The grand battle between HYBE and SM Entertainment continues with shocking reveals from both sides. And for the first time since the dispute began, SM founder Lee Soo Man finally speaks up. Check out the following report for simple explanations regarding arguments between HYBE Labels vs SM Entertainment, along with the initial statement from Lee Soo Man.
HYBE and SM Entertainment Continue Arguing: Lee Soo Man Released Initial Statement
The grand battle of HYBE Labels vs SM Entertainment is nowhere near an ending. SM Entertainment’s current management decided to turn up the heat by releasing a shocking reveal of all the misconduct done by SM founder Lee Soo Man.
At the same time, HYBE did not just sit back watching their names dragged into the video. Instead, the company decided to reveal more plans and their future hope regarding HYBE and SM Entertainment collaboration to increase the global reputation and popularity of Kpop.
Regarding all these arguments and allegations, SM Entertainment founder Lee Soo Man finally speaks up for the first time, hinting at his disappointment about the dispute.
SM’s Co-CEO Lee Sung Soo (Chris Lee) Revealed These Shocking Lee Soo Man Corruptions Details
On February 16, SM Entertainment Co-CEO Lee Sung Soo, also known as Lee Soo Man nephew Chris Lee, released a video statement.
The video titled SM Entertainment CEO Lee Sung Soo’s Statement Presentation Part 1 revealed that all these years, SM Entertainment has been enduring mismanagement and power abuse from founder Lee Soo Man to retain his profits from all the company’s production.
Here are some of Lee Sung Soo’s arguments in simple terms.
1. Lee Soo Man Had Allegedly Built an Overseas Company to Maintain Unfair Profits and Tax Evasion
Chris Lee (Lee Sung Soo) first revealed that Lee Soo Man had built CT Planning Limited (CTP) in 2019. According to Chris Lee, CTP is basically the overseas version of Like Planning, which is responsible for all global distribution of SM artists’ music.
Chris Lee further explained that through CTP, Lee Soo Man was unfairly maintaining his control to gain unfair profits from all of SM Entertainment’s music production. Not only that, but Chris Lee believed that CTP was one of many ways for Lee Soo Man’s attempt at tax evasion.
“This odd contract structure where distribution goes through CTP probably meant for Lee Soo Man to avoid National Tax Service’s observation.
Getting profits to CTP in Hong Kong using impractical transactions seems like typical offshore tax evasion.”
Chris Lee.
Chris Lee then addressed the question to HYBE whether the company was aware of this situation before entering the massive transaction.
“Did HYBE consent to ignore Lee Soo Man’s CTP’s illegality? Or was HYBE not aware of this issue?”
Chris Lee.
2. Lee Soo Man Gave Appalling Orders to Maintain Control of SM Entertainment
In addition to CTP facts, Chris Lee also revealed that Lee Soo Man had tried hard to maintain control of SM Entertainment.
According to Chris Lee, even after the production contract with Lee Soo Man ended, the SM founder gave the following orders to executives and employees.
- Release various statements to media that SM Entertainment artists still need Lee Soo Man.
- Tell the company employees and executives to send messages that SM Entertainment needs Lee Soo Man.
- Lee Soo Man and SM will enter a temporary consulting agreement in South Korea to justify Lee Soo Man’s activities.
- CTP will be responsible for the agreement of all SM Entertainment’s overseas album production and artists’ activities. If not, SM Entertainment should enter another production agreement with Lee Soo Man in South Korea
- Form a taskforce for general shareholders’ meetings to support Lee Soo Man even if it costs millions.
- Make plans so the first-quarter sales look like the company cannot sell without Lee Soo Man.
- Make plans to delay February-March 2023 album releases until after April.
With these orders, Chris Lee stated that Lee Soo Man was finding his way back to the company.
“The shareholder taskforce focus was to find a way for Lee Soo Man to return to the company. However, meaningless ’emergency response’ meetings led by Lee Soo Man continued, resulting in SM Entertainment’s current executive team, including myself, became exhausted from resisting.”
