- How the Kpop Industry Changed Over the Years
- A New Business Model for Kpop Entertainment Companies
- How Much Money do Kpop Idols Make? – Look at their Contracts
- So How much money do Kpop idols make compared to the labels?
- Why do Kpop Groups have so many members?
- Why do Kpop Entertainment Companies Take Most of the Profits?
- Breakdown of where the money goes from a Kpop Album
- How much money do Kpop Idols Make? Is it fair?
- Why Kpop Artists Should Start their Own Labels
The Kpop industry is a massive $5 Billion dollar industry. However, where does all that money go? How much money do Kpop Idols make from their music? How much goes to the K-pop Entertainment companies and how much goes to each member? Many decide to audition for Kpop Entertainment companies in hopes of signing a contract. Most think they will instantly become rich and famous when in reality a vast majority of Kpop artists get trapped into an unfavorable record deal. This article will do a deep dive into the sometimes shady world of the Kpop industry to see why some of your favorite Kpop artists are not making the money they deserve. In addition, we will see how money actually flows throughout a typical Kpop label. So how much money do Kpop Idols make? You might be surprised.
How the Kpop Industry Changed Over the Years
Kpop started back in the early 1990s and the industry has changed a lot over the last 30 years. Before K-pop could only be found on Korean social media channels like Cyworld or Korean TV channels. Now K-pop is on every social media platform and seems to be breaking some kind of record every month. Moreover many Kpop artists these days invite their fans into their daily lives via reality shows, live streams, and social media platforms like YouTube and TikTok. In addition, K-pop groups are sticking together for a lot longer than before. The average run for a typical K-pop group is 8 years. Before many K-pop groups only lasted a few years which meant their window to make real money was very limited.
If you go on the internet these days you will hear hundreds of former Kpop artists complaining about their past record deals. As the Kpop industry continues to explode, you will start to see more and more Kpop artists wanting out of their deals. The question of how much money do Kpop Idols make is a difficult question to answer because Kpop Entertainment companies have a history of keeping that information private.
Change in the industry
The music industry globally changed massively in the early 2000s. Napster and other peer-to-peer sharing platforms online allowed users from all around the world to basically get music for free. Fewer and fewer fans were buying albums. Kpop fans were getting their music from platforms like YouTube, iTunes, Spotify, and so on. This also applied to Kpop entertainment companies. The “Big 3” (YG, JYP, and SM) were able to make a vast majority of their money through album sales. However, due to online music, music labels all around the world needed to think of new ways to make money. They needed a new business model.
A New Business Model for Kpop Entertainment Companies
The business model shifted over the years from making money off album sales to touring, personal signing events, and merchandising. The good news for Kpop entertainment companies was that the sales of Kpop albums were still profitable. Because Kpop entertainment companies started to focus the albums more as merchandise. A typical album has artistic design covers, a photocard, and exclusive pictures. No Kpop fan actually listens to the CD since most don’t have a device to play it in. In some cases, fans don’t even open the albums and just keep them as collector’s items.
Many Kpop fans feel they are supporting their Kpop Group but many don’t realize that almost all the money goes into the pockets of the Kpop entertainment companies. Kpop Entertainment companies have fan events where Kpop fans submit a receipt of their album purchase. More receipts mean a greater chance to get selected to meet your favorite Kpop star. This is a great source of revenue for them because they know Kpop fans will continue to buy these albums because buying them gives them a chance to meet their idol. Other music labels from around the world can’t do this, it only works in the Kpop Industry because of their massively loyal fanbase.
How Much Money do Kpop Idols Make? – Look at their Contracts
Kpop artists are first signed on as “trainees”. Online these are typically called “Slave Contracts.” The Korean government has stepped in to stop this kind of practice. A Slave Contract means that the Kpop label will pay for all expenses of the artists from housing, training fees, food, and other expenses. This adds up and the average expenses for a typical Kpop trainee are around $50,000 a year.
Now if you think about this, as far as training fees, housing, and whatever else a Kpop Entertainment has control over, they can pretty much charge whatever they want. If they want to charge $1,000 a month or more for shared housing, then it gets added to the bill. Dance training is $100 an hour? Sure! Add it to the bill. In fact, most Kpop trainees don’t actually know how much their yearly bill is due to a lack of transparency from the Kpop entertainment companies. This was one of the major issues related to some TVXQ members whose contract was estimated to be 10+ years! Also, there was very little transparency in how much they owned.
