Fuckin’ mergers – how do THEY work?

mergers

A few people have asked me over the last few weeks if I had any thoughts about the SM/Woollim merger.  If you’re one of those three people, this post is for you.  If not, I’ll try and make it entertaining enough that you don’t fall asleep while reading it, although if you feel the need to slice open the veins on your forearm and pour caffeine directly into the gaping wound just to keep your eyes open during this shit, I won’t blame you.  I certainly melted down and mainlined a bunch of Cadburys just to write this.

I’ll start by mentioning that k-pop fans love telling both idols and record labels how to run their shit.  This is truly fuckin’ hilarious to me, and I’ll never fully understand why they bother.  I guess these people go on forums and articles just for stroking their own egos and feeling reinforcement of their pre-existing opinions rather than for actually learning any fresh information (besides what colour their bias painted their toenails this week) or, heaven fucking forbid, improving their mental processes.  When complex and nuanced issues like industry mergers, lineup changes, lawsuits etc come up, you’ve got masses of extremely derpy and unqualified people who mostly don’t even fucking know what half the shit entails telling people with decades of experience in the music business that “it will all be okay as long as everyone involved does what I say they should do”.  You can’t possibly imagine how much of a joke these people look like to someone actually in the industry.

Of course, point this out to them, and the advice goes down quicker than a Sacha Grey audition tape:

sgat

That’s my reply to a question thread in Onehallyu, and the red box contains my downvotes.  Collecting more than a couple downvotes for a single comment on Onehallyu is actually quite tricky unless you’re a completely obvious troll, so I’m impressed that I managed to achieve this result with nothing more than my sincere and honest opinion.

The reason why I bring this up (besides that it obviously amuses me to do so because I’m a cunt) is to explain why I’m not tackling the issue of the SM/Woollim merger from the angle of “do I think it’s a good idea”, or “did SM do the right thing” or even “did Woollim do the right thing”.   I’m not on the inside of the situation so I don’t know how things played out, so if I started casting judgement and saying “company [x] should [y] because I KNOW WHAT’S BEST” this would make me as stupid as the derps who “knew” that T-ara were bullies and that Tablo got his degree from Kinkos.  What I can do however, is tell you how mergers like this do typically play out in the industry, and put you in the shoes of someone who would actually say yes to a merger to help you understand some of the factors that may influence the decision, and I’m going to do it with one of my quasi-fanfiction “scenarios”.  You love my scenarios, yes you do.

So “chin up”, everyone, and picture this:

You’re a moderately-successful Korean male singer in your 30s.  You’re conscious that you’re actually pretty close to JYP’s age, and while you’re not as ugly as him yet, you know that it’s only a matter of time, and there’s only so much surgeons can do.  You’re certainly no dummy – in an industry dominated by appearances and image, you know that even with the help of the best clinics in Gangnam, your days in the limelight are numbered in triple digits at best.

It’s okay though, you’re not bitter.  By any objective standards, you’ve had a good run while it lasted.   In an industry where most stars vanish almost as quickly as they appear, you’ve managed to sustain a career for over a decade – no small feat.  However, most of your money went back into the company who had signed you up and you don’t have much to show for it all financially.  Looking at the situation gets you thinking about your future: wouldn’t it be a lot nicer to be the person on the other end of that contract, collecting the money and deciding where it goes, rather than just getting piecemeal sums for all your efforts?  With this thought in mind you take out loans from some sympathetic investors, start your own k-pop label “Open Goatse Entertainment” and begin scouting for some hot new talent to groom.

Three years go by, and you’ve got yourself and your staff at OG Entertainment a nice office, a recording studio, a dorm and a place to rehearse your new groups.  You’ve also gotten yourself heavily into debt because you had to take out multiple loans for all this shit from friends, parents, banks and everywhere else you can think of, and you haven’t started actually making money because your groups haven’t even debuted yet.  Most of your staff are working without a wage and have second jobs just to make rent, but you’re confident in the abilities of your new boy group CUMRAG (Choreographed Underaged Males Reawakening Antipathetic Girls) to bring in the revenue once they debut – they’re pretty tight musically and they’re certainly hits with the ladies in the office who assure you that they “have lots of potential, especially that one, what’s his number I lost it out of my phone”.  You’ve also groomed up girl group SPUNKMOP (Symbolic Prostitution Usurping Naive Korean Men Of Paychecks) but you’re not sure how well they’ll do – you mainly just started them up because it makes your label’s portfolio look more “rounded” to also have a girl group, and you figure it’s better to have girls in the building than to not have girls in the building.  After all what’s the point of being a label boss if you can’t be around pretty girls?  Also it’s good to have people around who can do guest spots on the boy group’s ballads that you don’t have to pay extra for.

