K-Pop’s Global Success and Its Innovative Production System

Abstract

The global music market has witnessed the rapid rise of Korean pop music, K-pop, in recent years. While there has been an increased interest of scholars from various disciplines to account for the global success of K-pop, limited attention has been paid to the key players in the industry, music businesses. Based on a historical analysis of Korea’s music industry, we contend that the innovative production system of Korea’s music businesses has played a significant role in facilitating K-pop’s global success. In order to provide theoretical support to the argument, this paper critically reviews the existing literature to present debates on (i) the process of how value is created in distinctive stages in the music industry; (ii) cooperative and competitive interactions between firms within the music industry; and (iii) changes in the music industry’s competitive environment.

1. Introduction

Korea’s pop music (hereafter, K-pop) has achieved remarkable global success in recent years. The successful expansion of K-pop and its musicians into the global markets is evidenced by their impressive records in the global music charts and the prestigious international music awards they have won. A seven-member boy group, BTS, has been the most successful K-pop band in the global markets thus far. For two consecutive years in 2020 and 2021, BTS was the top selling digital music artist in the US [1]. As of 2022, the group has won a total of 12 Billboard Music Awards, which has meant that the group has won the most Billboard awards [2]. A female K-pop group, BlackPink, has also achieved noteworthy success in the global markets, as it has become the first female group to reach number one in the Billboard Artist 100 chart with its album, The Album [3]. Based on the success of K-pop and K-pop musicians, Korea has become one of the fastest growing music markets in the world, rising from the 28th largest music market in 2004 to the 6th in 2020 [4]. The export revenue of K-pop and its music videos rose fivefold between 2017 and 2021, as the total export reached KRW 230 billion in 2021 [5]. With K-pop’s global success, there has been growing recognition regarding the significant contribution of Korea’s music industry to the nation’s economy. K-pop has been described as “South Korea’s greatest export” and “the next Samsung” [6,7]. Some commentators have also put BTS in the “same league and Samsung and Hyundai”, as the group’s estimated contribution to the Korean economy in 2019 was USD 4.6 billion, or 0.3 percent to the nation’s GDP [8,9].

The startling success of K-pop has attracted increased attention of scholars in recent years. The small but growing body of research has provided scholarly explanation on the key factors that contribute to this phenomenon. A review of previous studies in cultural and media studies highlights how music, as a cultural product, is created and disseminated. Other studies have examined how the changes in the music industry’s competitive environment are driven by technological advancement. While these studies provide some insights, there are limitations in providing a diachronic and holistic explanation of how K-pop has achieved success in the global music markets. In particular, the previous studies have limitations in explaining K-pop’s global success from the industrial perspective and also the pivotal role played by music businesses.

In order to more comprehensively understand the global success of K-pop, this paper focuses on the role of firms within the music industry. Firstly, we critically review the previous studies on the music industry to present theoretical debates for clarifying the complexity of the music industry and the role played by music businesses. We use the theoretical debates to propose an analytical framework that categorises a variety of activities within the music industry into identifiable segments. By applying this framework, this paper diachronically examines the interconnectedness between the key segments and the hegemonic changes in firms within Korea’s industry. Specifically, we focus on radical structural changes to the music industry and examine their effect on the relationship and interdependence of firms and their activities in the industry.

Therefore, the primary aim of this paper is to theoretically explain and empirically explore K-pop’s global success and the contributing factors. We contend that examining the pivotal role played by Korean music businesses provides a more holistic account of K-pop’s global success. Furthermore, this paper enriches the literature on the music industry by providing an analytical framework that may be used to examine the interplay between firms operating in key segments within the music industry.

2. Theoretical Background: Global Expansion of K-Pop and the Global Music Industry

To explain the recent global success of K-pop and Korea’s other cultural products, some scholars have focused on the role of the Korean government. Since the late 1990s, the Korean government shifted its approach towards the cultural industry. It moved away from politically controlling the industry and began to actively promote its growth, demonstrating its characteristic as a developmental state [10]. The government recognised the cultural industry, including the music industry, as a vital engine for the nation’s economic development and implemented policies for the growth and global expansion of the industry [10,11]. It has been argued that extensive planning and strong support of the Korean government have been crucial in developing the global competitiveness of Korean cultural products, including K-pop [10]. Some scholars have studied the impact of Korea’s copyright regulation on the development of Korea’s music industry [12]. They argued that the condition for the prevalence of music piracy in Korea that was facilitated by the government’s implementation of the copyright regulations had a positive effect on the enhanced competitiveness of K-pop. Other scholars have focused on information communication technology (ICT) infrastructure and digital transformations in the music industry [13,14,15]. For example, Parc and Kim (2020) [15] highlighted the impact that the all-encompassing digitisation process had on the Korean music industry and how the music businesses across the industry proactively adapted to these changes. Others have argued that the use of ICT has allowed Korea’s music businesses to bypass the traditional intermediaries in the global music industry, the major music labels, and directly reach the consumers via online and mobile channels, including social media [16,17]. It represents unprecedented innovative progress in the music industry and has allowed K-pop musicians to establish a dedicated fandom worldwide [18,19,20].

