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South Korea & Streaming Services

Can the U.S. market learn from them?

Sarah Liethof

· south korea,k-pop,streaming service,Music Industry,Online Marketing

We all know by now that the Western music world is being dominated by streaming services and actual hard-copies are having a hard time surviving (Friedlander, 2017). This is changing the music business globally. But is it really? How does it work in the world of Samsung, extreme high-speed internet and K-pop? This essay will be focusing on the development of streaming services in one of the most ‘smartphone-minded’ countries, South-Korea (it has a smartphone penetration of 97.7% amongst 18 to 24 year olds (Cha, 2017)). According to Sung-Won (2017), the paid music streaming services are thriving in South Korea with 41% of South Korean internet users who signed up for a streaming service. With the help of multiple academic research and journals, we dive deeper in the world of streaming services in South-Korea.

The K-pop band TWICE

To know more about the current situation in South-Korea we have to look at its past. South-Korea is one of the most technology-advanced nations in the world. It was and is a perfect example of a nation that has a complex environment as described in Christensen, Torp & Firat (2005). While, during the digital network revolution in the mid 20th century, there was a clear pattern where the more advanced and developed economies were proceeding more quickly towards digitization, South-Korea defied all odds and digitized its telephone network. Even though it was still a clearly developing nation (Larson, 2017). The country continued to develop itself digitally, with even around the year 2000 being recognized as ‘the leading example of a country rising from a low level of ICT access to one of the highest in the world’ (Larson, 2017, p.1). Fast forward to the South-Korea of now, it has not slowed down on technology developments. As of 2016 it was indicated that 74.1% of all mobile devices in South-Korea were actually smartphones and the download speeds of South-Korea’s wideband are the fastest in the world (Larson, 2017). These facts show us how connected the and hyper digital South-Korea really is, but how does this affect the music business?

According to Kim, Nam & Ryu (2017) South-Korea finished the transition into streaming services years ago already and it is more evolved and set than the US market is right now. The industry has a few big streaming services which characterize the market. These companies include Melon, Genie, M.net and Bugs music, which are all subscription based (Kim et al., 2017). Music streaming services were launched in the early 2000s in South-Korea, and these services established themselves even more with the development of smart devices like tablets and smartphones (Lee, Choi, Cho & Lee, 2016). The South-Korean music streaming market is much more advanced and matured than the U.S. market is. An interesting aspect of the market is that most of the major streaming services are strongly affiliated and in partnerships with mobile service providers in the country. This allows the streaming services to offer their subscriptions fees with a discount. The industry has been able to find business models which have shown to be profitable and still stay affordable for the customer (Kim et al., 2017). A perfect example of these statements is the case of Melon, as mentioned before one of the biggest streaming services. Melon was bought in 2016 by messaging giant Kakao for 1.6 billion dollars, a staggering amount for a streaming service. Understandable though, when considering that Melon has 28 million users (in a country which has 51 million inhabitants) (Resnikoff, 2016). It only shows the thriving business of streaming services within South-Korea.

As opposed to the cannibalizing structure of streaming services we are seeing on the U.S. music market (with still declining sales of offline record sales) (Friedlander, 2017), streaming services and offline music sales are actually complementing each other in South-Korea. Lee et al. (2016) indicated that the online streaming services actually promote offline record sales and show that since 2007 the offline record sales are no longer declining and even slightly growing in South-Korea. It was not always this case though, research finds did show that the increased penetration of internet into the music business led to the decline of music record sales, but after the stabilization of the online music market and understanding the complex and new market, an increase in offline sales was estimated (Lee et al., 2016). A great example of how an industry can adjusts themselves, even though the adjustments are complex.

Streaming has become a critical part of the music industry in South-Korea right now but as shown, it did not happen overnight. Comparing the South-Korean market to the U.S. market, it is clear that there is still much change needed in the U.S. market before it can have similar results as the South-Korean market (Kim et al., 2017). This year there were finally numbers coming in stating that the U.S. music market is growing again after being in decline for 15 years. With a growth of 7.6% in total, and streaming income rising by a steep 80% (Aswad, 2017) it seems to be going into the right direction for the industry. Although these numbers are positive there are still a lot of structure issues within the U.S. market and a strong sense of cannibalization. The South-Korean music market has been and is a perfect example where it shows that set, old-fashioned systems no longer work in modern day society. Instead of trying to control and set a complex market in a simple structure, there should be more investigation into how the market can be subtly moved into the right direction where, in the end, the ideal outcome is complementing each other, and not cannibalizing. Concluded, the U.S. market can certainly learn from the South-Korean music industry.

Sources:

Aswad, J. (2017, April 25). Global Music Report Shows Biggest Annual Growth in 20 Years — But YouTube Remains a Huge Threat. Retrieved September 17, 2017, from http://variety.com/2017/music/news/music-business-biggest-growth-20-years-youtube-1202394657/

Cha, F. (2017, June 15). 10 things South Korea does better than anywhere else. Retrieved September 17, 2017, from http://edition.cnn.com/travel/article/10-things-south-korea-does-best/index.html

Christensen, L. T., Torp, S., & Firat, A. F. (2005). Integrated marketing communication and postmodernity: an odd couple?. Corporate Communications: An International Journal, 10(2), 156-167.

Friedlander, J. P. (2017). News and Notes on 2016 Mid-Year RIAA Music Shipment and Revenue Statistics. Retrieved September 17, 2017, from http://www.riaa.com/wp-content/uploads/2016/09/RIAA_Midyear_2016Final.pdf

Kim, J., Nam, C., & Ryu, M. H. (2017). What do consumers prefer for music streaming services?: A comparative study between Korea and US. Telecommunications Policy,41(4), 263-272. Retrieved September 17, 2017 form: http://www.elsevier.com/locate/telpol

Larson, J. F. (2017). Network-centric digital development in Korea: Origins, growth and prospects. Telecommunications Policy,41(7-8). Retrieved September 17, 2017, from https://www.journals.elsevier.com/telecommunications-policy.

Lee, M., Choi, H., Cho, D., & Lee, H. (2016). Cannibalizing or Complementing? The Impact of Online Streaming Services on Music Record Sales. Procedia Computer Science,91. Retrieved September 17, 2017, from http://www.sciencedirect.com/science/article/pii/S187705091631359X

Resnikoff, P. (2016, January 13). Why South Korea's Biggest Streaming Service Sold for $1.6 Billion. Retrieved September 19, 2017, from https://www.digitalmusicnews.com/2016/01/12/why-south-korea-biggest-streaming-service-sold-for-1-6-billion/

Sung-Won, Y. (2017, April 24). Paid music streaming services thrive in South Korea. Retrieved September 17, 2017, from http://www.scmp.com/tech/science-research/article/2090088/paid-music-streaming-services-thrive-south-korea

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