Seoul South Korea
Photo by Mathew Schwartz on Unsplash

There is trouble brewing for two of the most prominent companies in the K-Pop industry, despite the growth and global expansion of their sector. SM Entertainment and HYBE are the subject of two separate, unflattering stories this week in their homeland.

In SM’s case, the issue is contracts. The Korea Herald reported that three members of K-Pop group EXO are leaving the agency in a dispute over contracts and payments. Baekhyun, Xiumin and Chen are also threatening to sue SM for outstanding payments, and have criticised the length of the deals that the company signs artist to.

SM’s response was combative, accusing “outside forces” of “not only luring the artists to breach the valid exclusive contracts they have signed with the company, but using them to get through to other artists to also violate the contract terms or sign double-contracts”.

In HYBE’s case, contracts aren’t the reason for its negative headlines. Three of its employees are facing insider trading charges, with accusations by South Korea’s Financial Supervisory Service (FSS) that they sold shares in the company before last year’s announcement that its biggest stars, BTS, were taking a hiatus.

The FSS is also unhappy about the way HYBE, a public company, announced the hiatus through a YouTube video rather than a statement to investors. It noted that “the primary artists and their activities are integral to the management of a listed entertainment company and can significantly impact company share prices”.

The two stories continue a tumultuous year for the leading lights of the K-Pop sector. Both HYBE and SM Entertainment’s revenues have been growing well – up 44.1% and up 20.3% year-on-year, respectively, in the first quarter of 2023.

However, the two companies tangled when HYBE tried to become the largest shareholder in SM without the approval of the latter’s board of directors. HYBE abandoned this attempt in March, but shortly afterwards its chairman Bang Si Hyuk delivered a warning to the sector.

He said that K-Pop’s growth in regions including the US and south-east Asia slowed down in 2022, and claimed that “the K-Pop industry is still just a David amongst three Goliaths” – referring to the three global major labels.

EarPods and phone

Tools: platforms to help you reach new audiences

Tools :: Wyng

Through Music Ally’s internal marketing campaign tracking, we’ve recently discovered an interesting website by the…

Read all Tools >>

Music Ally's Head of Insight