Chocolate Love - marketing 101 for deluded k-pop fans

 Lately I've been fielding a lot of questions like this:

and this:

So for those who wonder:

1.  How much money idols make, and
2.  How much fans and idols alike are being played like suckers by entertainment companies

This blog has the answer, in both short and long form.

Answers in short form first:

1.  Fuck all.
2.  A lot.

Those of you who hate long blog posts, you can now stop reading because you already have your answers.  The rest of this post is for those of you who like my usual rambling style, or for those people who don't believe me and absolutely must insist that I back up my completely-obvious-anyway points with some sort of detail.

Now that I've scared off all the tl;dr-haters, let's talk about k-pop idol contracts first.  Firstly, how fair are they?

When a label agrees to take on an artist, a contract is usually signed between the two parties.  The contract is basically a written agreement that decides how business is going to work between the artist and the label.  It includes things like the profit share, which is how much money per sale the label keeps vs how much the artist gets.  A very small independent label in the west that's feeling generous might split the profits 50/50 with the artist.  Larger western labels usually take about 90% of the profit for themselves and the artist gets 10%... or less.  So why would anyone sign to the major label instead of the independent?  You'd have to be crazy, right?  Well, the major label has a lot more reach - they can get you on the radio, on TV stations, they can do more advertising, fund your expensive touring, etc. because they've got a larger capital base to work from, so even though you're earning less per unit, you have the potential to sell a lot more units and thereby make a larger profit anyway.

However, until those sales are made, how is the artist going to live?  The answer is the "record company advance".  The record company often gives the artist a stack of money upfront (usually a few thousand for a small label, can be up to millions for high-profile A-list western artists), and says "here you go, this is for you to record your album and tour", but this money is not a gift, it's a loan.  The artist now has a debt - money that they owe the record company.  All money that the artist makes from record sales, touring etc goes toward paying off the debt first, before the artist ever sees any profits - they are "in the red" until it's all paid back.  Whenever you hear about some artist getting given a ridiculous shitload of cash, and you wonder what the fuck possessed someone to just hand over a massive wad of money like that to someone who is already rich as fuck, it's because whoever is giving them that money is expecting a return on their investment; they believe that the artist in question will be able to make all that money back, and then some.

What happens if the artist runs out of advance money, because recording their album costs more than they thought it would be, or took longer, or they just have "expensive habits"?  The label won't let them starve - they will generally give them a wage... and that wage is also added onto the loan, so the artist is expected to essentially pay their own wages out of record sales and tours.  And guess what else is also typically added onto the loan?  All the promotional costs.  Those expensive TV ads, the ads on the radio, posters, expenses for an MV, cost of making merchandise, all of this stuff gets thrown on top of the debt, the artist has to make enough money to cover the costs of all that stuff.  But what if the record label keeps doing advertising and MVs and spending money on promoting you at a faster rate than you can pay the money back?  Well, er, um... welcome to how the majority of major label deals work.  By continually keeping you in the promotional loop, a record label can keep you in debt as long as they want - as soon as you're about to break even, "let's do more ads and another MV!" and you've got a rising debt again, just like that.

Now a smart artist when negotiating a contract will insist on a clause where they can veto promotional expenses and set limits on what their label can add onto their debt.  However not many artists are that smart - most of them are young, naive and star-struck and will sign any old bullshit some guy in a suit from a major label telling them they will be a star throws in their face.  So unless the naive artist has an absolute MONSTER hit, they're going to be in debt for the duration of their record company contract, if the record company has their way.  Record companies are very good at spending money, and consider it their duty to spend every last bit of cash on pushing their artist.  The mentality of people who work in this "expenses allocation" side of the business is "if my artist is making a profit, I'm not doing my job".  The artists that get really rich are the small handful who either were savvy enough to negotiate better contract terms, run their own business side of things themselves and/or just made money a ton faster than their label could spend it.  The other ones, the vast majority, are just on that survival wage and see about the same amount of money as they would in an entry-level retail job.... at best.  At the end of the contract term any remaining debt is (usually) waived, but the artist usually didn't see any payout either.  They could have worked behind the counter at a supermarket checkout the whole time and seen similar income.