Some scholars in the cultural and media studies disciplines have attributed the global success of K-pop to the creation of a transnational fandom. There are three main schools of thoughts found in this stream of research. Firstly, K-pop, which is based on the Korean cultural values, was able to penetrate other Asian markets more easily, as Korea and other Asian countries share similar cultural values [14,21,22]. Second, K-pop’s success beyond the Asian markets into the Western and the global markets may be explained in terms of cultural hybridity [21,23,24,25,26]. That is, K-pop is an outcome of mixed genres and identities of Korean and Western cultural values that have attracted the interest of consumers beyond Asia [25]. Third, scholars have examined the social participatory characteristic of K-pop fandom. Some global K-pop fans not only merely consume music but actively facilitate the expansion of their consumed products in the market, for example, by translating Korean lyrics into their own languages [27] and creating and sharing dance covers and reaction videos of K-pop music [28,29].

These theoretical debates from different disciplines are useful in exploring the dissemination and consumption of K-pop in global markets, the factors that contribute to K-pop’s enhanced global competitiveness and the distinctive characteristics of the global K-pop fandom. However, attention to Korean music firms and the industry has been significantly lacking. In the cultural industry, which is a “system of organisations that produce and distribute cultural good” [30] (p. 665), firms play an indispensable role in the facilitation of commerce, as they produce and disseminate cultural products [30,31]. However, the study of the production and dissemination process of products has largely been limited to the traditional manufacturing and service industries, and has received scant attention in the cultural industry. This warrants more attention to the study of firms and their activities in the cultural industry as the key driver of commercial development of the industry.

Albeit limited in number, there have been studies that have attempted to account for the global success of K-pop by examining Korean music businesses. These studies have focused on the strategies and responses of these firms to the structural changes in the music industry. Using the concept of intermediaries, Shin and Kim (2013) [32] explained that the global expansion of K-pop is not only driven by the growing demand for Korea’s cultural products, government support and technological development, but also by Korean music businesses. They argued that it was the strategies of Korean music businesses and competition among them that have allowed K-pop’s global expansion [32]. By drawing comparison to Korean conglomerates, Lie (2012) [26] explained the glocalisation strategies of Korean music businesses regarding the entry the global markets. Ubonrat and Shin (2007) [21] highlighted the need for Korean music businesses to find the balance between standardised and localised strategies when expanding into global markets through the formation of partnerships with foreign companies. By explaining the change in the modes of exchange in Korea’s music industry, Howard (2014) [33] explained that Korea’s music businesses have successfully created a new business model, allowing them to generate diverse revenue streams and leapfrog the major international figures in the global music industry. Oh (2013) [34] highlighted the shortcomings of cultural hybridity and “pop Asianism” [34] (p. 405) in explaining the global success of K-pop. He focused on the process of localising global musical contents by the Korean music businesses and linkages they formed with transnational social media platforms. Using a similar approach adopted by Oh (2013) [34], Park (2013) [14] also emphasised the process of outsourcing music creation to foreign producers, localising musical contents and utilising social media channels for music distribution.

The global success of Korea’s music industry is a complex phenomenon, and its unique context in the music industry warrants more in-depth analysis and an approach that is specific to the music industry. Despite attempts of some scholars to explore the role of music businesses in the global success of K-pop, there is a current lack of studies that historically examine Korean music businesses based on an analytical framework developed for the music industry. This may be due to the distinctive and complex nature of cultural industries that involves the production of cultural products that have intangible cultural values, and consumption based on cultural acceptance of those products by the consumers [30,35]. Therefore, we argue that there is a need to historically analyse the activities of Korean music businesses based on a theoretical debate that takes into consideration the distinctive nature of the music industry in order to explain the remarkable global success of K-pop.

The following section provides theoretical debates on (i) the process of how value is created in distinctive stages in the music industry that is different from the conventional manufacturing industry; (ii) cooperative and competitive interactions between firms within the music industry; and (iii) changes in the competitive environment in the music industry.

2.1. Value Creation in the Music Industry

Unlike the conventional manufacturing industry, the music industry has a distinctive set of interconnected value-adding activities that are coalesced to produce final products for consumption. As a cultural product, music is created based on these intrinsic, yet identifiable, values by bringing together creative and commercial inputs from various individuals and organisations, and its marketability is sustained by aesthetic demand of consumers in the targeted groups [36,37]. Diverse activities performed by firms in the music industry, where inputs are changed into the outputs, may be categorised into four key phases, including music product creation, music product development, music product manufacturing and music product distribution.

