The Gangnam Phenom

Korean pop culture may not (yet) turn heads in Los Angeles or London, but its impact — economic as well as cultural — across the developing world is startling. First taking off in China and Southeast Asia in the late 1990s, but really spiking after 2002, Korean TV dramas and pop music have since moved to the Middle East and Eastern Europe, and now even parts of South America. "Gangnam Style," a music video by the rapper/satirist PSY, has been viewed 292 million times since it was released in July. Since then he’s been welcomed with open arms, and has been spotted teaching several celebrities his iconic "horsey dance."

Indeed, the rise of K-Pop is the bellwether of a variety of trends that are changing the global economy (and emerging markets in particular) in fundamental ways. Its success as a product – but, more importantly, as a cultural brand promoting Korean exports ranging from soft drinks to cosmetics to consumer electronics — suggests that Western countries aren’t likely to have a lock on the hearts and wallets of developing countries for long. More generally, it illustrates the new reality that the North-South pattern of trade and cultural exchange that has dominated the world since the ascendance of European colonialism is giving way and making room for unexpected soft power.

South Korea’s economy, reclassified by the IMF as "advanced" back in 1997 (along with Singapore and Israel), has doubled in size since then. But unlike most advanced economies, a disproportionate share of its exports (and foreign investment) goes to developing countries. In 2011, Korean exports to China alone totaled $134 billion — more than U.S. exports to China and about the same as those from the European Union.

Pop culture, in reality, is no more than a blip in the total Korean economy, comprising $137 million in exports out of a $1.5 trillion in 2011. However, while Korea mainly focuses on staying in front of the world’s electronics, auto, steel and shipbuilding industries, pop culture has proved surprisingly important to Korea’s commerce. A survey of 300 companies by the Korea Chamber of Commerce and Industry found that 52 percent considered the Korea Wave — the term for the success of Korean popular culture abroad — influential in increasing exports. Another survey (this one of households across East Asia) by the Korea International Trade Association found that 80 percent of respondents said the Korean Wave led them to buy more Korean goods. "There’s a confidence to the ‘made-in-Korea’ label now," explained Tyler Brûlé, the editor of Monocle, the London-based lifestyle magazine. "It’s fascinating."

So where did all of this come from? Korea made waves in television before music. With the rise of cable and satellite systems, the global appetite for entertainment became insatiable, and American shows were often too expensive for poorer countries to carry. Korea’s on-the-make entertainment industry filled the gap in Southeast Asia in the late 1990s with inexpensively produced soap operas akin to the telenovelas sweeping Latin America.

But a good business became a fabulous one only in 2002 with the series Winter Sonata, a twisting, turning tale of lost loves, near-incest, and sudden blindness, all served with a heavy dollop of nostalgia. Regional tourism to Korea spiked, and suddenly all things Korean were cool. Then, a couple of years later, Jewel in the Palace, a historical drama about a common girl with a heart of gold who worked her way up in the royal kitchens through piety and sheer will, did even better.

If soaps represented the gateway drug to Korean culture, pop music, delivered worldwide by the Internet, was the hard stuff. Korean music labels had been trying to penetrate overseas’ markets for decades, but with little success. The breakthrough came in the form of SM Entertainment’s teen girl star, BoA (no misprint), who made it huge in Japan before conquering the rest of East Asia. Rain (né Jung Ji-Hoon) a singer and actor, followed with the pan-Asian hit soap, Full House, and slew of albums that went platinum.

Each success has made the next Korean entertainer easier to sell in places where many people would have trouble pinpointing the country on a map. But there’s no denying that the Korean entertainment industry seems better tuned to the global zeitgeist than any since the rise of Hollywood. "Korean Wave dramas feel very straightforward, emotional, and passionate," explains Kim Jiyoon, of TBWA Korea/Media Arts Lab.