Chris Lee.
3. SM Entertainment Must Pay 6% of Revenue to Lee Soo Man for 70 Years
Next, Chris Lee also addressed the 6% unfair profits previously mentioned in HYBE and SM Entertainment acquisition facts.
“Even after Lee Soo Man stops producing, SM would need to pay him 6% of revenue sales from artists’ albums for 70 years.
Not only that, but SM will also have to pay 3% of management revenue for three years from 2023. That’s approximately 80.0 billion KRW (approximately 62.3 million USD).
I was extremely ashamed to meet employees, artists, and all of SM investors.”
Chris Lee.
4. Lee Soo Man Forced His Plans to SM Artists’ Album Concept
In addition, Chris Lee also revealed that Lee Soo Man has been forcing his ideas into the SM Entertainment business. Also, he insisted on forcing his plans and belief into several SM Entertainments songs, including SMTOWN’s The Cure and aespa.
In fact, Lee Soo Man was the reason why aespa members choked up their tears due to the Sustainability ideas Lee Soo Man forced into their album. The SM founder was also why aespa’s album release on February 20 was delayed.
“Lee Soo Man ordered Yoo Young Jin and AR Team to reflect on planting trees and sustainability in songs. Even aespa, who’s been having a spectacular concept, had been ordered to sing songs with lyrics about planting trees.
Parts of the lyrics include “just sustainability,” “lowering the degree by even one,” “co-existence,” and “greenism.” Words that have no relation to K-Pop at all appeared in the lyrics everywhere.
The early part of the song even contained “planting trees.” And the aespa members were so upset they even choked up with tears.”
Chris Lee.
Along with ruining aespa’s album, Lee Soo Man also pushed his personal projects, including a “smart entertainment city” or “music city”, where tourists can enjoy music, casino, and marijuana freely. Chris Lee believed that Lee Soo Man wanted to use SM artists to sell the idea of “Lee Soo Man’s Universe” to the market.
HYBE Label vs SM Entertainment Debate Continues – HYBE’s Counterarguments
Responding to Chris Lee’s allegations, a representative from HYBE Labels delivered a clarification. And in summary, these are the points that the global company wanted to convey in HYBE and SM Entertainment collaborations.
1. HYBE Has Severed All Existing Ties Between Lee Soo Man and SM Entertainment
First and foremost, HYBE Labels claimed to have nullified all the existing connections tying Lee Soo Man to SM Entertainment.
On the other hand, HYBE believed that the bigger issue was that SM Entertainment’s current management had not disclosed the existence of the CTP contract. And that was especially when SM Entertainment is now a public company listed on the stock market.
“Undisclosed details, including CTP transactions, had been included in a clause in the agreement that said HYBE would nullify all existing transactions.
However, it is a more significant issue that a publicly-traded company like SM didn’t disclose information as crucial as this.”
HYBE representative.
2. HYBE Revealed More Plans about Lee Soo Man and SM Entertainment
Along with the statement, HYBE also revealed more plans regarding Lee Soo Man and SM Entertainment.
- Lee Soo Man can only produce music overseas unrelated to SM Entertainment for 3 years, but it doesn’t mean he will return to SM after the period ends.
- Lee Soo Man sold his shares to HYBE under the premise of no transactional relationship between him and SM Entertainment. Therefore, after the sales agreement, HYBE will dismiss all royalties contracts between Lee Soo Man and SM Entertainment.
- HYBE also has the right to discontinue all contracts between CTP and SM Entertainment according to the stock purchase agreement.
- HYBE will not get involved in Lee Soo Man’s personal business and campaign unrelated to SM Entertainment.
- A phone call happened on February 10 around 1.20 AM between HYBE Chairman Bang Si Hyuk and Chris Lee per Chris Lee’s request.