The first phase is music product creation. Music is foundational to the music industry and is embodied into a market commodity by integrating the creative inputs of music producing, composition and lyrics. It involves gathering creative ideas and collaborative works from creators to materialise consumers’ aesthetic demands [38,39]. The second phase is music product development. This phase particularly refers to the casting of singers. A music business is essentially a venturing business that invests in unknown singers who have not been discovered and developed. These singers are mostly ambitious and aspiring singers, and provide raw talents that are processed, packaged and marketed by music businesses [40,41]. The combined efforts of singers and music businesses constitute the third phase of music product manufacturing, which involves music recording and record production, and singer training and management. Music records in the form of music captured in a physical format were the primary commodity in the music industry. With the development of digital technology, the scope of music records expanded to intangible digital music formats, including digital music and music videos [42,43]. Furthermore, the music industry is not only merely dependent on the selling and buying of music in physical or digital formats, but also on the stardom of singers [40,44]. While the physical and digital formats of music records have received much research attention, singers have received little attention in the literature. Thus, in analysing the music industry, this paper takes singers into account as a key music product that is central to the industry. In the final phase, the music product is distributed to consumers. The products are distributed to consumers via several channels. The traditional method of distribution can be described as the physical music records sold through the chain of wholesalers to retailers, then retailers to the consumers [45]. More recently, the development of the internet, combined with digital music compression technologies, has enabled music to be stored in digital formats to be disseminated via information and communication technology platforms [46,47]. Activities of singers also raise revenue through their live performances, endorsement deals, merchandise sales and appearances in television shows and movies [44,46].

2.2. Cooperative and Competitive Interactions between Firms in the Music Industry

The music industry comprises a group of firms that interact and compete to produce music products. Scholars from different disciplines have attempted to explain how these firms in the industry are involved in a wide array of activities. Some scholars focused on how music is created by composers in terms of authenticity, homogeneity and diversity of music genres [38,48,49,50,51,52] and distributed by record companies and digital music distributors in terms of geography, reception of consumers and technological changes [53,54,55,56]. Others have analysed various activities, including music production and recording, record manufacturing and distribution, marketing and promotion, publicity and legal representation and distribution of music, which are performed by music producers, record companies, promoters and distributors. Key themes from the management studies literature include value creation and protection [39,57,58], entrepreneurship and innovation [47,59] and market concentration of the industry [46,60].

While there have been many attempts to explore the activities of firms in the music industry, most of the studies have focused on certain segment or segments within the industry [47,61,62,63]. Firms are situated in different segments in the industry based on their capacities and competitiveness. They may be highly integrated with other firms in the different segments within the industry, and some firms may compete and cooperate with other firms in the industry at the same time [64,65]. Over time, firms with dominant market power in one segment may also expand the scope of their operations by vertically integrating, while others may outsource their tasks to external companies [39,46,48].

Investigating the interactive dynamics among firms in the music industry over time can provide us with a more holistic understanding of the music industry, as it reveals the shift in market power of firms within the industry. Hence, this paper not only examines the activities of firms in the four segments of the music industry identified above, but also the interconnectedness and evolution of these firms.

2.3. Changes in the Music Industry Environment

Understanding the historical changes in the business environment of the global music industry, especially in terms of cultural globalisation, and the availability of technologies and distribution systems also provides insightful foundation for explaining the growth of the Korean music industry.

The global music industry has displayed cultural globalisation. The traditional perspective on cultural globalisation was based on cultural imperialism, which explained the dominance of cultural products the West that threatened the heterogeneity of the national identities of less dominant countries [66,67,68]. In the past, the pattern of cultural imperialism was evident in the global music market, as the Western multinational record labels retained strong market positions throughout the 20th century [69,70]. However, cultural imperialism began to lose its empirical validity in recent years, as cultural products from non-traditional powerhouses, such as Korea, have successfully penetrated the global markets, including the countries of traditional dominance [66,71,72,73].

The historical review of the global music industry also illustrates the significant influence of technological advancement on the transformations of the industry, mirroring the Schumpeterian process of creative destruction. The advancement in music creation, recording and distribution technologies has enabled the creation of divergent genres of music and has changed how the product is packaged and distributed [52,61,74,75]. The pre-digital revolution literature on the music industry was founded upon the physical medium of music records and the related activities, which were largely conducted by the record companies. Music records replaced sheet music as the core product in the music industry in the 20th century and sound recording of music on phonograms became the dominant media for storing music to be played by phonographs. A crucial transition took place in the music industry in the late 1990s and early 2000s, with the establishment of the digital music market. In digital music markets, music was no longer tied to a physical intermediary, but was recorded in digital formats and distributed electronically using internet and mobile platforms, such as Apple Music, Google Music, Spotify and YouTube [53,61,74,76]. The digital revolution has also shifted the focus in the industry towards musicians and led to the establishment of the concept of 360-degree deals in major record labels, recognising the importance of singer management [70].

