[K-pop's New Revenue Stream] The Era of 500 Billion Won Royalties: How K-pop's Revenue Structure Has Changed

① Rapid Growth of Royalties Driven by Streaming-Centered Structure
Global Music Playback, Expansion of Overseas Royalties and IP
Enhancing Settlement Transparency Emerges as the Next Challenge

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The scale of music copyright royalties is approaching 500 billion won, signaling a shift in the profit structure of the K-pop industry. Moving away from one-time sales centered on physical albums, a recurring revenue model based on streaming, world tours, and intellectual property (IP) has become established, making royalties a key growth indicator for the music industry. However, as the market expands, challenges have also become clear. With the rapid increase in global platforms and overseas consumption, the degree to which transparency in royalty settlements can be enhanced is emerging as a crucial factor that will determine both further growth in royalties and the sustainability of the music industry.

◆Threefold Increase in 10 Years... Structural Change Driven by 'Streaming' = Music copyright royalties in South Korea have been one of the fastest-growing industry indicators over the past decade. According to the Korea Music Copyright Association on December 15, 2024, the amount of music copyright royalties collected in 2024 reached 436.5 billion won, with 423.5 billion won distributed. This represents a 7.5% increase from the previous year, and the market, which remained at just over 120 billion won in 2014, has more than tripled in ten years.

The background to this growth in royalties is the shift to a consumption structure centered on streaming. In 2024, transmission (streaming) usage fees amounted to 198.9 billion won, accounting for 45.6% of total collections. Compared to just 24% in 2013, the way people use music has essentially been transformed. As the preference for streaming over downloads has become the norm, the transition in revenue structure has also accelerated.

An official from a music platform commented, "Royalties are no longer a supplementary income to album sales but a key indicator explaining the growth of the music industry," adding, "Streaming is based on repeated playback, creating a structure in which stable revenue is accumulated."

Performance and broadcast usage fees, which had contracted after COVID-19, are also showing signs of recovery. Performance usage fees steadily increased from 39 billion won in 2022 to 54.8 billion won in 2024, and broadcast usage fees, which had plummeted in 2022 due to difficult negotiations, rebounded to 44.7 billion won in 2024. Overseas usage fees have increased for seven consecutive years since 2017, reaching 37.7 billion won in 2024.

The expansion of overseas streaming is another pillar driving the growth of royalties. According to the International Federation of the Phonographic Industry (IFPI), Korean music's global market share is about 3%, a fivefold increase compared to 2017. Spotify reported that global K-pop streaming increased by 362% from 2018 to 2023.

According to Luminate's analysis, the number of global K-pop streaming plays reached 9.04 billion in 2023. Consumption has surged not only in Japan (970 million plays) and the United States (920 million plays) but also in Southeast Asia and Latin America, and this growing overseas share is contributing to the increase in domestic royalties.

Physical album sales also remain robust. Korean artists accounted for half of the top 10 spots on the IFPI Global Album Chart, and Seventeen's "FML" was the world's best-selling album in 2023. However, not all revenue generated overseas is fully recovered. Composer Kim Hyungseok pointed out, "On overseas platforms, it is not uncommon for less to be recovered than the actual royalties due to data matching errors or non-transparent settlement structures."

◆IP Expansion and Financialization... The Need to Advance Settlement Systems = The increase in royalties is also linked to the expanded use of music IP. In 2024, Hybe reported consolidated sales of 2.2545 trillion won, of which direct participation sales such as albums, performances, and merchandise accounted for 1.4453 trillion won. Performance revenue increased by more than 25% compared to the previous year. SM Entertainment also saw improved results thanks to expanded concert and merchandise sales.

Secondary and tertiary uses of IP, such as live performance content, online concerts, and artist documentaries, are also growing rapidly. Given the strong fandom-driven consumption characteristic of K-pop, music IP is being recycled in various forms such as videos and goods, naturally expanding the revenue structure. In addition, everyday usage fees, such as those from karaoke and in-store music, have returned to pre-COVID-19 levels, broadening the base for royalties.

While performances and goods generate one-time revenue concentrated in specific periods, royalties are revenue accumulated over the long term as music is repeatedly played across multiple platforms and countries. Professor Kim Yonghee of Sunmoon University analyzed, "Crises in the content industry often stem from the absence of a revenue model rather than a lack of production capability," adding, "Designing music IP as a stable source of income determines competitiveness."

According to the International Confederation of Societies of Authors and Composers (CISAC), South Korea ranked 11th in the world in 2024 with 276 million euros (approximately 469.1 billion won) in music copyright royalties collected. The royalty market is also gaining attention as a financial asset. The Korea Intellectual Property Research Institute estimates the total value of domestic music copyrights at between 15 trillion and 22 trillion won. As the ways of utilizing copyrights diversify, so do the methods of investment.

However, for royalties to function stably as an asset, there are still many challenges. With the rapid growth of streaming and overseas markets, there are concerns that the settlement system, which was originally designed for the domestic album and broadcast market, cannot adequately manage the expanded market.

An official from the Korea Music Copyright Association stated, "If the settlement system does not meet global standards, disputes with overseas organizations will increase and it will become more difficult to protect creators' rights," adding, "It is necessary to link data with overseas collection organizations and advance digital settlement systems."