3. HYBE CEO Park Ji Won Promises and Ensures the Independence of SM Entertainment
Previously, HYBE Label vs SM Entertainment debate went viral on the internet with the fear of a major monopoly from the giant label to the Kpop company.
Regarding the issue, HYBE CEO Park Ji Won delivered a promise to maintain the independence of SM Entertainment.
On February 14, HYBE CEO Park Ji Won held a company briefing for HYBE employees. During the briefing, Park Ji Won revealed that Lee Soo Man will not return to SM Entertainment management and production and will not take any more royalties.
Not only that, Park Ji Won also guaranteed that SM Entertainment will remain independent as it usually works with HYBE’s existing labels.
“We respect SM Entertainment’s legacy. Therefore, we ensure that SM will remain independent. And HYBE has already proved its value with its multi-label system.
SM has its own value, and we will continue maintaining that color. HYBE will support SM to expand further. Both companies’ fans, artists, and employees will be able to enjoy the synergy of the two companies as the main pillars of the Kpop industry.
Lee Soo Man will have no participation in the management and production. He will no longer take royalties as well.”
HYBE CEO Park Ji Won.
4. HYBE Submitted Non-Creative Figures as Candidates for SM Entertainment Board of Director
Furthermore, to prove his promise about SM Entertainment’s creative independence, HYBE revealed the 7 names of SM director candidates.
Unlike the previous rumors, there were no creative figures like Bang PD or Min Hee Jin among the candidates. Instead, HYBE proposes crucial figures in business planning, legal affairs, finance, and administration. All these names are signals that HYBE plans to maintain SM Entertainment’s unique characteristics and focus on management instead.
Here are the 7 HYBE candidates for SM Entertainment’s board of directors.
- Inside Director Candidates:
- Lee Jae Sang (President of HYBE America)
- Jung Jin Soo (HYBE’s Chief Legal Officer)
- Lee Jin Hwa (HYBE’s Chief of Management and Planning)
- Outside Director Candidates:
- Kang Nam Gyu (Senior Partner at GAON Law Firm)
- Hong Soon Man (Professor in Public Administration at Yonsei University)
- Lim Dae Woong (South Korean representative of the United Nations Environment Program Finance Initiative)
- Non-Executive Officer Candidate:
- Park Byung Moo (Partner at VIG Partners)
- Auditor Candidate:
- Choi Gyu Dam
CJ Group is NOT Planning to Join HYBE Labels vs SM Entertainment Battle
Most importantly, rumors have been circulating that CJ Group will be joining Kakao’s side in the HYBE Labels vs SM Entertainment battle. That is why CJ decided to speak up.
Previously, Kakao reportedly reached out to CJ in their plans to acquire 19.9 of SM Entertainment’s shares to counter HYBE. However, CJ later stated that they were not discussing any proposal to acquire SM Entertainment’s shares.
As of today, HYBE is still the largest shareholder of SM Entertainment.
“Those reports are groundless.”
CJ Group.
Lee Soo Man Responded to Chris Lee’s Allegations
Following the massive debate and counterarguments between HYBE and SM Entertainment, Lee Soo Man finally responded.
However, instead of delivering updates and statements about HYBE and SM Entertainment acquisition, Lee Soo Man commented on his nephew.
“I’ve been keeping quiet about the actions and words of CEO Chris Lee.
CEO Chris Lee is my wife’s nephew. I’ve been watching him grow up since he was 4 years old.
Chris Lee entered SM Entertainment when he was 19 and started with fan management duties. And he has been with me since then.
My heart aches. Chris Lee a kind nephew who grew up in a family of a pastor father.”
Lee Soo Man.
No further statement was available from Lee Soo Man regarding HYBE and SM Entertainment issue in the video.
So, what do you think about this battle of HYBE Labels vs SM Entertainment? Feel free to share your thoughts in the comment. Also, stay with Kpoppost Instagram, Facebook, Twitter, and Telegram Channel for more updates.
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