Idol singer “member A” recently received his first settlement a full two years after his debut.
“About a year after our debut, I and other friends my age started talking about settlements among ourselves. The standard of success lies upon who gets them faster.”
For the past two years, A has released a total of three mini-albums and held continuous promotions in Korea and overseas as well as broadcast appearances. Every time he brought up payment, his agency would answer that he had not yet passed the ‘break-even point’ (BEP). Though numbers may vary, preparing a team of trainees for debut costs an average of half a billion to a billion Won ($434376-868810 USD).
Settlements usually start after the break-even point is exceeded. Generally, production costs include vocal and choreography training, recording, CD production, music video filming, and on as well as offline promotion expenses. Also, when the group starts making appearances on television shows, wardrobe and hair expenses followed by cost of back up dancers are added. The company pays for the group to be fixed members on shows as well. Additionally, housing, food, and use of studios are also part of the production costs.
In the beginning stages of an album release, agencies generally focus on getting their idols on television shows. When compared to expenditures of 3-4 million Won ($260620-347494 USD) to appear on a show, compensation for appearances are only 300,000-400,000 Won ($260-348 USD). Cable channel ‘Mnet‘, ‘MBC Music‘, and three terrestrial broadcasting networks, a total of five weekly music programs, result in negative earnings. The explanation for this is that though the artist may not earn any money, the company will not go out of business.
Top idol group “Team B” released three albums in 2011 and received two payments in the first and the second half of the year. Team B member C explained, “Even though the first album did well, if the second album doesn’t do well, we may not receive the settlement. The reality is that we worry every time we release an album whether we will exceed the BEP.” As a result, he is also concerned about the production cost: “In the process of preparing an album, if we find something on the company’s budget that is unnecessary, we ask that the cost be decreased. We’re going to have to earn it ourselves anyways.”
When a company schedules their artist for an overseas promotion project against the artist’s will, he or she will still have to carry the financial burden. Fundamentally, the agency has to have the consent of the artist to be able to expand to overseas promotions, but in reality, it is difficult for the artist go against the agency.
Even though these situations may seem reasonable, strictly speaking, this is not what happens in a normal working environment. It’s similar to saying that a company does not pay its employees because there is no profit and that the fault of the management company’s failure is due to the artist.
Predicting the nature of the entertainment market is relatively difficult. Even with all the requirements for a hit, the chances of hitting it big are slim though there are still unexpected success stories.
One agency representative complained, “In the past, there were cases that the production cost and event costs were separately calculated. The artists were paid when the production expenses surpassed the break-even point and the event costs were divided between the artist and the agency. However, most of the companies that took this approach mostly resulted in failure. It is impossible for the company to operate normally and survive in this business if the BEP isn’t reached.”
In Korea, SM Entertainment takes full responsibility of the production expenses, and JYP Entertainment also takes care of the album production cost as well as the entire production cost. This is possible because the two companies have other artists bring in plenty for the company to support other artists. SM Entertainment stated, “A trainee’s expenses to debut and prepare an album are funded by profit made by other artists.” In that case, the artists from those two agencies, start earning incomes as soon as they debut. Of course, revenue distribution is according to the artist’s contract.