Years of Training adds up
Training can last up to two years. Then they will put you into a group where you will train together for additional years. Then there is the actual making of the album. During this stage, there are ALOT more expenses that will go on the bill. It is possible the bill could be up to $1 million just to take Kpop Group from trainees to a debut album. Remember, every Kpop label is different and every contract is different so take this as a general rule. However, the vast majority of Kpop entertainment companies expect artists to recoup the expense they have incurred. This is the money the Kpop record label invested into the Kpop artist. However, it is not actually an investment but more of a loan. This is money that has to be paid back at some point.
Kpop Tours and Merchandise Sales
Once their album debuts, the Kpop stars will go on tours. These tours generate money through tickets but the main goal is to sell merchandise. This is why you will see so many signing events. The Kpop entertainment companies want Kpop fans to buy the merchandise so they can get it signed by their favorite Kpop star. Also, Kpop concerts incorporate Kpop lightsticks into their songs. Therefore if you don’t have one you will not be able to join in. It is actually brilliant! No fan wants to not participate in the concert right? So the real question is, what is the overall split of the revenue between the Kpop Entertainment companies and the Kpop artist? Remember, Kpop artists at this point are in huge debt to their labels. They need to start making money as fast as possible to pay off their bill.
So How much money do Kpop idols make compared to the labels?
The split between a record label and a Kop group can be….wait for it….90/10!
Yes, that is right some Kpop Entertainment companies take 90% off the top and the Kpop artist gets 10%. But wait…no Kpop Entertainment company these days promotes ONE Kpop Star…they promote Kpop Groups! A typical Kpop Group is 6 members…so they will split 10% amongst themselves. So let’s say an event brings in $1 million. The Kpop entertainment company will take $900,000 and the group will take $100,000. That leaves around $16,000 per member. Not bad right? But remember they need to use some or in some cases all of that money to pay off their bills and taxes.
This is an example of a Kpop group with only 6 members…what about NCT which has 23 members!! It is a well-known fact in the Kpop industry that Kpop artists end up making ZERO money off their first album. Some don’t start turning a profit (bill fully paid off) until their 3rd album! Now there are rumors that the “Big 3” do not make their artists pay off their trainee debt but nothing official can be found online. I am sure the ones that end up making it big like BTS and BLACKPINK can negotiate their contracts so that they don’t have to pay back their expenses because they are generating so much revenue now. However, a vast majority of K-groups don’t end up finding great success.
Why do Kpop Groups have so many members?
Kpop Groups are getting bigger and bigger every year. In the early days of Kpop, there were groups like 2NE1, Big Bang, TVXQ, etc that only had 4-6 members. Super Junior and Girl’s Generation were some of the first large groups to debut. Both had massive success and the Kpop industry never looked back. It also works out better for them because they are able to control the group better. Let me explain. The bigger the group the less likely one member will gain too much power. The last thing a label wants is for the member to become bigger than the group itself.
In addition, if one member leaves the group it will not have a huge impact on the group as a whole. In the eyes of a Kpop Entertainment company, each member should have equal influence. If they start to see one member getting most of the attention, it will be in the company’s best interest to push the other members via marketing and promotion methods.
Each member usually has their own style which gives more choices for Kpop fans who might have different tastes. Therefore in a large Kpop group, the question of how much money do Kpop Idols is hard to answer because it must be split among the group members.
Why do Kpop Entertainment Companies Take Most of the Profits?
To be fair they do invest a lot of time and money in a Kpop artist. In addition, there are also fees for promoters, tour managers, and any other people they will have on staff. Have you noticed how awesome those Kpop music videos are? There are costs for outfits, stylists, makeup artists, etc. One single Kpop music video is super expensive to produce with an average price tag of $200,000. As far as merchandising, they are responsible for creating the products and marketing them, which is not cheap. For example, designing, marketing, producing, and distributing Lightsticks cost a lot of money. Someone has to pay for the upfront cost which is why Kpop entertainment companies get most of the profit.
A huge Kpop Social Media Marketing Budget
How much do Kpop Idols make from Social Media? Kpop Entertainment companies send millions of dollars on Kpop social media accounts. Have you noticed that your favorite Kpop star has an awesome Instagram filled with flashy cars and designer clothing/jewelry? They actually have a whole team of social media managers that help manage their accounts.
