Sociological studies of the music industry emphasize the importance of mass media technologies in the birth of a new popular music genre. However, these studies have not fully explained the business structure of new media and new popular music. They also failed to predict K-pop’s global success via YouTube and iTunes. The emergence of Internet-based music stores and music video streaming sites, particularly YouTube, has a strong connection to Korean content as it allows Korean artists to bypass conventional music distributors who control business-to-customer music distribution channels in the United States and Europe. The emergence of the digital economy powered by PCs and smartphones, ushered in a new era of business-to-business music distribution, thus minimizing transaction costs of the global music business for Korean entertainment firms. This article argues that K-pop producers, with no alternative channels for distributing their music to global audiences for profit, actively chose YouTube for its free music distribution despite its low-profit margins from royalty fees. J-pop and American pop music distributors, however, avoided YouTube because the profit margin from YouTube was far lower than from traditional media, such as CDs and iTunes, giving K-pop primary standing in the niche market.
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