So that's a typical western scenario.  Now that we've got that out of the way, let's go over to k-pop and factor in what k-pop does differently.  I've never worked with a k-pop label myself, so I of course don't know the exact details of any contract, but just from observing things from the outside, a few basic things are fairly obvious to me as someone with general experience in this area.

Firstly, k-pop entertainment companies don't tend to give artists cash advances so those artists can go spend it on recording/transport/food/hookers/drugs - instead, they keep the artist closely under their wing and advance their artists goods and services instead - the company pays for all the artist's living expenses, and spend years training them and making their product.  They provide accommodation, food, equipment, training from several different tutors, pay utilities, provide clothes, etc etc.  All of this isn't cheap of course.  If the whole "family"-type marketing some of the bigger k-pop labels do has any truth in it, it's probably only in the sense that the label spends money on their in-house artists in a similar fashion to how your parents spend money on you while you're growing up.

 In my town, known as Australia's "murder capital", the most notorious serial killers in the 70s and 80s were called "The Family".
Just putting that out there.

So how much money is involved?  If you've got parents in the close vicinity, go to them right now and ask them how much money they have spent, in total on bringing you up over the last three years.   Then (if they haven't gone into hysterics or post-traumatic stress just from thinking about it) ask them how much extra money they would have had to spend if you also needed specialist private tutors in language, dancing and singing during that time.  Then multiply that total figure by the amount of girls or boys in a typical idol group.  Gosh, suddenly we've got hundreds of thousands of dollars, maybe even millions.  And this is just pre-debut training expenses, we haven't even talked about making any music or videos yet!

So where do you suppose the entertainment company is going to source the money for all this?  You guessed it - the idols' eventual money-making activity.  Existing labels can use previous successful activity to fund it, whereas a new label starting from scratch probably either needs a rich sponsor or a bank loan, but at the end of the day the responsibility to make that money back rests on the members of the new idol group's shoulders, or otherwise the whole business model isn't sustainable.

So what would a k-pop artist's contract look like, compared to a western artist?  Is there any way they could negotiate a deal where they at least get some money?

Doubtful.  Here's why.

Say you're a girl auditioning to be in some new five-member k-pop girl group, and the people running the auditions have trimmed down the selection from 100 girls to about a dozen, including you.  You get called into the office.

The CEO puts some paper and a pen in front of you.  He says "here's a contract - sign this, and we'll put you in our training program and debut you in 3 years time".

You weren't born yesterday, so you read the contract over.  You notice that this contract insists on strict adherence to the label's schedule, you're not allowed to see or contact your family, you have to eat their food, you don't even get a wage, basically it makes you their slave!

"But this contract is unfair!", you protest.

What do you think their reaction will be:

1:  "What would YOU like to see in this contract?  Maybe we can come to an agreement that suits everyone?"

2:

Selection processes for idol groups are extremely competitive, and when you first approach an agency, you're a nobody, so you have no bargaining power.  If there's not much separating you and the other girls who auditioned with you, there's no reason why they would negotiate with you.  If you protest they'll just send you out the door and ask you to hold it open for the next girl to walk through.  Sure, you might be a bit more talented, but so what - that's what the three year training program is for, to compensate for any talent shortfalls.  Another girl might have to train a bit harder, but if they're going to be more co-operative, from the label's point of view it's a better investment to go with someone not as capable but willing to work hard to address any weaknesses.  Less potential problems down the track, and it means the label can sign them with any contract they want.

There's an exception, however.  Where k-pop artists sometimes probably DO get good contracts is once their initial contract expires, and they get to sign a second contract.  If they did well up until this point, they are now a known name which means that they have bargaining power; they can say "okay, we're a known name that can generate revenue, so if you want us to sign this, we insist on terms X, Y and Z" which might mean fairer profit-share, more free time, a better release schedule, or any number of other things.  There's a good chance that Davichi's new contract with CCM doesn't suck - for CCM to get the group away from the new agency and back under their wing, they would have no doubt had to dangle a few appealing carrots.  KARA members have also been buying real estate recently, which suggests that they have disposable income - whatever agreement was made behind closed doors after the group's notorious dispute with DSP was no doubt more in KARA's favour than whatever was happening previously.  You may now also understand why SM Entertainment's ultra-long 13 year slave contracts were such a hot issue in the industry - by the time that 13 years is up, an artist's time in the pop limelight may have been and gone, and perhaps they are not hot property anymore, and once again the power of negotiation is not in their favour.

