Seoul equities traders do not read gossip about Korean pop stars purely for light relief. It can move stock prices. In the last decade, “K-Pop” has become a global export, thanks to bands such as BTS and Shinee. Returns on some entertainment stocks have been phenomenal. Shares in JYP Entertainment, one of the top three music businesses, rose by about 3,000 per cent in the eight years to its peak last October.
This year, scandals involving sex, drugs and bribery erupted across the industry. These are a problem for a business that promotes bands with squeaky clean images to teenage consumers. Shares of the three biggest entertainment companies are down more than a quarter this year.
A flawed business model has exacerbated the decline. A couple of K-pop groups may bring in most of a company’s revenues. For JYP, revenues from a single boy band, 2PM, were once over half its total. A new hit band can triple the previous year’s revenues. A flop means years of investment is lost. Idols, as the stars are called, spend up to a decade training at the company’s expense. There is no inbetween.