networking site CyWorld (five fans paid between $3,800 and $6,000 for the privilege last year). And if all that's not enough, fans can always tune in to the Wonder Girls' reality TV series, now in its third season as one of MTV Korea's top-rated programs.
It's a strategy that U.S. artists and record companies are increasingly trying to follow as revenues from music sales continue to decline. Madonna's mammoth deal last year with LiveNation, for example, encompasses not just music sales but also concerts, merchandising, DVDs, TV and film projects, and sponsorship agreements.
But while in the U.S. this arrangement was seen as revolutionary, in Korea, it's par for the course. Park's company has built itself into one of Korea's most powerful and consistently profitable music companies by developing a killer portfolio of brands like the Wonder Girls, leveraging the popularity of its girl groups, boy bands, and pop idols across dozens of revenue streams. By far, the most successful of these has been Rain, whom Park plucked from obscurity back in 2000, trained for four years, and watched blossom into Asia's biggest pop idol, topping charts in South Korea, Japan, China, Taiwan, Thailand, and Indonesia, and selling out 30,000-seat arenas from Taipei to Bangkok. For five years, the company's revenue related to Rain averaged about $10 million a year, and while Rain left J.Y.P.E. last year with Park's blessing (he says) to start his own management company, other stars like the Wonder Girls and a new, 12-member boy-band, code-named Hot Blooded Youth, may be well on their way to replacing him.
For J.Y.P., music sales are nearly a rounding error. It's everything else that creates the success. According to a report from the Korea Times and business portal Chaebul.com, J.Y.P.E. generated $16.3 million in revenue in 2006 and $10 million in the first six months of 2007, of which music sales were the smallest part. The report estimated the company to be worth in excess of $100 million, making it the most valuable independent entertainment company in Korea.
"That's because we don't make music," says Park. "We make stars."
It all begins with the J.Y.P. Academy, an institution in Seoul founded by Park to shape raw talent into all-around entertainers. The academy isn't just an instructional program--it's a way of life, with students receiving daily instruction in everything from singing, dancing, and acting to media interaction and languages.
The hundred or so students, most of whom are admitted before the age of 15 and train for a minimum of four to seven years, live together in dormitories, with all expenses--clothing, travel, personal allowances, and so on--covered by the academy. (Park estimates that he spends up to a half million dollars on an act before it's launched.)
Park is now actively trying to break into additional markets with the help of Korean wireless giant, S.K. Telecom, which bought a 50 percent stake in his company in 2001. The two initially hooked up when Park led an extremely successful drive for S.K.T. to sign up its first 3G subscribers back in 1997 (the program's target was to sign up 1 million subscribers in the first year; Park delivered 1.8 million). S.K.T. subsequently invested in J.Y.P.E., with the deal giving Park's artists unparalleled access to a large swath of South Korea's digital consumers via S.K.T.'s cellular and music-download services, as well as through its social-networking site CyWorld, which is used by 90 percent of the 20-to-29-year-old population in Korea.
Park is also able to follow S.K.T. into new territories. "They move into a market as a platform, we move in as the content," says Park. For example, S.K.T. exercised an option last year to take a 6.6 percent stake in China Unicom, whose 150 million users make it the second-largest mobile operator in K-pop-loving China. In April, Park will open J.Y.P.'s newest subsidiary, based in Beijing.
Here in the U.S., Park recently launched a national concert and live audition series sponsored by S.K.T.-owned mobile operator Helio. The tour is designed to find and develop new Asian American talent, as well as to showcase several of Park's new acts, including 15-year-old dance diva Min, bluesy crooner J.Lim, and R&B belter G-Soul, who for the past year have been working with top American names in hip-hop and R&B like R. Kelly and Outkast's Big Boi in anticipation of their Stateside debuts.
"J-Y doesn't do anything half-assed," says rapper/producer Lil' Jon, who is helping develop Min's first album. "And he's got fresh ideas on the business side, about relying on revenues other than just CD sales and targeting global markets, that people are just going to have to take seriously."
|Population||303 million||53 million|
|Standard price of a song download||$0.99||$0.50|
|Percent of price that goes to record companies||65%||25% to 40%|
|Size of music market in 2000||$14 billion||$494 million|
|Size of music market in 2007||$11.5 billion||$440 million|
|Downloads as percent of music sales in 2000||<1%||14%|
|Downloads as percent of music sales in 2007||10%||84%|
Sources: CIA World Factbook, International Federation of the Phonographic Industry, DPA Intl. News Service, Pew Internet and American Life Project, UN.org.
All Park has to do is point to the Wonder Girls, a group he created from scratch and developed and promoted into a regional phenomenon.
Flown in for a brief spotlight appearance on the J.Y.P. U.S. Tour, the Girls have already captivated the attention of American music labels and TV producers eager to launch them into the burgeoning tween market, despite the girls' limited English.
"Language doesn't matter," says Park, pointing out that song and dance--especially dance--transcend language. "'Tell Me' was number one in Thailand--does anyone understands Korean there? If the performers are charismatic and the music is written for global tastes, it'll cross over. A star is a star in any language."
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