Debut time for CUMRAG rolls around, and the pressure mounts.  Two thousand physical copies of their debut mini-album THIS IS CUMRAG are pressed and printed, and spots are booked on all the major music shows for the group to perform.   You and all your staff cross their fingers and hope that feature track “Romantic Towel” does the business…

Then something absolutely fucking terrible happens.  The group becomes a massive monster hit.

The group is received enormously well, far beyond your expectations.  THIS IS CUMRAG sells out its initial physical run in less than two days.  There’s demand to make more, but you can’t afford it right away – you’ve already taken out your umpteenth fucking loan just to get this far, and shovelling the meager amount of money from the first pressing and the first few digital sales straight back into the expenses of more product production is the very last thing you wanted to do with the money when you’ve got masses of debt plus unpaid staff who’ve been working for you diligently for years in the hope of a payoff… but what choice do you have?  Also, now there’s a demand for merchandise that you’d be crazy not to fulfill… so you hire a company to make up posters and other crap, once again with borrowed money.  To make matters worse, the first cray-cray fangirls have tracked down your company and are starting to saesang their oppas and slide their menstrual pads under the dorm doors… you’ll need to rethink building security, you weren’t prepared for this bullshit.  Catering to all this sudden success before you’re financially ready is ironically actually threatening to bankrupt you completely – why couldn’t the group have gotten successful gradually?

Fortunately for you, as the success of CUMRAG has gone national, the banks don’t mind throwing more money at you, knowing that they’re going to get it all back eventually (plus interest)… but each turn from the group just generates more success, which means more loans to pay for it, just when you thought the loans were ending.  Follow-up album “FEEL OUR CUMRAG” with its smooth feature track “Absorbing Our Love” sells out of its initial run of 10,000 physical units even quicker than the debut album, and every dollar you spend generates another ten dollars worth of demand, but to fulfill this demand, you need to spend more money and more time on continually expanding the business.  On top of this, everything around organising this shit is becoming far more work than you ever anticipated.  You have to oversee not just music production, artist training, choreographers, stylists, media liaison, schedules, manufacturing deals, distribution deals and video product, but also rent, cleaners, coffee machine filter changes, office supplies, vehicles, bills, plumbing, workplace arguments and whoever keeps stealing the milk from the fridge.  Whatever happened to just sitting back and collecting the money like you had planned?  It didn’t seem this hard for your boss back when it was you who was the singer.  Due to all this you’ve been pulling 22-hour days for weeks straight and your partner has become a stranger, you barely see her and she’s also getting a bit fed up with you bringing work home.  She tells you one day only semi-jokingly that she may as well move out and take the kids and you don’t even have time to talk about it with her because you have to field CUMRAG’s love calls from sponsors after they were just on some shitty variety show that you can’t remember the name of because the office phone is diverting to your mobile after hours.  Meanwhile, your girl group SPUNKMOP has been languishing doing very little, simply because you haven’t have the time to spend with them or the infrastructure to support them, your still-tiny label has had to devote just about every scrap of available energy and manpower to maintaining CUMRAG, so they’re on the backburner for now, and they don’t mind telling your staff exactly how they feel about it.  A dorm full of broke and pissed-off girls jealously eyeing off their labelmates’ success and pestering you about “their turn” is the absolute last thing you need right now on top of all this other shit.

Then one day, you receive a phone call from a much larger rival company, HappyEnding Entertainment.  They say that they like CUMRAG and want to discuss a mutually beneficial business deal.  Intrigued, you arrange a meeting.

In the boardroom, the guys from HE Entertainment are adamant -“HappyEnding needs a CUMRAG, and we’d like to use yours.”

“But what about my Open Goatse?”, you ask.