These are the exceptions.  VERY few k-pop artists would be rich, or even well-off.  K-pop companies are good at giving their idols the appearance of affluence, but it's not reality.  That flashy car you see in the MV?  It's a rental, it goes back in the hire company's garage after the MV shoot is over (and no pries for guessing where the money that pays for the hire fees eventually gets sourced).  Do you really think CL owns a "black-on-black Lamborghini"?

If so, think again (but if she ever does get one I hope she doesn't grip the steering wheel like that - incorrect steering wheel grip on a performance car is way more dangerous that dangling some fucking oranges, you know).  Like any idol has even got time to go cruising around in a vehicle so impractical anyway.  She might get to keep her "Gizibe" bling but that'd be about all, and even that's a maybe.  Even the more flashy clothes are often borrowed and unless you're going the DIY route like T-ara's Hyomin they go back to the warehouse once the MV and TV promotions are over.  Every time you hear about some new MV that came out where crazy six-digit sums were spent on things like set design and clothing, that's all debt that the artist has to pay off.  Those MVs don't look quite so impressive now, do they.

When Block B didn't get paid for over a year, they took their label to court and lost, because they just weren't making any profit after expenses so there simply wasn't anything to pay them.  They wouldn't have been able to afford a cup of coffee, meanwhile their label was still spending megabucks on their promotions up until that point.  This is a normal situation.  is it illegal?  Not if the group agreed to it in the initial contract.  This should also put those "fan gifts" into context.  The reason why some groups get so excited about their gifts is because it's the only actual source of assets that many of them have!  Remember when U-Kiss members tried to get fans to buy them copies of a computer game?  Why wouldn't they just buy the copies themselves?  Perhaps they're typical teenage douchebags, or perhaps they're just fucking broke, and their contract is that shitty that shelling out $50 for a computer game is not something that they can even afford (and they're typical teenage douchebags).

So what about the product?

It might be helpful to talk about the supermarket industry.  Yes, it's GOING OFF ON A TANGENT TIME, folks.  Would it even be a Kpopalypse blog without a twist like this in it?

I knew a person who was a PR representative for a large food company.  Her job was to deal with supermarket chain owners and manage their display of her company's product, making sure that it is placed in premium spaces where people buy more of it (stay with me - this becomes relevant).  There's several tricks that supermarkets use to get people to buy more stuff:

However, how is it decided who gets those premium spaces?  The answer has several terms, such as "cliffing" or "slotting fees" but what it all basically amounts to is shelf space rental - the manufacturer pays the supermarket a fee to allow them to use the shelf space.  How much are these fees?  There's no set figure, because it varies depending on what shelf space you want - obviously shelf space that more customers buy from will be worth more than the little bit right down the bottom nobody notices.  The person I knew said her company spent "thousands", but didn't elaborate specifically.  What she did say, was this: the supermarket chains she dealt with made more money off selling the shelf space to food manufacturers than they made from customers buying the product - a LOT more.

This turns the consumer equation on its head.  Here's what someone would logically assume about a supermarket:

You = the customer
What's on the shelf = the product
Supermarket = the retailer

But really, from the supermarket's point of view, it's more like this:

Supermarket = the retailer
Food manufacturer = the customer
You and the amount of attention you give to the shelf space = the product

Have you ever noticed when a supermarket stopped stocking your favourite item?  Did you go and complain to a staff member and say "hey, I really like Thing A that you stocked, when are you guys going to bring it back?", only to be met with lots of umming and ahhing and "er yeah, um... I dunno, I'll ask management for you about Thing A and we'll see what we can do"... and they seemed really noncommittal about it and nothing really changed and you still wonder why?  You'd think that as a customer, your purchasing power would be important, right?  Well, it's not, and that's because that as far as supermarket management is concerned, you are not the customer.  You're the product, your function is to look at shelves and buy Things, and it's this function as a consumer that is being sold to the real customer - the manufacturers of Things.  Thing A is however no longer stocked because the company that makes it decided they didn't want to pay for the shelf space anymore, or they got outbid by another company who makes Thing B, so that's all you can get for now.  Just wave to the checkout girls and smile because you're just a cog in a machine that isn't really even for you.

