The announcement two weeks ago of YG Entertainment collaborating with Cheil Industries on a fashion joint venture created a buzz.

It was an unprecedented tie-up between one of the major arms of Samsung Group and Korea’s second-largest entertainment agency. Analysts were quick to point out that Lee Seo-hyun, second daughter of Samsung Chairman Lee Kun-hee, leads the luxury goods and fashion division of the affiliate.

That day, YG’s share price jumped 5.1 percent.

YG and Cheil will establish a joint venture to roll out a fashion brand next year that targets the global market, said the press release from both companies on June 29. They have yet to decide on further details such as the size of the joint venture, brand name or concept.

“Fashion and music are inseparable,” said a spokesman for Cheil Industries. “Singers are supposed to be fashionable and some fashion brands originate from musical genres such as hip-hop. We have been in a close business relationship thus far with YG, using its artists such as T.O.P. and G-Dragon from the boy band Big Bang as models for some of our brands. Although we could have chosen SM Entertainment and JYP [for the joint venture], we opted for YG because we highly appreciate its creative power.”

The spokesman stressed that the partnership won’t take advantage of the popularity of YG artists.

“It’s a deal to merge our strength in fashion and YG’s leadership in youth culture,” he said.

“Samsung seems convinced of YG’s competence as a creative content provider,” said Jin Hong-goock, an analyst with Hyundai Securities. “For YG, there is nothing to lose from a business tie-up with Cheil - whether it gets involved in the design or its artists model the goods. If the clothes from the joint venture sell well, the profits will go to YG, and even if they don’t, YG won’t need to pay for the loss.”

Last Friday, YG went so far as to announce a sponsorship from global tech giant Samsung Electronics. BigBang is having a year-long global concert tour of 25 cities from Asia to the Americas and Europe under the “Bigbang Alive Galaxy Tour 2012” title.

This is the first time a tour of a K-pop singer or band will include the name of a product from Samsung. The product is Galaxy, the flagship brand of Samsung’s smart mobile products, including smartphones and tablet PCs that account for more than 70 percent of Samsung Electronic’s profit.

An industry source who spoke under the condition of anonymity said YG probably received several billion won from Samsung.

“We think the sponsorship was an opportunity for both Galaxy and BigBang to effectively promote the brands,” said a Samsung spokesman. “That the event combines smartphones and music, the key elements of life for the younger generation around the world, makes a crucial point.”

YG was established in 1996 by Yang Hyun-suk, one of three members of the popular 1990s trio, Seo Taiji & Boys. With hip hop as its musical identity, the Mapo, western Seoul-based agency has produced and managed dozens of entertainers including musicians such as Big Bang, 2NE1, Se7en and Psy, and actresses like Kang Hye-jung, the tortured heroine in Park Chan-wook’s 2003 incest-themed film “Old Boy.”

Thanks to its internal culture, which is reputed to appreciate the free spirit and personality of their artists more than its rival firms, YG’s entertainers aren’t caught in the typical K-pop mold of being sexy or cute. They have emerged as icons of unique and trendy styles.

“YG has been getting obvious attention in overseas markets including Japan on the back of its strong lineup of competent artists,” said Chung Woo-chul, an analyst with Mirae Asset Securities.

For instance, 2NE1, the four-member girl group, has been receiving stage outfit support from U.S. fashion designer Jeremy Scott, while will.i.am of American band the Black Eyed Peas has served as their musical patron, producing and composing some of their works.

An entertainment agency going corporate as such is rare in this country. Most of the profitable businesses of entertainment companies, aside from their talent, is in fields like restaurants and cafe franchises.

JYP, with girl groups such as Wonder Girls and Miss A, has been running a Korean restaurant in Manhattan since March. SM Entertainment in April formed a joint restaurant venture, SM Kraze, with burger chain Kraze International. Formerly known as sidus HQ, iHQ, which manages actress Han Ye-seul and actor Jo In-sung, established a strategic partnership with cafe chain Caffe Bene in 2008, contributing to its massive expansion across the country.

YG is outspoken about its open-mindedness about business opportunities. “We are pretty much open to every industrial field for synergy and we always pursue something new,” said a spokeswoman for YG.

With nearly 200 employees, a four-fold increase from the end of 2009, the firm listed on the Kosdaq in November last year. Yang is the top shareholder with a 36 percent stake in the firm, which has a market capitalization of 491.2 billion won ($427 million). Its share price has surged 40 percent in the past eight months to close at 47,600 won last Friday.

With YG’s entry into the Kosdaq, all of Korea’s top three agencies are now listed on the secondary stock market, increasingly luring investors’ attention to the so-called entertainment category and giving birth to analysts specializing in that field.

SM Entertainment, the nation’s largest, manages Girls’ Generation, Super Junior and F(x). Listed in 2000, it became the first company in the industry to be listed on the market. It ranks seventh on the Kosdaq in terms of market cap at 1.04 trillion won. No. 3 player JYP has a market cap of 106.5 billion won and was listed on the Kosdaq in late 2010. YG also opened a store on eBay Korea earlier in June to sell CDs as well as souvenirs including photo books, T-shirts and cell phone accessories representing YG and its artists. Last year the agency launched a joint record label with Avex Group, Japan’s leading entertainment firm, and set up YG Asia, an Asian headquarters in Hong Kong.

A month ago, YG started a joint project with Hyundai Card, Korea’s second-largest credit card issuer, which has gained a reputation as an icon of hipness and creativity due to a series of cultural projects it has brought to Korea in recent years. They include Hyundai Card Super Concert series, which has invited a slew of top-notch musicians ranging from Sting to Stevie Wonder, Lady Gaga and Eminem, who is set to perform in Seoul on Aug. 19.

Through a project dubbed “Re-Monster, ” YG aims to discover talented yet obscure musicians. They will submit their own interpretation of Big Bang’s latest single “Monster,” and YG’s key music producers, and will introduce those covers on Hyundai Card’s Music, a Web site for music.

By Seo Ji-eun [spring@joongang.co.kr]

Source: Joongang Daily