[T/N: This is a very interesting insight into the past, present and future of SM Entertainment. Though it downplays certain aspects that we find as important (such as the lawsuit between JYJ and SM), it’s quite intriguing to see how this ’empire’ was formed. We do acknowledge that this opinion piece has a pro-SM tone and the flip side of the ‘trainee system’ that SM prides itself in can be found in this opinion piece here.]
The Hallyu culture have evolved from dramas to music, and K-pop’s popularity has spread from Asia to other continents like Europe. The every move of Korea’s idol groups are the center of the world’s attention. The programs they appear in are translated into different languages and spread through SNS and YouTube.
Collaborations between global artistes and Korean idols is another effect of the changes blowing in the K-pop industry.
When he visited Korea in 2011, pop music’s bigwig Quincy Jones stated, “I’ve met many artistes around the world, but I’ve never any as good as K-pop artistes,” and “Korean singers have a high possibility of succeeding in Western markets.”
On the 1st of May, 2011, 300 people gathered in front of the Louvre Museum in Paris, the city of culture and the arts, and performed a flashmob. Two days later, 4,000 people gathered in Lima, the capital city of Peru. They all held pickets and banners with the same request, “We want to go to a SM Town concert.”
K-pop fans who were unable to get tickets for the ‘SM Town’ SM Entertainment family concert in Paris requested more concerts and even opened a petition. Cities in Peru and the US became the background of people taking to the streets and demanding more concerts to be held in their respective cities. It was something K-pop had never experienced before.
They sang and danced songs of SM Entertainment artistes and made a demonstration a festival. They even worked hard to show the reporters just how much they wanted a concert. In the end, the SM Town event in Paris, which was supposed to be a one-day concert, was extended to two days.
SM Entertainment is undeniably the frontrunner and leader of K-pop and the Hallyu Wave. Let us look back on the road SM has walked down and hear their story.
The first footsteps towards an empire
With the creation of TV music channels in the early 1908s, CEO Lee Soo Man, who was studying for his Masters in the US, realized that music was moving into a visual generation. Returning to Korea, he created SM Entertainment in 1995 and debuted first generation idols ‘HOT’.
Created in 1995, SM began making its name known with the debut of first generation idols ‘HOT’ in 1996. The group was followed by others such as ‘SES’, ‘Shinhwa’, and ‘Fly to the Sky’, increasing the company’s hold in the K-pop industry. Their success solidified SM’s unique ‘Discovery-Training system’.
With success obtained in Korea, SM turned its sights to overseas markets. SES were the first up to bat and declared that they would be entering the Japanese market, but that quickly came to an end with no meaningful results. It was a failure. But CEO Lee Soo Man did not give up his dreams of entering international markets. There were limitations in domestic markets, and he believed that a vision of entering international markets was needed for the long-term growth of SM.
SM took SES’ failure as a lesson well learnt and began forming a systematic process to create contents that would succeed in international markets. SM specialized their talent training system, as well as the structure of the company itself. As a result, the company debuted ‘BoA’ in 2000, who had been trained to enter the global market from the very beginning. For perfect glocalization, they signed a contract with the Japanese agency AVEX in 2001.
With all of BoA’s recording work done in Japan, and the singer herself able to speak in Japanese fluently, she could have been passed off as a Japanese rookie. She held a showcase in March, 2001 and entered the Japanese market, and still holds the record for seven Oricon chart-topping albums. Her best album that was released in 2005 made her the first female singer in Japan to sell over a million copies.
BoA appeared on NHK’s Kohaku Uta Gassen, Japan’s biggest end-of-the-year program, for six consecutive years from 2002 to 2007, proving just how popular and well-known she is in Japan.
BoA is not just a Korean singer who succeeded in Japan, she is the pioneer who paved the way for other Korean idols entering the Japanese music market. During the SM Town Live concert that was held at Tokyo Dome in 2011, BoA commemorated the 10th anniversary of her Japanese debut and talked about how she felt to be a pioneer of K-pop.
The singer expressed a sense of envy for her juniors as she said, “10 years ago, there was no such thing as the Hallyu Wave. It was rare for Korean singers to stand on a Japanese stage. There were so many things I wasn’t used to and I was very lonely. It’s true that I was at a more disadvantaged position, when I compare myself to the people who are entering the Japanese market now.”
