Fandom Reimagined: K-POP in the Metaverse
Rabid fan culture in Asia means its primed for takeoff with NFTs
Gangnam Style almost did not come to be. At 34 years of age, few imagined that Psy would become a worldwide sensation, let alone the person that would single-handedly propel K-POP beyond the shores of Asia into the West. The comedic, controversial rapper also became the first person to join YouTube’s “Billion Views Club” with his infamous music video.
Since then, K-POP has been the number 1 cultural export from South Korea. BTS, a Korean boy band, generates $5 billion in revenue annually and accounts for 0.3% of South Korea’s GDP. Its fans comprise the 2nd largest “army” in the world, after the US army. Girl groups are rising up to global audiences too: BLACKPINK was the first all-female K-POP group to perform at Coachella in 2019, to great fanfare.
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Fan culture in Asia is very different from the West
K-POP fans are highly spirited. They are willing to support their favorite stars (financially) and prop them up to success. Fandom is centered around buying up extraordinary amounts of physical albums and merchandise. Top fans in China buy up entire pallets of albums to push up their favorite stars’ popularity rankings.
These large purchases earn them leadership status in the official fan clubs. K-POP is dominated by large entertainment agencies that scout, train and introduce all the biggest stars and groups to the world. The big 4 agencies today are SM Entertainment, YG Entertainment, JYP & HYBE Corporation. Entertainment agencies fly their top fans out every weekend to attend concerts as VIPs.
It’s astonishing to see the album sales for the top K-POP groups.
Assuming each album costs $20, the top 5 groups have generated $1.5 billion in album sales alone. Albums contain a physical CD, but that’s the least important part (who even has a CD player these days?). Fans buy albums for the photo cards, posters, and other memorabilia of their favorite stars that are included within. It functions like a Gacha machine: you don’t know whose photocard you’re going to get, and often you’ll have to buy multiple albums to get one of your favorite star. Ownership helps fans feel a closer affinity to their stars.
The differences in fan culture are already reflected in business metrics:
HYBE’s total revenue in 2020 was $673M, of which $276M came from albums alone (41%), $219M from merchandise (32%), and $27M from fan-club products. This is $521M in revenue from physical albums and merchandise related to K-POP.
In contrast, Universal Music Group’s total revenue for 2020 was $8.9 billion. Yet only $217M was from merchandise (2% of gross revenue). Universal Music Group’s artists include many top artists from the West, such as Taylor Swift, Billie Elish, and Ed Sheeran.
NFTs are an improved version of fandom
Albums, photo cards, and other physical memorabilia have no utility except they bring their owners a psychological sense of affinity and happiness.
NFTs can do the same thing, plus:
Enable exclusive token-gated experiences, such as concert ticket presales, private fan channels, and meet-and-greet with stars.
Include dynamic digital media that can change and evolve based on actions taken, creating elements of gamification and interactivity.
Function as a transparent and unalterable record of “fandom.” Everyone can see who the top fans are.
It can be easily traded on secondary markets.
Have known scarcity: you can see precisely how many of each item there are
Music NFTs are a particularly interesting new type of collectible that can be sold to fans
Unreleased tracks or new songs can be packaged as limited-edition NFTs. It’s super cool to “own” a song by your favorite artist recorded on the blockchain. A social flex.
Even though music NFTs may not confer anything significant other than bragging rights today, there is the potential for royalty sharing and IP co-ownership in the future.
So..how do we do this?
The ecosystem is pretty vibrant today. I’m probably missing several Korean-native companies and partnerships, but the infographic above captures the meat of things. Three main players are on the search for the Holy Grail of K-POP fandom:
Established KPOP Agencies: Salivating at the chance to print more money
Established Web 2 & Web 3 companies: Smelling the business opportunity in partnerships
Newer startups: Passionate and driven by their creative visions
This leads us to a few interesting approaches to K-POP x NFTs today
Partnership with top K-POP agencies and top stars. This makes the most sense because of the massive fan bases that are ripe to tap on. However:
Top agencies have been trying to do this in-house and will move everything in-house when they can. YG and SM entertainment are actively hiring NFT teams. Corporate culture in Korea is cut-throat and heavily profit-driven.
Top stars are very busy and can earn more from brand deals. Selling NFTs is not their priority.
Fear of backlash from their fans against NFTs
Deep industry connections are crucial for success, as it is crucial to convince the agency/star to work with them in an authentic way. Example: Dunamu and HYBE established a joint venture to release digital collectibles that capture exclusive moments of their top stars via Momentica
Focus on 2nd-tier artists. Many talented artists do not make it big in the K-POP scene because of competition, or they get too old, and the agency stops actively promoting them. Few artists make it big after 25 years of age due to existing biases. Yet, they still have sizeable fan bases. For example, SISTAR was a popular girl group in the early 2010s. Today, they still have 900K+ Spotify followers and 585K Twitter followers.
These artists are more open to new opportunities. If one of them achieves remarkable success in the future or shows results through their NFT endeavors, others will follow behind closely.
Built a new entertainment agency from the ground up and grow its own IP content library. These often leverage NFTs as a fundamental tool for community co-ownership, nurturing fan ambassadors and experiences.
It’s arduous because it involves rebuilding many facets driving the K-POP industry today. It takes grit and perseverance. But if it can remove middlemen & empower talented but marginalized creators, I am rooting for someone here to succeed. Modhaus is launching a K-POP girl group called TripleS, made and operated by its fans using NFT voting. Gimme is developing its own virtual K-POP star.
Fandom NFTs: Primed to explode
Fandom NFTs — defined as social/fan NFTs released by popular stars — are going to be the next big thing. And I predict this wave will start in Asia before extending out to the west because of the cultural differences in fan behaviors.
The wave will begin once the right product is found. Many startups are already experimenting with new ideas and innovating. If I were to guess at the product-market fit: it would be a dynamic collectible NFT that allows fans to co-create with one another and their favorite stars. This captures the true potential of the digital medium instead of re-creating the static, loot box-type mechanics of today’s K-POP memorabilia.
The distribution of these products will be more akin to NBA Top Shot than Bored Ape Yacht Club. By this, I mean:
More mainstream buyers than Web3-native buyers.
A large supply and low entry price point make it highly accessible to the young teenage girl who still receives pocket money from her parents.
Rare, highly-coveted items that wealthy fans will want to own and flex.
The tipping point will come when early adopters flex their favorite digital collectibles to the rest of the crowd and celebrities actively discuss their NFTs on social media. This might take 6 months, 1 year, or more. As we saw with Top Shot, once attention gets going, it can explode quickly. I’ll be watching for it.
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Source: Ingrid Chan, K-Pop’s dominance in Merch Sales