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Has Japan’s K-Pop bubble burst? Weakening yen hits major Korean record label hard

Philip Kendall Jul 13, 2013
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It wasn’t so long ago that everywhere you looked in Japan there were ads for Korean pop groups, cosmetics and health drinks. More people than ever were snapping up Korean language textbooks and, despite territorial squabbles and a few extreme-right noise makers, Japan was positively leaping on anything prefixed by the letter ‘K’.

Recent reports, however, suggest that all is not well in the K-Pop (Korean Pop music) camp in Japan, with major Korean record label and talent agency S.M. Entertainment reporting losses of more than 70 percent compared to the same period last year. Has the K-Pop bubble finally burst in Japan?

Despite boasting sales amounting to some US$44 million ($4.5 million net) in the first quarter of 2012, Japan’s Livedoor News reported earlier this week that S.M. Entertainment’s profits fell by more than 70 percent during the same period this year, prompting industry analysts to wonder whether it’s finally game over for Korean pop idols in Japan.

The K-pop train may not be running at quite the speed it once did, but the real cause of S.M. Entertainment’s sudden dip in financial fortunes may not be Japanese fans’ indifference to their neighbours’ music so much as the fact that their money is worth less than it used to be abroad.

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“No matter how you look at it, the cheap yen is very likely the major factor here,” said the editor of a Japan-based Korean entertainment magazine. “According to Korean financial analysts, some 70 percent of S.M.’s profits come from overseas, with Japan making up close to 50 percent of that. It’s only natural that, having relied on the [previously] strong yen so much, the company should take a hit now.”

Thanks in part to Prime Minister Shinzo Abe’s recent ‘Abenomics‘ financial footwork, the cost of the yen has fallen significantly for the first time in years, making life a little easier for Japanese companies trading outside of their homeland, but neighbouring countries are feeling the strain as a result.

An S.M. Entertainment spokesperson responded to fears that the Japanese K-pop industry was in trouble, saying that the company had indeed posted much lower profits than in previous years, but stressed that the second financial quarter is set to be far more lucrative, with big names like Girls’ Generation and boy-band SHINee both going on tour and performing at a number of venues in Japan during the summer. Even so, with the yen far cheaper than it was last year, you can be sure that S.M., and many other Korean companies that rely on their Japanese fan-base, will be left fondly remembering the days when their Japanese customers’ yen was worth much more back home.

Let’s just hope for the sake of Japanese K-Pop fans that SHINee and friends stick around even when the takings aren’t quite what they used to be.

Source: Livedoor News