Though BoA had made a successful Japanese debut, SM was facing a bleak period in the domestic music market. With first generation idols announcing their retirement, the idol groups that followed them never quite hit the mark. It was on his path of decline that SM debuted their new savior in 2004, ‘TVXQ’.
TVXQ opened up the new generation of idols and began succeeding as the center of the SM fandom, just like HOT in the generation before them. TVXQ’s success had SM debut second-generation idols such as Super Junior and Girls’ Generation. Having already had a taste of the possibilities of the Japanese music market, SM began sending each group out into the world after becoming successful in Korea.
International Market Tactics Hit Their Stride
With TVXQ as the frontrunners, SM’ singers entered and found their place in the Japanese market through hard work and effort.
In an interview, CEO Kim Young Min revealed the secrets of succeeded in the Japanese market when he said, “Our SMP (SM Performance music) appealed to the public.”
“The music that SM strives for incorporates great performances to make the artistes shine. When a person sees a performance or watches a video, the thing that needs to stick in that person’s mind the most is the singer. If a song comes to mind before a singer, it’s hard to succeed,” and “The song must never outshine the singer. This can be avoided through a great performance. The reason why the SMP genre was able to succeed in Japan was because it was something nobody else had ever tried before.”
With a strong hold on the Japanese market, SM turned to the Chinese market.
The first singers in SM to go to China were HOT. They were followed by Super Junior-M, a unit of the group Super Junior, and their second Chinese album ‘Breakdown’ topped the US Billboard World Album charts, proving just how successful they had become.
On the 31st of March and the 1st of April in 2012, SM held a large-scale showcase in Seoul and Beijing respectively. Through these events, they debuted their 6-member rookie groups EXO-K and EXO-M simultaneously.
K and M stand for Korea and Mandarin. This was the first time that any company had tried this system, with two groups using the same concepts, songs, and choreography to perform in Korea and China at the same time. This was a strategy employed by SM to target the Chinese market.
Talking about the reason why SM was able to stand as the center of the K-pop craze, Lee Soo Man stated, “We worked hard to create a network with composers and choreographers all around the world. We are reaping the rewards of the 10 years of preparation we have put in this project,” and “It was possible because the SM family have all done their best to succeed.”
He also added, “Our talent training system, that is completely different from the system in the West, is SM’s strength and competitive edge,” and “The success of the Hallyu Wave rides on the industry’s cooperation with local companies. An organized company, systematic education and talent must be in harmony to ensure success.”
A Global Contents Business with a National Status
Before the ‘SM Town Live World Tour 3’ concert in Seoul at the Jamshil Olympic Stadium on the 18th of August, 2012, the singers of SM declared the creation of an imaginary nation ‘Music nation SM Town’, where the world’s music becomes one. The declaration was attended by fans from over 30 countries.
The beginning of this nation status came in 1999 when the singers of SM got together to release the Christmas album ‘Christmas in SM Town’. Since then, SM has gathered its singers together to release albums and hold concerts under the name ‘SM Town’. With K-pop’s status in the world skyrocketing, their ‘SM Town concert’ was renamed the ‘SM Town Live World Tour’ in 2008 and started adding overseas concerts as well.
With the global K-pop craze spreading, SM’s fandoms are also spreading into the world. Starting with the ‘SM Town concert demonstration’ in France in 2011, fans all over the world have proved their love for K-pop, showing that the singers don’t need to officially ‘enter’ a market to have the kind of influence they’re experiencing now.
In order to create a stronger bond in the SM fandom, the ‘imaginary nation’ has been created. Even passports have been made, as well as a flag. This is because the company understands that loyalty of fans correlates to higher sales.
In a recent debate session, Producer Lee Soo Man stated, “China has the largest offline market, and ‘SM Town’ will exist in an imaginary nation,” and “It could be a nation with a population in the billions, rather than just limited to the 50 million people in Korea. The generation of having to take our culture to other countries is coming to an end. What’s more important than entering overseas markets now is the quality of the contents you produce. By combining culture and IT, we have created an explosive national brand.”
The Truth Behind The Unlawful Game
On the 31st of July, 2009, popular-group TVXQ’s Kim Jaejoong, Park Yoochun and Kim Junsu filed an injunction against SM and said, “Please nullify our unlawful exclusive contract.” After the controversy, U-Know Yunho and Max Changmin appeared on stage again as TVXQ in August, 2010 while the trio created JYJ and began performing independently from the group.
