What the Spotify/K-Pop Showdown Underscores About the Future of Streaming

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After the Korean conglomerate Kakao clashed with Spotify over international licensing agreements, the streaming platform removed hundreds of their artists’ catalogs—only to restore them 10 days and much public outcry later.

The Spotify logo displayed on a phone in front of a fiery backdrop
Photo Illustration by Avishek Das/SOPA Images/LightRocket via Getty Images

On February 28, hundreds of Korean artists—ranging from glitzy girl-groups like GFRIEND to rap superstars like ZICO—discovered that their back catalogs had been yanked from Spotify without warning. The songs were rendered unlistenable on the streaming service in all international markets, including the United States. Within a day, it was revealed that the mass exodus was the result of an expired licensing agreement between Spotify and the Korean label/distributor Kakao Entertainment.

Angry and confused fans around the world woke up to empty playlists and pointed the blame wherever they saw fit: Some called for Spotify boycotts, while others decried the perceived “greed” of Kakao. On March 10, the companies finally resolved the dispute, announcing that Kakao’s catalog would return to Spotify and come to Spotify Korea for the first time. But the licensing dispute highlights key issues with the streaming economy, how important streaming has become to global music consumption, and how difficult it will be to put this metaphorical genie back in the bottle.

When the songs were first pulled, both Spotify and Kakao Entertainment put out statements to explain their sides of the story. “Despite our best efforts, the existing licensing deal we had with Kakao M (which covered all countries other than South Korea) has come to an end,” read Spotify’s statement. Kakao Entertainment—at that point known as Kakao M—painted a different picture, asserting that Spotify’s insistence on simultaneous renewals for global and South Korean contracts caused the rift. “As Kakao M’s global licensing agreement with Spotify neared expiration on February 28 2021, Kakao M has asked Spotify to separate the two agreements so the global agreement can be renewed,” read the company’s statement. “However, Spotify currently requests a licensing agreement which included both global and domestic markets and this has extended our discussions.”

Industry observers were quick to point out that Kakao’s myriad business interests as an entertainment conglomerate offered a possible reason for their bullishness towards Spotify. In addition to serving as a label and distributor, Kakao’s majority-stakeholding parent company owns and operates Melon, the predominant music streaming service in South Korea. The contractual clash with Spotify overshadowed the Swedish streaming giant’s long-heralded Korean debut on February 1, which launched without any Kakao material. Keeping this substantive catalog off the platform would obviously incentivize fans within South Korea to use services where they can listen to their faves.

Professor Chang Hoon Oh, who teaches international business at the University of Kansas, compares Kakao withholding its catalog from Spotify to the way Disney ceased licensing many of its films to sites like Netflix ahead of launching their competitor, Disney+. His perspective is that Kakao’s intention with this business dispute was less about preventing Western streaming hegemony—something that seems unlikely to happen in Korea, where music streaming has been in place for longer than in the U.S.—and more about landing the best possible terms for its artists. “Disney is a movie-maker that created a platform; Netflix was a platform that got into making movies,” Oh says. “This isn’t really a competition between platforms so much as a competition between supply chains.”

It should be noted that Kakao is a literal megacorporation that operates South Korea’s most popular messaging app in addition to E-banking services, transportation programs, and more. It’s a classic example of a vertically integrated company; with Kakao Entertainment, it’s able to supply its own music streaming services with songs that it owns and distributes. Oh says he wouldn’t be surprised to see Kakao make international moves with Melon in the future, catering to a niche, K-pop loving audience abroad. (To give you a sense of the landscape, another Korean power player, BTS label Big Hit—soon to be rebranded HYBE Corp.—is reportedly also looking into expansions into sectors like communications and travel.) As K-pop’s popularity balloons, the ability of Korean companies to leverage that success is primed to grow as well.


 

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