3. Research Methodology

A historical case study was adopted as the research method to provide a holistic explanation of the phenomenon of K-pop’s global success. The case study method is useful for examining past and current events, and allows researchers to present a rich description of the phenomenon and the context in which the events occur [76,77,78]. In particular, the case study is an appropriate research method, as this paper aims to investigate the activities of firms in the Korean music industry and their interrelationships with the complications of the environmental context over a period of time. That is, the case study method allows researchers to capture the complexity of the phenomenon and explain the historic dynamics in their context [78,79,80,81,82]. Hence, through longitudinal observation, this paper provides a diachronic analysis of (i) the dynamic interplays between the activities of music businesses; (ii) the industry structure; and (iii) the business environment over three key periods. The three key periods are divided based on the distinctive nature of the industry, namely (i) political control and underdevelopment during the 1960s and 1970s; (ii) democratisation and industrialisation during the 1980s–1990s; and (iii) globalisation and digitalisation in the post-2000s period. This paper uses secondary data sources, supplemented by a close reading of evidence in previous studies of the Korean music industry. Secondary sources included individual companies’ reports, government documents, media reports, including newspaper and magazine articles, as well as broadcasting reports. It also included numerous published interviews of key figures in the Korean music industry, including musicians and other industry professionals.

4. Case Study: Korea’s Pop Music Industry, 1960s–2010s

4.1. 1960s–1970s: Political Control and Underdevelopment

During the 1960s and 1970s, Korea’s music industry was under the strict control of the authoritarian developmentalist government, as the government subordinated musicians and music businesses for political and ideological purposes using its authoritarian power. While Korea’s music industry largely suffered from technological backwardness, a rapid increase in television and radio ownership paved the way for mass distribution of music via broadcasting. This coincided with the strong surge of youth culture, which became a catalyst for the emergence of a new generation of musicians who showed strong assimilation to the Western pop music culture [83]. On the back of the rapid growth of youth culture, Korean youth consumers ascended as a key consumer group.

During this period, a relatively small of number record companies competed in the music industry. Up until the early 1980s, around ten record companies dominated the industry and most of these companies faithfully adhered to the government’s political objectives [84,85]. These firms played a central role in overseeing the key functions in the industry, including the production and promotion of music records, and finding new musicians and managing their day-to-day activities [86,87].

For music creation and singer management, former bandmasters and instrument players from U.S. military base music clubs, which served the American soldiers stationed in Korea, played a pivotal role. Following the demise of the US military base music clubs in the 1960s, record companies began to hire leading bandmasters and instrument players as their in-house composers [88,89]. These composers introduced the latest Western music trends to the Korean music scene, as they composed songs for Korean singers. In the 1970s, youth singer-songwriters creating folk and rock music began to gain popularity and support from impressionable youth consumers who demanded new styles of music. In terms of lyric wiring, the activities of lyricists were oppressed by the political and ideological control of the authoritarian government. Consequently, most lyricists deliberately avoided writing lyrics on pertinent social or political issues [90,91]. Singer casting was also a core function of the in-house composers of the record companies. To search for new musical talents, the composers often solicited recommendations from trusted sources they had across the music industry [92,93]. In the 1970s, a large number of live music clubs around major university towns in major cities opened to target youths. These live music clubs developed close networks with producers and DJs of music broadcasting programs who aided the successful entry of some of these singers into the mainstream music scene as the gatekeepers [83].

Music recording and record manufacturing remained typical of an underdeveloped manufacturing sector, using primitive and manual technologies due to limited financial and technological resources available. The record companies also lagged behind the European, American and Japanese recording companies that used more advanced technologies [86,94]. Most record companies also did not have their own recording studios, due to the high upfront costs of setting up the studios. Similar to singer casting, it was also common practice for composers of record companies to be directly involved in singer management and promotion.

Music record distribution remained underdeveloped due to the backwardness of the industry infrastructure and limited purchasing power of consumers in Korea. There was a noticeable regional disparity in the distribution of music records caused by rapid migration of the population from rural areas to urban cities and different rates of industrialisation across the country [95,96]. However, radio and television broadcasting quickly emerged as important channels for music distribution. With a rapid rise in the ownership of radios and televisions, music broadcasting programs became a crucial channel of disseminating key commodities in the music industry, including singers and their music, to mass audiences.

4.2. 1980s–1990s: Democratisation and Industrialisation

The Korean music industry entered a period of crucial transition in the 1980s. Abolition of many politically motivated restrictions significantly improved the conditions for creative and commercial activities for musicians and music businesses. The Korean consumers became more avid consumers of cultural products, including music, as the Korean society enjoyed greater affluence. In particular, youth consumers who demonstrated a heavy reliance on music television programs and an inclination to idolise visually attractive singers solidified their position as the most lucrative group for music consumption.

