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YG Entertainment’s alleged sex scandal unlikely to impact artistes’ sponsorship dollars

South Korean entertainment companies are known for carefully crafting the image of their K-pop idols to portray them as pristine and perfect. But recently the alleged K-pop sex scandal surrounding YG Entertainment’s founder, however, goes against the flawless image that the K-pop industry has so meticulously been trying built.

If you haven’t already heard, earlier this week, it was alleged by The Korea Herald, a daily newspaper in South Korea, that YG founder Yang Hyun Suk arranged sexual services for foreign investors during dinner parties. Among the foreign investors was Malaysian businessman Low Taek Jho. Some bands and artistes under YG that are a hit with fans include Blackpink, Winner and Big Bang, and the entertainment company has also teamed up with KIA Motors, Shopee and LVMH over the years.

With the K-pop sex scandal looming over YG, industry players weigh in on whether YG’s brand, product and artiste sponsorship dollars will be impacted moving forward.

Ampersand Advisory’s CEO Sandeep Joseph told A+M that YG’s stock price, which has dipped by 37% over the past four months, will take “a further beating”. However, he adds that even if YG potentially suffers from this, the industry will continue to grow in soft power. Ampersand Advisory has a sports marketing arm known as Ampersand Sports that was created to market the commercial rights of domestic Malaysian football.

While K-pop has become a global phenomenon, Joseph said it is becoming increasingly known that stars are under onerous “slave contracts” and are heavily engineered and controlled. He added that if found guilty, the media company and its founder might have to apologise for the actions. Nonetheless, the recent scandal involving YG “definitely” raises plenty of interesting points about brand reputation and celebrity culture.

“I don’t believe this dark underbelly of K-pop will cause it to lose popularity. It’s candyfloss appeal is too widespread and all-embracing,” Joseph said. However he added that at any point, when brands work on sponsorship deals, they need to have a crisis communications plan ready.

Also weighing in on the issue is PR agency Be Strategic’s chief strategist Ashvin Anamalai who said the “superstardom” that YG’s talents gain from the adoration of fans worldwide will “far outweigh” any of the bad press circulating around the founder.  According to him, sponsorship for worldwide superstars in YG’s talent roster doesn’t look to suffer despite stock prices taking a hit.

“Its roster of talents represents the gold standard in K-pop music and culture and collectively help YG generate over US$300 million in annual revenue,” Anamalai said. However, he added that there is a chance that stakeholders “in high and powerful places” within the K-pop industry might have a different opinion given the zero tolerance on such public sex scandal news.

“The common phrase of ‘All publicity is good publicity’ could be applied, assuming YG breaks the glass and press the crisis control button that hopefully has been prepared. However, in this case it allegedly also involves a fugitive wanted in three countries, and an illegal sex trade, so the saying ‘There’s no such thing as bad publicity except your own obituary’ could also be applied,” Anamalai said.

On the other hand, PRecious Communications managing director Lars Voedisch told A+M that at this juncture, while the buzz around YG is only allegations based on one report, it might have already formed a perception in consumers’ minds and as the saying goes, “perception is reality”.

“From a reputation management perspective, the tricky part is that the more they would now try to deny the allegations, the more guilty it might make them look. So the response strategy has to stick to facts and possibly share more about their general code of conduct,” he added.

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