Is K-pop the latest victim of the weakening yen?

A weak yen stands between 2NE1 and global domination.
A weak yen stands between 2NE1 and global domination.
Image: REUTERS/Jo Yong-Hak
We may earn a commission from links on this page.

Samsung and Hyundai aren’t South Korea’s only globally renown brands. Across Asia and in developing countries, one of its most recognizable exports is K-pop, the South Korean equivalent of Top 40 music in the US. Known for its stylish ensemble acts, the K-pop industry is a big contributor to the country’s growth; it brought in $3.4 billion in 2011, $180 million of which came from exports. The industry needs those exports to continue growing, given South Korea’s stagnating youth population.

But after a stellar few years of expansion, the industry has hit a wall. South Korean record label SM Entertainment—the Sony BMG of K-pop—reported revenues of $44 million in Q1 2013, but its profits imploded, falling more than 70%, compared with the same period in 2012. Of particular concern is Japan, which accounts for 35% of SM Entertainment’s profits, according to analysts cited in Japan Today.

The reason? Analysts suspect the drop off has more to do with the falling Japanese yen, rather than fleeing K-pop fans. Here’s a look at the trend:

Image for article titled Is K-pop the latest victim of the weakening yen?

The yen has weakened largely because of Japanese prime minister Shinzo Abe’s economic policies, known as Abenomics, which have rapidly expanded the money supply. Since Abe became prime minister in November 2012, the South Korean won has strengthened nearly 20% against the Japanese yen.

Seoul, South Korea - South korean K-Pop boys group SHINee, performs onstage during the 2013 Miss Korea Beauty Pageant at Sejong Culture Center in Seoul, South Korea on June 4, 2013. (Photo by Lee Young-Ho/Sipa USA) (Sipa via AP Images
K-pop sensation SHINee shows off some sick moves.
Image: Sipa via AP Images

For adoring Japanese K-pop fans who want to see SHINee, pictured above, in concert, the weakening yen makes their ticket purchase a lot less valuable to SM Entertainment. A concert ticket that cost around ¥8,000 ($80) back in November would have earned SM Entertainment 109,840 Korean won. Now that same ¥8,000 ticket amount earns only 89,584 Korean won. Ouch.

Still, the falling yen can’t be blamed for the entire 70% drop in profits. Waning interest in K-pop could be partly responsible. The Japan legs of blockbuster tours by SHINee and Girls’ Generation, another K-pop sensation, will need to hold up this summer. If not, that might signal that K-pop’s global conquest is more of a bubble than a bonanza.