“We realise that your artist is becoming a relevant market force and we’d be willing to buy out Open Goatse completely.  We’d rather work with the market strength of CUMRAG rather than compete against it.”

You object “I want creative control over my artist, I refuse to give them up, I didn’t put in all this work for you to just take CUMRAG and make them just like your other acts.  No offense but they probably did so well partly because they are a little bit different.  Nobody at HappyEnding would take a chance on a feature track like ‘Romantic Towel!'”

“You would relinquish the CEO position but you would still be in charge of CUMRAG, in a management oversight role, with a generous performance-based salary.  Open Goatse would still exist but as an “imprint”, your own “brand” within HappyEnding, if you will, to release these acts and any future ones that you recruit.  You would take care of all the decisions concerning the releases of those artists, essentially nothing would change for you in the creative area, you would maintain full creative control.  You would also have the benefit that you can now use our existing well-established infrastructure to promote and make product, as well as having your artists become featured on our touring circuits and events.  Using our infrastructure also means that a lot of the more boring jobs will become stuff that you won’t need to think about anymore, because we already have people for that.  You can concentrate your energy on the things that matter to you most – grooming and directing your artists, and lightening the load might help you devote more energy to SPUNKMOP.”

“I’ll… have to think about it”

“Oh, and if you’ve accumulated any debts in your business processes thus far, we’ll pay those off in full, on top of whatever price we mutually negotiate for the sale of your label.”

“Look, it sounds great, but I need to talk to my lawyer first…”

“And you can move your artists into our nice new dormitories where we have a specially-trained anti-saesang security detail that beats unsanitary trespassing fangirls to a pulp”

You reach for a pen to sign that contract so fast that you nearly bore a hole right through your fucking hand.

Anyway I hope this explains mergers somewhat, although I did gloss over a few things and focus on others instead for the sake of entertainment, because some details just aren’t that interesting to read about.  If you’ve got questions, or you feel like I’ve left anything out that you’re curious about, feel free to ask.

What’s the worst that could happen?

10 thoughts on “Fuckin’ mergers – how do THEY work?

  1. Yes! I’ve been waiting for this! Thank you so much! I love articles like this! They’re really informative! Great job! So I was right when I told all the INSPIRITS to fuck off because Woolim still had full creative control over INFINITE (Well, not any DIRECT creative control because they out-source everything anyway, which I also mentioned because everyone was bitching about how Woolim had their own “unique style”)
    P.S. Is CUMRAG that group you were talking about who are openly Ilbe users, use their Ilbe usernames as stagenames and encourage their fans to communicate with them on Ilbe forums? In that case, YONNA-FAP867 OPPAR MY YEONGWONI SARANG IBNIDA!!!!

    • Why would Woollim agree to a merger deal with SM if it was just going to fuck Woollim in the ass. They wouldn’t, obviously. SM acquired Woollim because Woollim had something that SM wanted (Infinite), this puts Woollim in a position of bargaining power. They wouldn’t sign away creative control unless they specifically wanted to sign it away, they would have retained it, otherwise what’s the point of preserving the Woollim brand.

      • btw, I think those three people you mentioned who asked about this article were all me under different monikers. I remember asking you on twitter, on AKF and on anon at your ask.fm.

        • Yeah, might’ve been, I really don’t remember. It’s a good strategy anyway, submitting blog requests multiple times probably works well because I don’t have a good memory.

  2. I totally like that article. It explains pretty well whats going on, and for me, person who probably will never fully understand the entertainment business, since I only know what i hear, its a good way to learn something more. Thank you

  3. Um…why wouldn’t you use the income from the successful initial pressing to do a second one? Even if the fans want merchandise, I don’t see why you’d need to fulfill it right a way(if anything, it would leave them very thirsty for any little tidbits you toss their way)…or at least budget/restrict how much you make(limited supply would mean you’d be able to charge more for it, too, as it’s in such high demand, right?). Seeing how well the first pressing did, the second one should do quite well, especially if this hypothetical group is in such high demand and as wildly successful as you’ve dreamed up.

    You also make it sound like the creditors would what their payments back right away…I thought this actually happens over a long period of time…so that can throw high interest rates at you into oblivion.

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