Kpop entertainment companies spend a lot of money building their Kpop star’s brand image. Once a Kpop artist becomes a star, they are encouraged by the Kpop Entertainment company to promote their music, videos, and tours on their social media channels. Almost everything they post is reviewed by the labels. The vast majority of the revenue from their social media channels goes straight to their labels.
HYBE and BTS an Exception
HYBE formerly known as Big Hit Entertainment gave BTS members shares in their stock. Each member was given 68,385 shares. Since a share of HYBE stock is worth 282,000 won ($230), each member has over $15 million in stock. This instantly makes all the members of BTS millionaires. This makes sense as BTS is largely responsible for the majority of HYBE’s earnings. It is estimated that BTS accounts for 85% of all of HYBE’s revenue for 2021.
Breakdown of where the money goes from a Kpop Album
When a Kpop Group records a song there are two different copyrights to consider. The first is the composition of the songs. Many Kpop artists don’t actually write their own songs or produce elements of the songs. There are exceptions like BTS, Big Bang, SEVENTEEN, PENTAGON, WINNER, EXID, GOT7, etc that produce some of their own music. However, in most cases, Kpop Entertainment companies use featured songwriters, ghostwriters, background vocals, and tracks composed by someone else. Everyone involved in creating the song will get royalties. This is why it is so hard to figure out how much money do Kpop idols make.
The second is what is called the masters. This is something many Kpop fans might not know. But a master refers to the final product/version of the song that is released to the public. The one that owns the masters owns the song. Kpop Entertainment labels own all the masters and they will be the ones profiting off of the Kpop Group’s music FOREVER. Therefore even if a Kpop Group or Artist writes the songs, the important question becomes who actually owns the masters. In almost all cases it is the Kpop Entertainment companies.
How much money do Kpop Idols Make? Is it fair?
Kpop Entertainment companies are taking a lot of risks when investing in a Kpop artist. Those that pass the auditions usually have a very small fanbase. For most this is their only opportunity to become a Kpop star. It is almost impossible to become a Kpop star unless you join a major Kpop entertainment company. These Kpop labels invest millions of dollars into their Kpop artists with no guarantee of success. Kpop Entertainment companies have many artists and trainees on their roster and they’re investing resources into all of them.
It is estimated that only 5% of Kpop groups reach superstardom. Kpop Groups like BTS, EXO, and BLACKPINK don’t grow on trees. It is a number’s game, the more Kpop artists these labels sign the greater the chance that at least one group will turn a huge profit. That one breakout group needs to be able to cover the cost of all the money the label invested in the other groups.
Kpop Entertainment Companies = VC Fund
Therefore think of Kpop Entertainment companies as a kind of VC fund that invests hundreds of thousands of dollars into startups hoping that one will become a unicorn.
An argument from Kpop Entertainment Companies could be that it is just the price artists need to pay to become a Kpop Idol. The Kpop industry is in the business of not only creating great music but also a business of making money. This is why they want to control their artists as much as possible. This is why there are so many stories online about corruption and conspiracies in the Kpop Industry. The real money is made by those running the Kpop labels and owning the music. This is why so many artists around the world stress the importance of owning your own songs (masters).
Why Kpop Artists Should Start their Own Labels
There have been many Kpop Stars who have gone on to start their own labels. Jay Park, Hyorin, Rain, and Tablo, are just a few who have gone on to create successful record labels. They are paving the way for other artists to start their own labels to have more control over their music. In this modern digital age, starting a record label is easier than ever before.
Once you nail down your genre, company name, and most of all focus on your branding. Branding is crucial for any business, especially in the music industry. Your branding will be featured on all your social media accounts like Instagram, Facebook, and Twitter. Remember to also target music platforms like Soundcloud and Spotify.
Make sure you post at least once a day and use relevant hashtags to generate more traffic to your accounts. In addition, make sure you have a really stylish website that showcases your brand image. Then find a digital distributor to deliver your music to all the major online stores and stream sites.
Independent Label = Startup
Think of starting your own label as starting your own startup company. You should have an initial budget to set it up but you can also rely on getting investment. This will be critical for building the right team consisting of a music producer, digital marketer, PR partner, accountant, lawyer, and music video director. Make sure the people you work with fit the core values of your label. Then you will finally be able to create your own music as well as sign up-and-coming artists in Korea.
More independent labels mean more opportunities for young and energetic artists in Korea. It is very important that these independent labels succeed because this will allow other Kpop stars to create their own labels. This is how Kpop artists can start to earn more money. More competition and opportunities lead to more options and in the end, more profit for all.