What the Kakao and Spotify music licencing deal means for the Korean music market
Armoured with Parasite’s domination of the 2020 Oscars and BTS’ Grammy nomination, the Korean Wave has never been stronger. Today, the Kpop industry is worth upwards of 5 billion dollars. So, it came as no surprise when this February, with bated breath and simmering anticipation, Spotify launched its services in South Korea. But many were surprised that it took the largest streaming service so long to approach the world's sixth-biggest music market, having already cemented its presence in 92 countries at the time. The answer lies in the unique disposition of the Korean music market.
As much as the western media would like you to believe otherwise, Korea has an older streaming history than the West. Home-grown 'Melon', an online music store and streaming service, was introduced to Korean citizens back in 2004, two years before Spotify started offering its services. Since then, it has been successful in becoming South Korea's largest music subscription service, with over 28 million users. Not limited to streaming, Melon is also the main sponsor of all the top Korean music shows such as ‘Inkigayo’ and ‘Music Bank’. Since 2009, it has also been organising the famous Melon Music Awards (MMA). Its success in Korea can be attributed to Kakao M’s business savvy.
Kakao M happens to be a bit of a juggernaut. The company possesses strategic partnerships ranging from Studio Dragon Corporation, the studio behind smash-hit dramas likes 'Start Up' and 'True Beauty', to Starship, King Kong, and Cube Entertainment. On top of that, they also license music for several big Kpop acts such as IU, Mamamoo, Seventeen, Zico, Gfriend, and many more. When it comes to entertainment, especially streaming, Kakao holds somewhat of a monopoly, with 37.5% of songs featured on last year’s Top 400 Song Chart from Korea’s Gaon Music Chart being distributed by Kakao M.
Spotify was not the first western conglomerate that tried to break into the Korean market. In 2016, Apple Music’s service arrived in Korea and secured a music contract with three major agencies (SM, JYP, YG), but failed to get a contract with Kakao M, a move which many believed was aimed at protecting Melon’s monopoly in Korea.
However, Melon's 3.6 million subscribers pale in comparison to Spotify’s 155 million. Locally, Melon still had an upper hand, because according to the Korea Creative Content Agency's 2019 survey, 94.6 percent of the surveyors preferred to listen to Korean songs. Thus, before its debut, industry experts advised that Spotify must secure the licenses of as many K-pop songs as possible to succeed, given Korean listeners' huge preference for local, rather than Western, music. If not, Spotify risked having minimal to no impact on the market, similar to Apple.
As predicted, Spotify was unable to secure domestic licensing deals with Kakao; at the same time, the original global licensing agreement between Spotify and Kakao, which allowed users outside Korea to listen to Kakao artists was about to expire, come March. In a drastic move, on February 28th, the entirety of Kakao M's music was removed from Spotify following the expiration of the license. As a result, users outside of South Korea could not access catalogues of Kakao artists. The reason behind the failure to renegotiate is a bit of a ‘he said, she said' situation. In its statement, Spotify used a very disappointed tone, highlighting its efforts in working with Kakao M for over a year and a half to renew the global licensing agreement, while cleverly sympathising with the affected artists whose music, in their words, would now not be available to Spotify’s 345m+ listeners in nearly 170 markets around the world. Kakao, on the other hand, tried to shift the blame onto Spotify by stating that the mishap was a result of Spotify’s policy to proceed with the domestic and global licensing contracts at the same time. Since Spotify failed to get a local license for Kakao's music in Korea, renegotiation for a new global license could not be achieved.
It’s important to note that although Kakao may distribute music for quite a few popular acts, the big four entertainment agencies (SM, YG, JYP, and Hybe, previously known as Bighit Entertainment), home to big names like NCT, Twice, Blackpink and BTS, were hardly affected. Despite this, the backlash from fans was quick and aggressive. Kpop fans tend to be particularly passionate about setting good streaming records and rankings on the charts. Furthermore, many of the affected artists like IU and HyunA were amid album rollouts or had recently released new projects, meaning the effect was even more detrimental.
Thus, Youtube was flooded with confused fan videos explaining their frustration over not being able to stream music. With his explosive tweet, EpikHigh’s Tablo finally broke the camel’s back. Not only did he inform the general public about the music licensing disagreement between Kakao and Spotify, but also called the removal of the group’s music “against our will”.
“Regardless of who is at fault, why is it always the artists and the fans that suffer when businesses place greed over art?”
Fuelled by sympathy for the mistreatment of their Idols, fans trended Kakao M on Twitter, heralding abuses of pure greed at the corporation. Spotify wasn’t left unscathed as #spotifyisoverparty also took over Twitter. With their PR departments in frenzy, both the companies scrambled to reach a deal. However, Spotify’s mammoth global presence and harsher scrutiny of Kakao M may have tilted the balances against the latter. It was finally on March 11 that the widespread fires of frustration in the Kpop community were quelled by Spotify and Kakao’s announcement stating that they had reached an agreement to bring hundreds of K-pop songs back to the global streaming service.
This showdown between Spotify and Kakao transparently displayed that even in the age of streaming, the power of controlling the streaming and access of music falls into the hands of these corporations, not the artists, or for that matter, listeners. The Korean, entertainment industry works hard to avoid scandals because the general public seldom forgives and hardly forgets. Thus, with the loss of public faith, globalisation of Kpop, and a hit in artist’s good faith, Kakao is in turbulent waters. The loss of even a single major artist like IU could result in the collapse of Kakao’s carefully crafted monopoly. With its recent success in getting the global license, if Spotify was seeking an opportunity to lure any of the displeased Kakao artists, and subsequently force Kakao to sign a local license, or if Apple Music that seems to have taken a backseat since its debut, finally wanted to acquire some of the market share by providing Kakao artists with attractive contracts, the timing has never been better.
Unlike other major markets, Korea has been able to evade foreign competitors but with the launch of Spotify Korea and subsequently the manner in which the global music licensing deal between Spotify and Kakao played out, it is evident that the Korean Music Market has evolved into a global playing field.