During this period, competitive dynamics among firms within the industry began to change significantly. Musician management companies (MMCs), which specialised in singer management, rose to prominence by demonstrating their superior abilities to flexibly respond to the protean tastes of media-savvy youth consumers. Led by SM Entertainment, MMCs developed a star-making system (SMS) strategy that was aimed at developing television-friendly youth singers, emphasising their visual appearance, on-stage performance and admirable characters for promotion via broadcasting channels. On the other hand, the record companies gradually lost their dominance in the industry, as they handed their key creative and product development functions to MMCs [97]. In the early and mid-1990s, major multinational record companies and Korean chaebols (referring to family-owned conglomerates in Korea), including Samsung, LG, Hyundai, Daewoo and Lotte, entered the music industry [98,99]. Based on their financial capacity, the chaebols pursued aggressive diversification strategies and invested in the key activities of the music industry. However, they failed to apprehend the unique characteristics of the Korean music industry, which was primarily teenage-centred and built on informal personal networks, and eventually exited the industry.

Music creation under MMC’s SMS strategy gave rise to performance-oriented dance music, optimised for promotion via music broadcasting programs. Music composition became more intimately associated with singers’ stage performances and visual presentations to highlight their performance skills and manufactured images. Similarly, lyrics were largely treated as a tool to reinforce singers’ images, rather than conveying sophisticated messages or making a metaphoric impact [100].

In discovering new musicians, MMCs gained a significant foothold. As MMCs grew and expanded their operations, the activities of singer castings by these firms became more specialised and formalised. For example, SM Entertainment held the nationwide auditions, as well as putting out an ‘open call’ for aspiring singers to send audition tapes [101]. The casting managers judged the performances of aspiring musicians in categories of singing and dancing, and offered the prospective singers to join the company for formal training [101].

In music record manufacturing, record companies upgraded their facilities with automated mass manufacturing systems in response to a shift in the dominant format of music records from LP music records and music cassette tapes to CDs. Increased investment by the record companies significantly improved their manufacturing capacity. With the development of cable music broadcasting programs, music videos were recognised as a crucial promotion tool. MMCs significantly increased their investments to produce high quality music videos for television viewership and production of dramatised blockbuster-style music videos. It was reported that the average cost of music video production throughout the 1990s increased more than tenfold [102].

MMCs also introduced a more specialised approach in developing star musicians under its SMS strategy. Instead of granting recruits an immediate chance to record and release music albums, MMCs required them to undertake in-house training programs. The programs not only included music and performance skills, but also diverse entertainer skills to enhance their competitiveness as an entertainer on various genres of TV programs. Development of a more refined SMS strategy is also reflected in the changes in the organisational structure of MMCs. For example, SM Entertainment separated the function of managing visual presentations and performances of singers from the artist and repertoire (A & R) team by establishing the standalone visual directing team [101]. The company assigned specialised managers, including fashion coordinators, visual director and image makers, to be responsible for tasks related to singers’ fashion, accessories, hair styles and makeup [101].

The operations of music record wholesalers and retailers expanded as the music records sales market grew considerably. Some wholesalers vertically integrated to establish their own retail shops through which they could maintain greater control over the music record distribution [103,104]. Moreover, there was a major structural change in the Korean broadcasting sector. In addition to the existing 3 terrestrial stations, 21 new cable broadcasting channels began their operations in 1995. In particular, the opening of two specialised cable music broadcasting stations, MNet and KMTV, meant significantly increased music broadcasting programs for the viewership [105,106]. In response to the formation of the dominant viewer group by adolescent audiences for music broadcasting programs, most music broadcasting programs primarily focused on targeting these young viewers.

4.3. Post-2000s: Globalisation and Digitalisation

At the start of the 2000s, the Korean government recognised the significance of the cultural industry, including the music industry, in generating return for its new economic development program, which was based on knowledge-and technology-intensive industries. Thus, the government provided more constructive support for the music industry. In particular, the government promoted the integrated growth of the music industry with the nation’s highly advanced information and communication technologies (ICT) [10]. In addition to this, the introduction of more advanced technologies, enabling the convergence of online and mobile media platforms, created highly favourable conditions for the expansion of the digital music market. The active support of the government, combined with the consolidation of a highly networked society, accelerated the digital transformation of Korea’s music industry.

MMCs with abilities to develop competitive market-oriented music products based on the SMS wielded greater power by diversifying and internationalising their operations. For example, MMCs diversified into music record retailing, which further strengthened their market positions. In the early 2000s, eight music businesses, which included MMCs specialising in the development of teenage idol singers, SM Entertainment and DSP Media, established a joint music record distribution firm, IKPOP [107]. As the earnings from music record sales rapidly declined due to the growth of the digital music market, MMCs expanded their operations outside the traditional boundary of the music industry and also paid more attention to the global markets. Major MMCs utilised their internalised singer development strategies to develop singers as multi-talented entertainers to be deployed across multiple cultural sectors. MMCs also more actively sought to expand into global markets. During this period, major telecommunication companies, which gained significant market shares in music distribution channels, began to vertically diversify by acquiring music record companies. For example, major telecommunication companies, SK Telecom and KT, acquired Seoul Records and Doremi Records, respectively, in the mid-2000s [108]. These firms played a pivotal role in the digital transition of Korea’s domestic music market. With aggressive horizontal and vertical integration strategies, MMCs and the conglomerates dominated the music industry.

