Exploring the Investment Opportunities in K-wave: The Rise of K-dramas, Movies, and Webtoons

Korean dramas (K-dramas) and movies have gained significant international recognition, attracting a dedicated fan base. The movie ‘Parasite’ (2019) and the Netflix series ‘Squid Game’ (2021) have been sensational products globally, which played an eye-opening role for global audiences and led to increased interest in Korean content beyond Asia. The compelling narratives, talented actors, and high production quality have contributed to the global success of K-dramas and movies. Streaming platforms like Netflix, Disney+, and Amazon Prime have played a crucial role in introducing K-dramas to the global audience, allowing viewers to access and engage with a wide range of Korean content.

In fact, Korean content providers have been one of the key beneficiaries of the so-called ‘global streaming war’ because Korean dramas and movies provide the perfect solutions to these global platforms amid intense competition. Korea has a rich content source of so-called webtoons (i.e. digital comics originating from Korea) that can be used for movies and drama production. Webtoons are generally also very easy to make into series once the first one gains a good attraction and thus usually brings high returns on investments to platform companies with a good enough number of captive audiences globally. According to Netflix co-CEO Ted Sarandos, 60% of the platform’s viewers had already seen a Korean drama and the odds are high that many of those dramas were inspired by webtoons.¹ Thus, we have been seeing increasing investments by global streaming companies in Korea, which will continue to create a virtuous cycle for the overall Korean content industry.

Cultural Influence and Soft Power Leading to Cross-Industry Synergies

K-pop serves as a powerful vehicle for promoting Korean culture and values on the international stage. Through their music, fashion, and performances, K-pop artists showcase the unique aspects of Korean culture, garnering interest and admiration from global audiences. The success of K-pop has paved the way for a broader interest in Korean culture, including its language, fashion, beauty, and cuisine. This cultural influence and soft power provide a unique advantage for investors looking to tap into the global consumer demand for Korean goods and experiences.

The influence of K-pop extends beyond the music industry. It permeates various sectors, including fashion, cosmetics, and entertainment. Collaborations between K-pop artists and fashion brands have led to successful clothing lines and endorsement deals. For instance, in recent years, an increasing number of Korean artists have become brand ambassadors for global luxury brands such as Channel, Louis Vuitton, and Dior. Moreover, the integration of K-pop in television dramas and movies has further amplified its reach, creating cross-industry synergies that enhance the sustainability of the entire ecosystem.

The improved brand perception of Korean goods and brands across various categories contributes to their sustainability. The widespread popularity of K-pop and Korean dramas has created a halo effect, positively impacting the perception of Korean products. Consumers associated the success and appeal of K-pop with the quality and innovation found in Korean goods. The trendiness and sophistication in Korean fashion, coupled with the innovation in cosmetics and skincare, attract global consumers. Korean cosmetics companies, both original design manufacturers (ODMs) and brand owners, have been at the forefront of innovation, introducing unique formulations, packaging, and skincare routines that have captured the attention of global consumers. The export-oriented approach of Korean companies further expands their consumer base, ensuring the long-term growth of Korean goods.

Investment Risks

While investing in a K-Pop and Culture ETF presents opportunities, it is important to consider the associated risks. First, market saturation is a potential risk leading to increased competition and slower industry growth. This may be why leading entertainment companies are trying to make K-pop music with local artists and even produce beyond the non-K-pop genre. Second, changing trends and shifts in consumer preferences could also impact the success of specific K-pop acts or cultural trends. Third, geopolitical factors, such as tension between countries, could create uncertainties that affect K-pop’s growth and international reach. In fact, many Korean companies, from entertainment to consumer goods like cosmetics, used to rely highly on the Chinese market and were hit by geopolitical tension between the two countries due to the THAAD dispute in 2016. However, this accelerated companies’ progress in diversifying their geographical mix and fostered them to invest in other overseas markets. That said, such risk can arise from other countries and could impact companies in this ETF. Lastly, dependency on individual artists or groups poses risks, as their popularity and success can be subject to fluctuations. This is one reason why investing in this theme through an ETF provides a good way to diversify the risks.

Investing in Global X K-pop and Culture ETF (3158) offers a unique opportunity to participate in and capitalize on the sustained growth and global demand for K-pop and Korean culture. The global reach, cultural influence, cross-industry synergies, rise of K-dramas and movies, and the sustainability of Korean goods all contribute to the potential of this investment avenue. By staying informed and leveraging the opportunities presented by the thriving Korean entertainment industry, investors can position themselves to potentially benefit from the continued success and growth of the K-pop and Korean culture phenomenon.