K-culture Going Global
The author is an analyst of NH Investment & Securities. She can be reached at hzl.lee@nhqv.com. -- Ed.
In 2021, Butter, by Korean boy group BTS, stayed on top of the Billboard Hot 100 chart for 14 weeks in a row, and Korean drama Squid Game became the most watched show on Netflix. In our view, these two achievements were made possible by K-culture creators: 1) strengthening their fundamentals in order to overcome the limitations of the small-scale Korean market; and 2) firmly seizing the opportunities offered by global platforms such as YouTube and Netflix to gain wide access to a broader global audience. Still, some people argue that the ongoing Korean wave phenomenon is a passing fad, but we believe that K-culture’s incorporation into the global mainstream is just taking off. In our view, it is time to consider a K-premium for the entertainment industry.
Entertainment: K-pop is to expand its global market coverage, taking advantage of strong global fandom, a unique feature it enjoys. And, in 2022, domestic entertainment firms are to ramp up their NFT businesses using in-house artist IPs. We recommend HYBE as a sector top pick.
Content: Following Squid Game’s global success, expectations for upcoming K-dramas have grown. Increasing global demand for K-content should boost both sales and prices. We highlight J Contentree as a sector top pick for its promising lineups.
I. 2021 overview: Going mainstream
In 2021, Butter, by Korean boy group BTS, stayed on top of the Billboard Hot 100 chart for 14 weeks in a row, and Korean drama Squid Game became the most watched show on Netflix. Having strengthened their fundamentals to overcome the limitations of the small-scale Korean market, Korean creators have firmly seized the opportunities offered by global platforms such as YouTube and Netflix. Still, some argue that the ongoing Korean wave is a passing fad. However, unlike the short-term popularity enjoyed by Psy’s Gangnam Style, recent K-pop and K-content offerings are seeing longer-term success, with the number of global hits among Korean content providers also rising. It seems that K-culture’s incorporation into the global mainstream is just taking off.
II. 2022 outlook: (1) K-pop moving towards the metaverse
K-pop has established itself as a unique genre in the global market. What differentiates it from other genres is its unique fandom culture, in which K-pop is not just a taste in music, but a hobby. Activities such as content appreciation, event participation, and MD collection, as well as fan community activities and the sharing of secondary creations are common in K-pop culture. Considering this, if the metaverse is added to fandom platforms, the scalability could prove limitless. In particular, the digitalization of collectable MD, such as NFTs using artist IP, is likely to draw attention going forward.
III. 2022 outlook: (2) Korean content begins to enter global mainstream
Domestic content providers have strengthened their fundamentals to survive the small domestic market. Korean content has differentiated itself by ingraining unique aspects of Korean culture into universal genres. This, together with Netflix’s content recommendation algorithm and dubbing and subtitle services, as well as the global success of Kingdom, Sweet Home, and Squid Game, has propelled global audiences’ interest in Korean content. As Korean content has begun to enter the global mainstream, Korean production companies are likely to enjoy wider markets and stronger negotiating power moving ahead.
IV. Top pick
We maintain a Positive rating on the entertainment sector. Entertainment: Deserving of attention are benefits from: 1) offline concert resumption; and 2) NFT business expansion using artist IPs. We recommend HYBE as a sector top pick. Content: Rising global demand for K-dramas should lead to higher sales volumes and increasing ASPs. We highlight J Contentree as a sector top pick for its promising lineups.