Music creation for most K-pop musicians followed a typical strategy of integrating well-crafted powerful performances into the mix of electronic dance and hip-hop music genres, with catchy melodies and easy-to-sing-along simple lyrics. In particular, MMCs recognised that performance-oriented dance music using such formulaic strategies had a better chance of being accepted by foreign consumers [109,110]. To make the music more appealing to foreign consumers and to achieve greater diversity in musical styles, MMCs increased collaborations with foreign composers. In the early 2000s, the government subsidised Korean MMCs to attend major international music exhibitions and tradeshows, including MIDEM (Marché International du Disque et de l’Edition Musicale), to purchase licenses of music composed by foreign composers. Throughout the 2000s, it became a common practice for Korean MMCs to engage with foreign music producers and composers, as well as multinational music publishing companies, to obtain licenses of music created by foreign composers [111,112].

As the demand for Korean music and musicians from global markets soared, a growing number of MMCs pursued a globalised approach in recruiting singers of non-Korean nationalities and ethnicities. For example, to search for Chinese members for its idol groups, SM Entertainment established the Chinese subsidiary, SM Entertainment China, in 2006 and it held regular auditions in major Chinese cities [113,114]. Since the late 2000s, SM Entertainment has expanded the coverage of foreign auditioning and conducted regular auditions in more than 15 foreign countries [115].

MMCs developed a more refined singer training system aimed at helping their singers to more effectively penetrate the global markets. For example, foreign language lessons and cross-cultural training became essential in singer training to facilitate singers’ global reach [116]. Korean MMCs also actively used social media and video sharing platforms for the promotion and distribution of their musicians in the global markets. For example, BTS has used social media extensively to interact with its dedicated fans, widely known as ARMY, around the globe. BTS’ strong presence on and engagement via social media are evident by their Guinness World Records for having the most followers on Instagram for a music group; as of February 2022, the group reached more than 60 million followers on Instagram [117]. The use of social media allowed MMCs to monitor the opinions of domestic and international consumers effectively, allowing them to adjust their strategies in the production of subsequent albums [118,119]. In order to reach global markets, Korean MMCs paid greater attention to producing higher quality music videos to be distributed via online video sharing services. Production of quality music videos, coupled with online video sharing services permitted, Korean MMCs to effectively promote their musicians and music to global audiences, bypassing the intermediaries in the traditional physical music record distribution channels. In that process, instead of claiming copyright of the videos to prevent the reproduction of the videos by the internet users, Korean MMCs opted for an open-source approach to allow internet users to share and modify their original videos freely [120].

The progression of the ICT infrastructure significantly reconfigured the online media music product distribution market in the 2000s. One of the key technological developments in the music industry was the introduction of smartphones, which integrated the functions of computing capability with mobile phones [120]. This presented the interface between the previously dichotomised digital music product markets for the online and mobile music markets. With the advent of smartphones, consumers could directly download digital music products and access online media using the internet connection from smartphones, without using the mobile networks, and play the downloaded files or access online media music contents on the smartphones [121].

As discussed, Korea’s music industry has developed to become one of leading music industries in the world and its success may be attributed to a number of factors. Firstly, Korea’s music industry benefitted from the favourable conditions created in the local and global music markets. There was a crucial shift in the Korean government’s paradigm for governing the music industry, as its approach changed from political control to industrial support. Accordingly, the Korean government introduced effective initiatives and support programs to promote the commercial growth and global expansion of Korea’s pop music. Korea’s domestic industries, which provided crucial infrastructure and support for the music industry, such as the electronics and ICT sectors, have also demonstrated strong growth in recent decades. Development of these industries laid the foundation for the rapid industrialisation and digitalisation of Korea’s music industry. The trend of cultural globalisation, coupled with the advancement in internet communication and digital media technologies, also boosted the demand for Korea’s pop music in the global markets.

Secondly, Korean MMCs have demonstrated competency in developing globally competitive music products based on their product development strategy. The MMCs developed the core platform for developing star musicians, a strategy we referred to as SMS. Using this common platform, MMCs were able to produce market-oriented music products by flexibly responding to the demands in the global markets. This significantly reduced the costs and risks of product development and also enhanced the chances of their successful penetration into the global markets.

Thirdly, Korean MMCs capitalised on the development of the ICT infrastructure for effective promotion and distribution of their products in the global markets. The digital transition in the music industry since the 2000s has allowed music businesses to directly link with consumers. This meant that Korean MMCs were much less constrained by the entry barriers created by the major multinational music record labels in the traditional music record distribution system. Korean MMCs were able to effectively reach the global consumers using the online media and social media channels.