Now keeping this example in mind, let's get back to k-pop.

It's no secret that there's no money in selling music to the public anymore, as most people are downloading, either illegally for free, or at best, for a fraction of the price that a full-length album used to cost.  Most western groups make up for the fact that nobody's buying albums by going on the road and making a shitload of money touring (which is why concert ticket prices have skyrocketed in the past 10 years) - but most k-pop groups don't do this either.  So where is the money made?  How can these companies and groups even afford to exist?  Let Bernie Cho of DFSB Kollective give you the answer:

Relevant part at 7:07: "The cold hard reality right now is music is actually no longer the business - if anything, it's become a business card.  If it becomes popular, it leads to other opportunities, that is where they make money."

These other opportunities are commercial films (CFs), endorsements and product placement.  An idol's MV is at heart an advert, but it's not just an advert to you to buy the music.  It's also an advert to people who might like to use the young men and women in these things for advertising and product placement purposes.  The Korean entertainment companies are saying to manufacturers of Things "Look at this group of guys, wouldn't they look nice holding your product?  They have lots of crazy rabid fans itching to buy anything associated with them." - your idol is not even the product, he is living, breathing shelf space, just waiting for a product to be associated with him.

CFs are self-explanatory and idols get paid a ton of money for these.  We've all seen product placement in MVs too, where people are showing using phones and so forth with the brand and sometimes even a specific applet shown clearly to the camera.  If the company is willing to pay a premium some companies will just go "fuck it let's just make it a CF instead and do a song ABOUT the damn phone".

You've also perhaps seen the reverse end of the scale which is stuff like this:

When a brand shows up incidentally in k-pop, if the person who owns that brand hasn't paid a hefty sum in product placement fees, they blur it out.  This isn't product placement, it's the lack of product placement, it's the entertainment company saying "your advert could go here if you were to pay us".  (This use of the blur in MVs is different to in some TV shows where they blur because it's illegal to use product placement in that context, or has been until recently).  The piss-poor looking retailer in the background sure as hell don't look like they've got the money to pay for their logo to be displayed in a k-pop MV so what you're looking at in the above picture is an empty supermarket shelf.

Endorsements are common too, and they work with crazy fangirls who will buy any old shit as long as their idols are on it.  I simply can't count the amount of people I personally know who have bought "B2ST Instant Noodles".

These have got to taste terrible like all dried instant noodles do but I'm sure there are crazy fangirls out there buying hundreds of these packets so they can "live off B2ST" in an emergency and feel close to their oppars.  Having a "B2ST Noodle" inside them is probably as close as they will ever get to their wet dreams and what's in their favourite fanfics.

Just like in the supermarket situation, the amount of money that companies make selling you the music is positively dwarfed by the amount of money they make in selling idols' marketing abilities to product manufacturers.  So in this context:

You = the customer
K-pop group's songs = the product
Entertainment company = the retailer

Has now become:

Entertainment company = the retailer
Advertisers = the customer
Idols = the shelf space
The amount of attention you give to the idols/shelf = the product

If people don't pay attention to their idols and care about them, then those idols holding the latest mobile phone becomes worthless.  It could just be any random person in that case.  In this way the manipulation of fan insanity is actually the engine that drives the moneymaking side of the industry.  If you've ever seen an idol use something and think "cool - I've got to get one of those", you'll know that this works, and exactly how powerful it is.

Yes, you are being manipulated (of course), along with the idols.  If you're thinking "well, this is shit" then I guess that's another way you could interpret the lyrics of "Chocolate Love" isn't it.  Everyone sing along now.