By Kwaak Je-yup

K-pop agencies have been most noted for their ability to produce an endless string of catchy tunes and attractive performers, but these prolific music factories will be unable to sustain the rate of success for too much longer.

The domestic music market structure fosters the production of addictive but forgettable hits; similar-looking and sounding new teen idols pop up every week.

While the genre's foreign sound may have generated a cult following that spans the globe, management agencies have yet to prove their capability in replicating that success on a truly global scale.

Recent IPO successes can lift them with financial security, but without fundamental reforms — to favor creativity — K-pop will soon fade into oblivion.

Download, listen and delete

Korean music download services are too affordable, and artists receive a pittance. A song costs only a few cents, and around half of the income goes to distributors.

Generally, users download the monthly top 100 singles at once, as a 150-track download package costs less than $10. Then, the next month comes around.

This structure imposed by the three dominant distributors — Loen Entertainment, an SK Group company, CJ E&M, and Neowiz — has reshaped the music game, changing everything from the strategy of promotion to even the length and content of songs and albums.

Idols make an appearance with a splash hit single — with a catchy hook or dance — for a month or two then disappear from the charts, with few exceptions such as Girls' Generation's successful 2009 single "Gee" or the same year's club sensation "Abracadabra" by Brown Eyed Girls.

They often release so-called mini-albums, which contain up to five fillers that generate as much income as the single when purchased as an album.

Within a few weeks of the track release, they appear on every variety show on TV, telling supposedly personal stories that are just sensational enough for tabloids and blogs.

The words to the songs need to be memorable, easy to sing or mime along to, a trick mastered by girl group T-ARA, created and managed by Core Contents Media.

Music is no longer the end product but the means to stay "hot," or culturally relevant, and that coveted status presents other income-generation opportunities, like sponsorships or performances in musicals, soap operas, or even films.

The large number of members in groups like Pledis Entertainment's After School or SM's Super Junior is due to the possibility of individuals or sub-groups also working in different deals, which maximizes profit.

And they are succeeding: the income statements of SM, YG and JYP, the trio of publicly listed K-pop agencies, reveal that they earned more from side projects such as fan merchandise and endorsements than music sales this year.

Because music is not a reliable source of income, stars are held under much-derided contracts that span more than a decade, often equivalent to their stardom. But agencies say they have to get returns that exceed the investments made to create the stars in the first place.

"'Slave' contracts wouldn't have existed if the pricing structure were better, on par with international standards," said a music industry executive, speaking on condition of anonymity.

Several past lawsuits filed by singers and their parents have revealed that they usually get paid less than 0.1 percent of the profits.

The five members of girl group Kara, managed by DSP Media, were paid only 3 million won each from their 18-billion-won Japanese sales last year. On the verge of dissolution earlier this year, the group and management settled out of court.

Expand or extend?

As a solution to the domestic troubles, the agencies and their artists have taken two options: expand their roster or extend their activities abroad.

There has been some initial success but it is doubtful if this can continue to grow at the current pace.

Increasing the number of acts has not proven itself completely worthy, as the new groups always manage to look secondary at best, best shown by SM's second female group f(x) that has yet to solidify its own style. Critics have panned their music as too similar to songs sung by fellow label-mates Girls' Generation.

JYP showed that it is possible, however, by categorizing its own groups with different genres. The ballad male quartet 2AM, last year, matched its R&B-oriented heartthrob brother group 2PM in popularity, scoring chart-toppers themselves.

All eyes are on YG, which was listed on the KOSDAQ exchange last month, to find if it can succeed with a new girl group early next year and enlarge its portfolio that relies too heavily on the signature group Big Bang.

The major agencies have tried betting on foreign countries this past year, with the industry No. 1 SM leading the way by holding sold-out concerts in Paris and New York, and YG proving its profitability in Japan.

The popularity of K-pop music has happened unexpectedly through the surge of interest in its music videos on YouTube as well as the meticulous reporting by English language blogs like Soompi and Allkpop.

The government may be jumping on the bandwagon now, expressing vocal support with some flag-waving, but questions still remain about the business model.

With the majority of music and concert ticket sales there also going right into the hands of foreign distributors like AVEX or Live Nation, however, a substantial leap in overseas income seems unlikely, at least in the short term.