South Korea was producing very little internationally recognised music in 1995 — within three decades it was topping the global album charts and had climbed into the world's largest music markets, a rise seeded by a post-1997 government bet on culture as an export and built by the record labels that bet alongside it

In 1995, South Korea’s recorded music business was, commercially, a domestic one. Seo Taiji and Boys were selling in the millions at home and registering nowhere abroad. The country had no act on a major Western album chart and no meaningful export line for music.

Three decades on, the Korea Customs Service logged US$301.7 million in K-pop album exports for 2025, the first year the figure passed US$300 million. Japan took US$80.6 million of that, China US$69.7 million, the United States US$64 million. In the IFPI’s 2025 Global Music Report, covering 2024, South Korea ranked as the seventh largest recorded music market in the world.

Those are physical album shipments alone. Streaming, publishing, touring and merchandising sit outside that customs line.

What the 1999 statute created

What the law actually did is less sweeping than the retellings suggest. The Framework Act on the Promotion of Cultural Industries passed on 8 February 1999, and it named music and games as industries in their own right. That classification is what made them eligible for the tax breaks, cheap credit and government-built facilities the Act goes on to describe. Investment funds could now be set up specifically for cultural products. A guarantee scheme let producers borrow against work they had not yet finished, which is the ordinary difficulty in paying for an album or a film. Government money could go towards overseas marketing and towards co-productions with foreign partners. A state content agency was created under the Act, the body that after a 2009 merger became the Korea Creative Content Agency.

The ministry was already running a cultural industry bureau before the Act passed, which makes 1999 an escalation of an existing function rather than a founding. Kim Dae-jung took office in February 1998, the same month that ministry was renamed from Culture and Sports to Culture and Tourism in a broader government reorganisation.

On the strategic framing, the Victoria and Albert Museum’s account of hallyu’s origins describes the post-crisis gamble as a twin bet on information and communication technologies and on culture industries, with the stated aim of quadrupling cultural industry exports.

The sums were modest. The cultural industry budget rose from roughly US$14 million in 1998 to around US$84 million by 2001, a figure traced to the 2003 White Paper on Culture and Industry and cited in a 2025 piece on Korean cultural statecraft in the US Army War College’s War Room. Set beside the semiconductor build-out of the same years, that is a rounding error.

What the state did not do

No agency built the acts. That was done by privately held companies incorporated in the same window: SM Entertainment in 1995, YG Entertainment in 1996, JYP Entertainment in 1997. H.O.T. debuted in 1996 and set the template the sector still runs on, which is long-horizon trainee development, in-house production, and groups configured for a specific market rather than assembled around a single writer.

Financing is the part usually left out. SM Entertainment listed on the KOSDAQ exchange in 2000, meaning a pop label was raising public equity at a point when its overseas earnings came overwhelmingly from elsewhere in Asia. That structure, listed capital funding multi-year artist development, let firms absorb the cost of acts that would not return anything for five or six years.

The state bet on the category. Labels bet on individual careers, with shareholders carrying the risk.

The 2018 threshold

Commercial proof arrived twenty years after the statute. BTS’s Love Yourself: Tear, released by Big Hit Entertainment on 18 May 2018, entered the Billboard 200 at number one with 135,000 equivalent album units, 100,000 of them traditional album sales. It was the first Korean-language album to top the chart and the first predominantly non-English one since Il Divo’s Ancora in 2006.

That ratio matters more than the position. Streaming supplied a small share of the debut; most of it was people buying objects. Korean labels had spent a decade refining album packaging, version variants and pre-order mechanics for domestic and Japanese fan markets, and the same machinery worked in the United States unmodified.

The 2024 plateau

Growth was not continuous, and the middle of this decade complicates the arc considerably.

Exports came to US$291.8 million in 2024, up 0.55 per cent on 2023 by Korea Customs Service reckoning, which after nine years of compounding growth amounts to a standstill. Shipments to Japan fell 24.7 per cent that year. Korea’s own recorded music revenue declined 5.7 per cent in 2024, the only contraction among the IFPI’s top ten markets that year even as the country held seventh place. Circle Chart, run by the Korea Music Content Association, recorded a fall in album sales for the first time since 2014.

Sales kept sliding through 2025. Circle Chart put the combined domestic and overseas total at roughly 93.5 million copies, a second consecutive annual decline from about 120 million in 2023, with plastic CD waste and reduced fan-targeted marketing cited by analysts as contributors. Exports rose while units fell.

Where the money sits now

HYBE, the largest of the listed firms, reported record 2025 revenue of 2.65 trillion Korean won, roughly US$1.86 billion, up 17.5 per cent. Operating profit dropped 72.9 per cent to 49.9 billion won, taking the operating margin from 8.2 per cent to 1.9 per cent. Concert revenue climbed almost 70 per cent while recorded music fell 10.2 per cent. Net loss came to 256.7 billion won, widened by an impairment of about 200 billion won booked in the fourth quarter against the restructuring of the North American business, which the company describes as an accounting item with no cash outflow.

IFPI’s Global Music Report 2026 records physical formats returning to growth worldwide in 2025, up 8.0 per cent, which it attributes to fan demand for tangible releases and a 13.7 per cent rise in vinyl, vinyl’s nineteenth consecutive growth year. Japan, the second largest market, returned to growth at 8.9 per cent.

What the first half of 2026 answered

Two questions left open by the 2025 filings have since been settled, at least provisionally.

The first was whether a BTS return would lift recorded music or only touring. HYBE’s first-quarter 2026 results answer it plainly. Recorded music revenue nearly doubled to 271.5 billion won on the back of Arirang, released 20 March, a rise of 98.9 per cent. Concert revenue fell 42.8 per cent to 88.7 billion won, because the tour had barely begun. Total quarterly revenue of 698.3 billion won was its largest opening quarter to date. HYBE still posted a net loss of 156.7 billion won, driven by a one-off stock award expense of about 255 billion won; excluding it, adjusted operating profit was 58.5 billion won.

The second was the geography. K-pop album exports reached US$257.48 million in the January to June period, up 125 per cent year on year, with roughly 55 million units shipped. The United States took US$74.12 million, ahead of China at US$61.18 million and Japan at US$45.61 million. Japan has been the anchor of Korean physical sales abroad since the 2000s and is now third.

What remains unresolved is the domestic market and the margin. Album sales inside Korea have fallen two years running, and the concentration question sits underneath the 2026 numbers: a single comeback moved the national export total by 125 per cent. Whether the investment that flattened HYBE’s margins in 2025 produces a second tier of exportable acts is not something a strong first half can demonstrate.