By Siti Sarah Sofea
If you are a fan of K-pop, you are likely to know of the "Big 3" or "Big 4" term, which is basically the main companies that dominate the industry and have built their legacy in the industry. The Big 3 refers to SM Entertainment, JYP Entertainment, and YG Entertainment while the Big 4 includes HYBE Corporation as one of the big companies. Usually having big names in K-pop as part of their company, these companies are referred to as Big 3 or Big 4 due to their massive influence throughout the history of K-pop.
Surely you did not think that their success and influence would just pop out of nowhere like mushrooms after the rain, right? In order to expand and control their power and influence, there would be various strategies employed, among them vertical integration and horizontal integration.
While these terms sound less interesting than the drama plot you might imagine in your head (e.g., kidnapping, sabotaging, and threatening their rivals), the two business strategies are more prevalent in the industry than you can imagine. Does the acquisition of Pledis Entertainment by HYBE Corporation sound familiar to you? What about the investments in YG Plus and Weverse? Have you noticed that some actors or models are often featured in music videos of celebrities from the same company? These are among the various examples of horizontal and vertical integration that happens in the K-pop industry, but what exactly are these strategies?
Horizontal integration and vertical integration are the strategies often used to expand businesses. Horizontal integration is related to the merging and acquisition of companies, while vertical integration refers to the production and distribution aspects.
For a brief analogy, imagine yourself as a fruit stall owner. When you merge with or buy other fruit stalls for reasons such as joining forces, reducing competition and making use of resources and production on a larger scale, you are implementing horizontal integration. When you grow your own fruits, process the fruits, and sell them directly to the customer, you have wide control over the whole process of production and distribution—a vertical integration.
“If all the big companies keep using these strategies to expand, wouldn’t the fact that they could possibly become the oligopoly or dominators of the industry be a threat to smaller companies?”
That is such a valid concern, as the concentration of ownership among the big companies will make it harder for the smaller companies to thrive or even survive in the K-pop industry. That is why some of them also implement a similar strategy (most often horizontal integration). In order to compete with the bigger companies, some entertainment companies decided to acquire or merge with other companies to improve their forces.
Announcing their aim to grow better globally, ABYSS Entertainment decided to acquire and merge with MAKEUS Entertainment. In the same year, Play M Entertainment and Cre.Ker Entertainment are seen to be merged as IST Entertainment, while WM Entertainment is acquired by RBW Entertainment as a subsidiary label.
However, it is important to note that even these smaller companies are not that small and have their own influence in the industry. IST Entertainment itself is a part of the biggest co-publisher company, Kakao Entertainment which houses various other companies such as Antenna Music, EDAM Entertainment and Flex M (Horizontal integration at its finest, huh?).
Small companies, especially independent companies, in reality, struggle in various aspects, from resources to management and from production to distribution. The K-pop group VANNER revealed that all of their members including their CEO had to work part time jobs in order to support their career as a singer. Their leader had to become the social media manager and handle matters such as scheduling and media content due to the lack of resources in the company. With their talent and perseverance, they won the reality show Peak Time, signed with a better company with better resources and finally were able to gain more recognition in the K-pop industry. This shows that, if a company is not able to expand itself, the struggle to remain in the industry would be challenging.
Knowing and understanding the strategies of horizontal integration and vertical integration are not only useful for K-pop fans but for media consumers in general too. If we are aware of which company merges with which company or how a company manages the production and distribution processes, we will be able to discern the factors that influence the type of media we consume. Then, we will be able to make informed choices about artists or content creators that we support instead of blindly or passively consuming media content.
All in all, be it the K-pop industry or the media landscape you are more familiar with, knowing the different strategies employed by the companies, particularly on horizontal integration and vertical integration that we have discussed previously, will help us be more media literate and create a healthy and responsible media landscape.
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