5. Discussions: Understanding Global Success of K-Pop

5.1. Structural Changes in the Global Music Industry

The music industry of each nation is inevitably connected to the global music industry. How the global music industry develops over time impacts each nation, and Korea’s music industry was no exception. As a latecomer, Korea was in the periphery of the global music market, but it has rapidly caught up with the leading music industries in the post-2000s period.

Korean music businesses gained competitiveness in the global markets, as they promptly and effectively responded to the radical digital revolution and cultural globalisation that took place in the global music market in the post-2000s period. The global music market was radically restructured and it created a gap for new types of music businesses to emerge. One important gap created due to the digital revolution was the opportunity for musicians and music businesses to more directly link and engage with global consumers, without having to rely on the traditional distribution channel dominated by the major multinational record labels. By utilising the internet and mobile infrastructure and implementing refined social media strategies, Korean music businesses have capitalised on the rapid digitalisation of the music industry to expand rapidly into the global markets. This, combined with the support of the Korean government and the world-class ICT infrastructure in Korea, empowered the Korean music businesses to gain and sustain competitive advantages both in the domestic and international markets.

Furthermore, the global music industry exhibited cultural globalisation, as diverse music genres performed by singers outside the Anglo-American music markets spread across the globe. This allowed music products from a nation with sufficient universal appeal to reach the global markets, as the cultural globalisation process secured a greater level of acceptance from global consumers. As discussed above, the Korea music businesses accumulated competency to develop music products that could satisfy the diverse and rapidly changing tastes of global consumers. There was a strong emphasis on visual presentation in the domestic market as colourful costumes, synchronised dance moves and catchy tunes became the key formular for developing successful idol musicians in the 1990s. Since then, the Korean MMCs have further developed product making strategies and capabilities that have allowed K-pop and its singers to gain and sustain competitiveness in the global music product markets. These major changes in the music industry also impacted the firms’ activities and their hegemonic positions within the industry.

5.2. Players in the Music Industry

As illustrated in the case of Korea’s music industry, a constellation of firms perform various activities within the music industry. The unique nature of the music industry in terms of production, distribution, consumption and sources of competitiveness, compared to conventional manufacturing or services industries, makes understanding the process of value creation more convoluted. This paper has attempted to clarify the complexity in the music industry by proposing an analytical framework. It categorises a variety of activities in the industry into identifiable key segments—music product music product creation, music product development, music product manufacturing and music product distribution—which may facilitate a more systematic analysis of the industry.

In this paper, we have also attempted to address the limitations in the existing literature on the music industry by examining the role of firms in developing competitive singers. We have highlighted singers as a key commodity in the music industry, and integrated singer casting, training and management into our analysis. While the music industries in the West have largely observed firms cooperate with self-made star singers, the case of the Korean music industry demonstrates firms that carefully planned and equipped singers with necessary skills and qualities to develop them as star musicians with global competitiveness. For this, Korean MMCs adopted SMS, a specialised strategy of developing star musicians. As demonstrated, SMS is indispensable in understanding the rise of Korea’s pop music industry.

5.3. Interconnectedness between Key Segments and Firms in the Music Industry

In the paper, we discussed how firms in the industry interact with one another to produce and deliver the products to consumers. As illustrated, a variety of firms operate in one of more of the four key segments based on their ownership of resources, capabilities and competitiveness. The size and scope of activities of firms may vary; firms may be small-and medium sized firms or individuals operating as a one-man company, possessing expertise in one of the segments, or larger-sized firms that internalised a number of activities across multiple segments.

We contend that understanding the interconnectedness between the key segments and the hegemonic changes in firms can provide greater insights into the development of a music industry. The case of Korea’s music industry showed the dynamic interactions between firms operating in those segments, and how these interactions evolve over time. It was observed that firms that gained dominant market power in one of the segments vertically integrate into another segment over time. For example, after developing competency in casting and managing new aspiring youth singers, MMCs internalised music creation within their operations and also expanded their operation to distribute music products. Similarly, large telecommunication companies and major cable music channel operators vertically integrated to produce albums and develop new singers.

5.4. Structural Changes in the Music Industry and Their Impact on Key Segments and Hegemony

From a diachronic perspective, the structural changes in the music industry can significantly impact the competitiveness and hegemonic positions of firms in the music industry. This paper identified key factors that have contributed to the crucial structural changes in the music industry and analysed how these changes have impacted the balance of power held by firms in different segments of the industry over a period of time.

