Lee Soo-Man built his SM Entertainment into a music powerhouse. Swept along by the Korean Wave, it’s conquered much of Asia
For a look inside SM Enter- tainment’s K-pop marketing machine, stop by the Lotte Young Plaza department store in central Seoul this summer. For two months, South Korea’s top record label and music talent agency is branding the six-storey building with a giant banner of its latest act, EXO, a boy band. SM has taken over the basement with a pop-up store selling everything from bags, clothing, folders and postcards to collector’s edition CDs of Girls’ Generation, Super Junior and the company’s other groups.
The company kicked off the K-pop phenomenon in the 1990s. With its boot-camp-style training for the performers and production-line approach to the music, it perfected the model for churning out acts that storm Top 40 charts and pack concert halls across Asia and beyond. An SM report lays out the industrial scale of the enterprise. For spots in its groups, it receives 300,000 applicants in nine countries every year. Its training facility in Gangnam is 2,550 square metres. It collaborates with 400 songwriters worldwide and samples some 12,000 songs a year. From 2010 through last year, its artists played to a total audience of 2.5 million. Its YouTube page gets 1,000 views a second. One key to its success: It was the first Korean label to market “bands as brands”, says Bernie Cho, an ex-MTV executive and now president of Seoul entertainment agency DFSB Kollective.
The SM model is immensely profitable. Last year, net income almost doubled to $38 million on an 82 percent jump in revenue to $225 million. The company, which went public in 2000, now boasts a market capitalisation of $660 million—much bigger than its closest rival, YG Entertainment, the label of global superstar Psy. All this, for the second year in a row, puts SM on Forbes Asia’s list of the best 200 listed companies in the Asia-Pacific region with an annual revenue of under $1 billion.
Like South Korea’s manufactur- ing conglomerates, Lee realised that profits beckoned abroad. As the hallyu, or Korean Wave, of pop culture washed across Asia, SM jumped in, becoming the first Korean label to join with overseas players, notably Japan’s Avex Group. Mark Russell, author of Pop Goes Korea, says that was key to breaking into a music market 20 times as big as South Korea’s. Today, SM maintains overseas offices in Japan, China, Hong Kong, Thailand and the US.
(This story appears in the 06 September, 2013 issue of Forbes India. To visit our Archives, click here.)