If this story had ended there, South Korea would be an impressive cultural force around Asia. But, bizarrely, programs like Full House, Winter Sonata and Jewel in the Palace kept finding new audiences. They took off in Egypt and Iran, in Turkey and Eastern Europe.

Back in 2007, I received an email from a woman in Egypt thanking me for blogging about the singer Rain and other K-pop subjects. Winter Sonata‘s theme of "innocent love matches our culture and customs," she wrote. "After watching those heart-touching dramas, I got back to writing poetry."

Which gets at one major reason Korean culture has found a home in so many places. Contemporary American pop culture strikes much of the world as cynical and harsh; Korea’s, by contrast, features family, strong social connections and innocent love, all in an aspirational, modern package. The fantasy world of K-pop includes the newest smartphones and luxury cars, but it is still strongly rooted in a safe morality. "Korea has a way to promote very clean-cut and very beautiful artists who are considered ‘non-problematic’ by adults," said Charlotte Naudin, a prominent Korean drama fan from Paris.

The unintended consequence of all this — indeed, the mighty tail that wags the K-pop dog — is the impact on the marketing of Korean products. Product placements are rife in Korean programming, with stars wearing sponsors’ clothes and flaunting corporate logos, with pictures and links on the programs’ websites. Cosmetic exports have been a big winner, up 35 percent last year (reaching $805 million), thanks in large part to the glamorous images of Korean actresses from the popular dramas. And, of course, it works for more familiar Korean exports like computers, phones and flat-screens. K-pop "opens doors to pockets of audiences who may not have considered LG before," said Kenneth Hong, director of international communications at LG Electronics.

"Even though the stars become commercial, fans see such trends as another chance to feel a sense of kinship," said Moon Soomee, global PR manager at Cheil Worldwide, the Seoul-based advertising agency. She points out that Korean artists have exploited new technology to achieve a remarkable degree of intimacy with ordinary people in dozens of countries. "By using these social/digital media, K-pop stars become someone like me, someone very approachable, someone who’s very close to me."

One striking example was how JYP Entertainment’s 2pm worked with water purifier company Woongjin-Coway to create a YouTube video with simple dance moves, asking viewers to record and upload their own. Scores of fans from Vietnam, Indonesia, Brazil and more obliged. Or how cosmetics chain Etude teamed up with YG Entertainment’s 2NE1 (a four-girl hip-hop group) to "leak" a teaser for a music video and let their frenetic supporters embrace it as their own. All told, K-pop fan clubs (outside Korea) have some 3.3 million members — and that figure pre-dates "Gangnam Style."

K-pop’s latest conquest: South America. U-Kiss had a concert in Colombia in May. Big Bang (one of the most popular groups in Korea) has added Peru and Brazil to its tour, heading there this November after two shows in the United States. Even Drunken Tiger, Korea’s most respected hip hop artist — but too old and edgy for your usual K-pop–has developed a following in Brazil.

While it’s difficult to isolate the factors affecting Korean brand acceptance, the numbers following the Korea Wave have been gratifying. In 2006, according to one survey of 15,000 people around the world, consumers faced with a choice of an American or German product and the Korean equivalent required a 34 percent discount to buy the latter. Five years later, that discount had narrowed to 23 percent.

The Korean Ministry of Culture, Sports and Tourism is certainly doing its best to exploit the positive spillovers to commerce. It is expanded the number of Korean Cultural Centers in foreign cities (to 28 by the end of 2012), and it has teamed up with the Federation of Korean Industries to form the Bureau of Culture Diplomacy that explicitly uses soft power to push Korean exports.

Linkages between popular culture and commerce are hardly a novel phenomenon. What is new is the evidence that a relatively small country with a language nobody else speaks could become so trendy so quickly, and convert the new image to soft economic power so effectively. It’s become a cliché that digital technology smashes barriers of all sorts. Korea’s dazzling success with pop culture suggests we’re not even close to understanding the breadth and depth of the impact on global commerce.