This paper demonstrated that when the music industry undergoes fundamental structural changes, the interactions among the key segments, as well as the hegemonic positions of firms within the industry, may be altered significantly. For instance, the music industry, since the early 2000s, has undergone crucial changes in terms of digital music compression and storage technologies, and electronic distribution of music products. The advent of digital music has reshaped the Korean music industry, as physical music record manufacturing and distribution quickly shrunk, while digital music distribution expanded. In the midst of the digital transformation, traditional record companies gradually lost their dominance. On the other hand, MMCs and major telecommunication companies rose to prominence in the industry. In particular, MMCs have become the dominant type of firms in the industry based on their strategy of developing singers. MMCs disseminated these singers in multiple cultural sectors and to the global music markets to compensate for a decline in music record sale revenue in the domestic market. This illustrates how the structural changes in the music industry alter the relative significance of key segments and the competitive dynamics among the firms in the industry. As observed in the Korean music industry’s case, when an industry is going through a turbulent change, a generation of firms may quickly rise to take a dominant position by rapidly and flexibly responding to the changing business environment.

This article contributes to the body of knowledge in explaining the music industry’s development through the analysis of relationships between firms in key segments within the industry. Prior studies have focused on a linear process of products being developed, produced and distributed by music businesses. Our article extends this theoretical approach to analyse the cooperative and competitive interactions among the firms across the music industry through longitudinal analysis. Some firms may develop innovative systems to dominate the segment in which they operate in, and subsequently venture into other segments over time, while other firms may gradually lose their competitive position in the segment. Accordingly, we propose a diachronic industrial perspective that analyses the interaction among firms in the key segments in the music industry to investigate the impact of innovative production systems on the development of the industry.

Our study also contributes to empirical research on the global success of Korea’s pop music industry. The rise of K-pop in global markets has attracted scholarly attention to examine the various factors that contribute to its success. Although the effects of government support, advancement in digital technology and cultural globalisation have been extensively studied, relatively little attention has been paid to the evolutionary changes in the strategies of Korean music businesses. Our study addresses this research gap by highlighting the role of innovative production systems developed and implemented by Korean music businesses in the global success of K-pop. It provides valuable insights into the innovative strategies of Korean firms, which enhance our understanding of the phenomenon of K-pop’s global success.

6. Conclusions and Further Research

This paper sought to explain the development of Korea’s pop music industry by analysing the changes in firms’ activities over time. This paper adds to the knowledge base of the literature by introducing a framework for analysing the activities of firms in the music industry and redressing the limitation of scant attention given to the role of music businesses in the global success of K-pop. To provide more comprehensive understanding about the various activities and hegemonic changes in the firms, the paper placed the focus of attention on the interconnectedness and interdependence between firms in the key segments of the industry over time. It particularly used a diachronic approach, rather than focusing on a single firm and single or few activities from a static perspective.

Korean music businesses were latecomers in the traditional music records market, with limited access to the global distribution channel. However, Korean music businesses were able to penetrate the reconfigured global market as one of pioneers when the market was in the state of unrest and turbulence, due to a radical digital transformation. As the global music market underwent a radical structural transition, the Korean MMCs demonstrated their superior ability to flexibly respond to these changes. More specifically, they leveraged their accumulated strengths in the visual presentation of music, as the advancement in digital music technologies allowed MMCs to more directly engage with foreign music fans via multimedia online and mobile channels.

Based on the findings of the paper, it can be concluded that theoretical understanding in the following three areas may be useful to better account for the activities of firms in the music industry that have undergone a complex transformation. First, it is imperative that we analyse the unique value-adding activities within the music industry, and how these are combined together to create the final product before reaching the consumers. Second, this study suggests that understanding how different firms in each segment within the music industry interact with one another over time provides insights on the growth and development of the industry. Third, we need to examine the factors that bring about structural changes in the music industry and how these factors may reshape the interaction between the key segments in the industry and hegemonic positions of the firms.

Finally, there are some limitations and shortcomings that leave room for further studies. First, the study was confined to the case of Korea’s music industry, which limits the generalizability of the results. Expanding a holistic macro level analysis of the music industry beyond that of Korea would provide more substantive debates, as considerable discrepancies may exist in product creation, development, manufacturing and distribution in other music industries. Furthermore, the analytical framework from this study may be replicated in other cultural industries, especially those that rely on the stardom of entertainers. It could be a meaningful step in furthering our knowledge of how the changes in business activities, and relationships between firms and key segments over time influence the development of the sector. Second, this paper was based on a specific local market, Korea’s music industry, and the process of how this industry has penetrated the global markets. While it focused on an industry that has already achieved global penetration, this will inevitably have limitations in explaining other music industries that have not yet been able to enter the global market. Third, this paper has examined the music industry from a broad industry level. There is a need for the invigoration of research on the music industry at the firm level to examine the actions of individual firms. Moreover, the study of the music industry is fundamentally different from the traditional manufacturing and service industries. That is, the cultural products, such as music, are not consumed based on utilitarian functions, but based on aesthetic or sensory functions and cultural values within the idiosyncratic boundary. Therefore, the research of the music industry needs to be expanded to consider cultural values of music and their acceptance by consumers.