"While K-Pop has become a global industry, small and mid-sized agencies that support the backbone of this ecosystem are struggling to survive," said Choi Hwi-young, Minister of Culture, Sports and Tourism, during a meeting on July 8 at the National Museum of Modern and Contemporary Art in Seoul. The meeting focused on strengthening the music industry ecosystem, where representatives from small and mid-sized agencies unanimously called for government support in production costs and expanded tax benefits.
Participants noted that although the K-Pop industry has grown, rising production costs and a concentration of resources among large agencies have exacerbated polarization within the sector. Jo Young-cheol, CEO of Mystic Story, stated, "Small agencies that should support the industry's backbone are facing severe difficulties. The average operating profit of 500 agencies has decreased to one-third over the past three years, and most are experiencing management challenges, except for a few major companies."
Jo identified the urgent need for tax credits on album production costs. He explained, "If we implement a tax credit of 10-15% on album production costs, similar to other content industries like film and webtoons, it could create a virtuous cycle where that money is reinvested into production. Research from the Korea Creative Content Agency shows that while the tax revenue reduction from the music industry is relatively small, the employment generation effect is significant, making tax support essential."
Minister Choi agreed, acknowledging the growing disparity in production costs among agencies, which can differ by nearly 30 times. He emphasized, "For the remarkable achievements of the popular music industry to continue, the backbone of the industry must be strengthened," and promised to work on tax credits for music production costs, new loan support, and expanded assistance for indie music.
Concerns were also raised about the limitations of the current system, which excludes mid-sized agencies from support. Kim Yoo-sik, CEO of FNC Entertainment, pointed out, "The top four agencies generate profits in the trillions, while other companies struggle to reach around 100 billion won in revenue. Many are operating at a loss. Currently, only small businesses can receive production cost support, but we are excluded due to our revenue size. However, the gap with large agencies remains significant."
He added, "About 15 K-Pop groups have made it to the Billboard 200 Top 5, but only two are not from the top four agencies. This creates a cycle where trainees and investment funds are concentrated in large companies, while others fall into a vicious cycle."
Kim also argued that support criteria should be adjusted to reflect reality. He suggested, "Instead of providing 300 million won per project, a more effective approach would be to support multiple albums for a single team over the long term."
Kim Jin-woo, CEO of RBW, assessed that the K-Pop industry has effectively turned into a 'capital competition.' He noted, "In the past, it was possible to nurture a new artist with around 2 billion won, but now it takes nearly 10 billion won over three years to develop an artist and generate revenue. Previously, there was room to try again after a failure, but now everything must be risked at once." He expressed concern that large agencies invest up to 10 billion won in a single album, leading to a structure where only artists from large corporations survive.
The indie music sector called for expanded support for creative diversity. They argued for more granular support to enable various creators to challenge themselves in different ways and proposed the establishment of new financial support, such as dedicated investment funds for small labels, to help them secure funding outside of advance payments from distributors. Additionally, they highlighted the need for changes to local ordinances to adjust high venue fees, which can reach 10% for large regional concert halls, compared to those in Seoul.
* This article has been translated by AI.
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