However, the lawsuit went on for three years and four months, making JYJ’s efforts to appear on broadcasted activities a rocky road. With JYJ’s fandom and a vote of sympathy for the relatively weak behind them, JYJ wished to be as active as they had before but have been unable to appear on a single music program.
This is similar to the path of HOT. After HOT’s disbandment, Jang Woo Hyuk, Tony Ahn and Lee Jae Won created the group JTL and returned to the industry, only to have their path blocked.
Unable to appear on music programs or variety shows, JYJ have been making appearance on TV through dramas. The Fair Trade Commission held a six-month investigation against SM on the charges of interfering with JYJ’s activities and placed a prohibitive order against the company.
On the 28th of November, 2012, SM and JYJ came to the agreement that their exclusive contract had expired on the 31st of July, 2009, the day the trio filed their injunction. With the lawsuit at an end, they signed an agreement that there would not be any more interferences in the group’s activities.
But even with their legal battle behind them, JYJ’s red light never turned green.
With Junsu’s second solo album set to be released on the 15th of July, 2013, the major distribution company that was in charge of distributing and marketing the album notified the singer that they would nullify all marketing strategies six days before the album’s release. Though the controversy was resolved in a day with the planned promotions put back into effect, these celebrities who have left SM still have troubles with their activities in the industry.
A representative of a broadcasting company hinted at the existence of external pressure as they said, “We can’t ignore the influence of large-scale agencies because they are in charge of popular idol stars.”
With SM celebrities filing lawsuits against the agency, SM’s exclusive contract clauses came into light and started the ‘slave contract’ controversy. With rippling social effects getting larger and larger, the FTC began investigating and SM voluntary changed some of the clauses in their contracts.
Though SM’s singers have stood up for the agency, singers who have left SM still face many unexplained difficulties in their activities, meaning that the agency still hasn’t been able to shake off their label of having slave contracts and interfering with former-SM singers.
Market Monopoly or Growth for the New Hallyu Wave?
SM’s SM C&C is partaking in aggressive tactics to bring in more celebrities.
Starting off with retired Kang Ho Dong in mid-August of 2012, SM signed contracts with Shin Dong Yup, Kim Byung Man and Lee Soo Geun. The agency also merged with AM Entertainment, with top stars such as Jang Dong Gun, Kim Ha Neul and Han Jimin. SM recently signed an exclusive contract with actor Kim Suro.
This mass movement of top stars seems to fit with SM’s vision. Top stars can create a synergy effect with SM’s global market infrastructure and overseas know-how, and allows SM to expand into the drama, music, concert and variety show industries, moving SM from a ‘music nation’ to a ‘entertainment nation’.
During the acquisition of AM Entertainment, CEO Kim Young Min stated, “We plan to expand our video contents creation business and acting management business.” This means that SM plans to target overseas markets with contents created from scratch in the company itself.
SM C&C’s aggressive actions has the entertainment industry on edge. SM already has some of Korea’s most influential idols, and with SM C&C’s latests actions, they may now have too much power in the industry. With the video creation business having more of an effect on the success of a star, this is a worry that can’t be ignored.
Meanwhile, SM C&C has been diversifying its business plan, launching a mobile game in June, 2013 with its celebrities as characters in the game.
When Change is Needed
Recently entering into the drama production business, SM is diversifying itself in the culture contents industry. It has been unable to garner the success it expected but is still increasing in size through M&A.
With SM C&C’s aggressive celebrity acquisitions, SM’s plans to enter the video production industry is set to be smoother than expected.
But the future of the K-pop industry, the main business of the company, is not set in stone. With the analysis appearing that the idol trend is coming to an end, SM continues to release contents that are similar to their previous work and is unable to let go of their characteristic color.
SM opened the doors to the idol generation and has stood in its center as a mega-trend. SM’s unique style has brought it so far and it’s undeniable that they have played a leading role in shaping the Hallyu Wave. However, this may actually be a weakness of SM that may lead to its downfall.
It is important for SM to expand its identity as a brand. But water that has collected in one place for too long is bound to rot. Right now, SM needs something new to capture the hearts of the public. SM must not be swept away by its current success and must focus instead on implementing new changes. Only then will they be able to dream of becoming legends of K-pop and stand as true culture groups that others look up to.
Translated & Shared by: dongbangdata.net