Hallyu, the surging wave of global Korean culture, without China.

In 2006, the Korean entertainment company CJ E&M expressed an explicit goal that “everyone will watch at least 2-3 Korean movies a year, eat Korean food 1-2x per month, watch 1-2 Korean dramas per week, and listen to 1-2 Korean songs per day”. ”Impossible”, any observer would have scoffed. Yet today, with the runaway success of Squid Game, which is the most popular Netflix show in 92 countries, this goal seems imminently attainable. Netflix have recently announced a plan to invest half a billion dollars on Korean content in 2021.

Most Western observers will remember their first exposure to Hallyu, or the Korean wave, through a hit song in 2012 called Gangnam Style, which they helped to catapult to 1bn views with both mockery and fascination. The Chinese will remember their first exposure to this phenomenon much earlier. In 2005, the popular broadcasts of Yellow Handkerchief and Dae Jang Geum (Jewel in the Palace) kicked off a long obsession with Korean culture. However, in 2010, there was a stampede which caused hundreds of injuries at the Super Junior concert at the Shanghai World Expo, leading to a backlash against “brainwashed” Chinese fans and hallyu. Over the years, and culminating with Korea getting the THAAD defence system, China has banned Korean imports time and time again, forcing Korea to diversify from its giant neighbour into other markets. Why has South Korean culture managed to go global? Perhaps because its society sits at the forefront of trends in technology, capitalism, demography, and consumerism, it allows its artists to foreshadow a future for societies everywhere.

After all, Parasite and Squid Game comment on growing inequality and the absurdity of so called “meritocratic” systems across the world. At heart, Squid Game is a fierce critique of the zero-sum nature of rat races; no wonder the Chinese have banned it, despite reports of millions of secret views. It is too dark, too close to social anxieties at home.

The ability to accurately capture the zeitgeist of the day is extremely lucrative: Parasite has grossed USD 259mn, and Netflix proudly claims that the Squid Game series has generated USD 900mn. But the crown jewel of Korean cultural export is a boy band named BTS, which generates an estimated USD 5bn a year, or nearly half a percent of the entire South Korean GDP.

The boy band’s exceptional success rests on its early content, with song lyrics that capture the anxieties of the “N-po generation” in Korea, which refers to the number of things that people of the younger generation have given up on attaining, such as a career, a home, and marriage due to a combination of asset inflation, lack of job opportunities and an excessively competitive environment. Sound familiar? Indeed, it is very similar to the “Tangping generation” in China, the “lie flat” generation that I have previously written about, or even the notorious avocado-toast eating millennials in the United States, suffocating under the unattainability of the Boomers’ generation. Like in China, Korean youth unemployment rates hover around 20%.

But unlike mainstream rappers or social media influencers in the United States, who turn to nihilism, either expressing great anger with society or withdrawing into self-obsession, BTS’ content is imbued with a sense of community, a sense of elevation and hope. Their tagline is “Music and Artist for Healing” with a new narrative to “Love Yourself” being promoted to focus on mental health. Tune into any of the music videos and you will see amazing production, a technicolour wonderland of music, dance, and camaraderie. BTS’ fan-club is called ARMY (Adorable Representative M.C. for Youth), which number over 40mn globally officially (almost as large as the entire population of South Korea), and just like parents staying together for the sake of the children, BTS have said over the years that the reason why the 7-piece group hasn’t split up is on account of their devoted ARMY. We talked to several ardent fans, including from the Philippines and France, who commented that they felt that BTS was producing music for them, with positive messages that they write themselves, rather than Western artists who produce music to glorify themselves. They also expressed feeling refreshed that BTS is not about sex at all, unlike the highly sexualized celebrity culture in the West. So, after decades of “sex sells,” the loneliness and alienation of the modern individual drives the value of true community. The fans we spoke to have found charity groups such as food drives, tutoring groups and most importantly, close friends within the ARMY. This sense of community also drives serious monetization. The app that Hybe owns, on which you can buy the entire world of BTS (including merchandise and concert tickets), generates an average revenue per user of USD75 per month! For comparison, Spotify’s app generated a global ARPU of USD 5.25 per month in 2020.

The Chinese are afraid of the clout of these artists. Much of the recent regulatory push against “sissy boys” or “fan club culture” is a rejection of Korean culture. The first objection is geopolitical: the Chinese view Korea as a US ally; they do not want the young to fraternize with the enemy. The second objection is metaphysical: images of fans throwing away milk into the gutters in a show of horrific decadence led the Chinese to understand just how powerful these pop stars can be. A campaign to encourage fans to purchase milk for the QR codes under the caps led to excessive bulk buying as fans demonstrated their loyalty to their idols. With 40mn unofficial ARMY members, BTS’ fan-club is nearly 40x larger than the US army and 20x larger than the Chinese army. When directed towards buying goods on the Weverse app, this devotion can be very lucrative; however, it can also be potentially very dangerous. The irony is that the greatest risk for the BTS group is the mandatory and universal military service for which many of the members are now overdue. To guard against this risk, a “BTS law” has been passed in South Korea where K-pop entertainers who have received government medals for helping spread or elevate the country’s cultural influence around the world can apply for deferment of their military service. All seven meet the requirement when they were awarded the medal in 2018.

There are critiques of Western culture – or shall I say, of commoditized, capitalistic, and secular culture raging across the world. From the Muslim Brotherhood to Wang Huning’s (the leading strategist within the CCP) “America Against America” to Korean pop culture, we are seeing different responses to this cultural anxiety. Where Chinese regulatory policy was largely geared towards remediation of this phenomenon, we believe Hybe is the best (certainly most lucrative) antidote to the nihilistic nature of individualist societies.

BTS has been the target of many critics, including the allegation that they are not serving Korean Culture but are focussed solely on taking money from young girls’ pockets. BTS released the song “Idol” as a direct response to this critique. But we see ARMY as a community that young people can actually afford to belong to, which fulfils a spiritual need in the absence of realizable aspirations for home ownership or career satisfaction. Whereas once Korean culture exports were reliant on China, now Korean culture has proven itself as a global culture, and Hallyu can finally stand on its own two feet even without China.

Disclaimer: Quaero Capital managed funds hold positions in Hybe, the group that owns BTS, Justin Bieber, and Ariana Grande.