To get to the point, HYBE’s Bang Si-Hyuk was not just a mere business white knight, but more of an exit strategy for SM Entertainment’s Lee Soo-Man. The two go beyond being friendly alumnae of Korea’s most prestigious university, Seoul National University. Reportedly, ‘the deal’ was all and only about SM: SM’s extraordinary history, SM’s immense future and SM’s value.
This message is clearly conveyed in HYBE’s statement.
“Former Chief Producer of SM, Lee Soo-Man, has agreed to actively cooperate in restructuring HYBE’s business management framework.” (HYBE)
Widely known as the father of K-pop, SM Entertainment is Lee Soo-Man, just as Lee Soo-Man is SM Entertainment.
Although SM’s founder Lee Soo-Man ran the company with his heart and soul, ironically, he was also holding the company back and “damaging shareholder value.”
Evidence can be found in a leaked contract between Like Planning (Lee’s private company) and SM Entertainment, which states that from 2022 to 2092, Lee Soo-Man will receive 6% royalty of all music-related profits from the company, in addition to 3% royalty of all management-related profits until 2025.
In a nutshell, this means that Lee Soo-Man can ‘free-ride’ ₩80 billion KRW (approximately $63.3 million USD) over the course of 70 years.
HYBE, the Korean entertainment agency that houses supergroup BTS, announced that this clause would be eliminated from the contract.
“In the midst of forming this agreement, the clause regarding former Chief Producer Lee Soo-Man’s royalty program will be excluded, in demonstration of our commitment to governance enhancement.” (HYBE)
Hence, HYBE signed a deal with Lee Soo-Man to buy 14% of his SM shares, and in return, Lee gave up on his royalty, as the first step into improving the corporate framework.
“Lee Soo-Man has decided to fully liaise in restructuring the business management framework of SM Entertainment by transferring his SM affiliate company shares that he had been personally holding under HYBE.” (HYBE)
Stocks of SM brand marketing and stocks of an affiliate company that manages SM’s concerts and music copyrights, Dream Maker Entertainment Ltd., have been signed off to HYBE. In other words, HYBE has blocked any possible money leaks from SM to Lee Soo-Man himself.
Is Bang Si-Hyuk the white knight of Lee Soo-Man?
Let us clarify again. Bang Si-Hyuk did not join forces with Lee Soo-Man, but rather with SM Entertainment. And in that sense, Lee Soo-Man let go of his grip on SM.
An insider explained the details of ‘the deal’ to Dispatch in an exclusive talk.
“Lee Soo-Man was the one to reach out first. And Bang Si-Hyuk took his hand. However, what is noteworthy is that now all of Lee’s ties and connections with SM have been slashed with this contract.”
The insider added that it is the end of Lee Soo-Man's era.
“All the SM profit that Lee Soo-Man was obliged to, is gone. The shares will undoubtedly go back to the company and its shareholders. In summary, Lee Soo-Man just handed over his shares and made his exit.”
The insider was in strong denial at the speculation of “Lee Soo-Man returning to SM again.” He continued, “in what justice will he be able to come back to SM management?”
It is an ongoing reel of irony.
The current SM management could no longer stand watching Lee Soo-Man gain unfair profits, so they held hands with Align Partners, an active asset management fund, and sought to restructure the business management framework.
They chose Kakao as their new partner to join on the venture. And they chose right because the underlying sheer intention of Kakao's partnership is the successful listing of ‘Kakao Entertainment’, with no interest in management rights – bingo.
The drop of the new phase ‘SM 3.0’ only made Lee Soo-Man as helpless as a turtle on its back. Caught in a pickle, the best he could do was to send an SOS to HYBE (whom he had sworn to never sell to).
Lee Soo-Man’s drop of a bombshell sure worked and put a halt on SM’s project but ironically, if you look in deeply, SM’s current management team and Align Partners have achieved their goal.
To prevent Lee Soo-Man from getting his hands on ‘unfair’ profits and turning their backs on Lee Soo-Man’s business management structure. The minute Lee Soo-Man reached out to HYBE, it was inevitable he had to let go of SM.
What remains now is the role of HYBE. They say their primary goal is to regulate SM.
“HYBE will forever be a competitor of SM. We will forever be competitors for the future of K-pop. However, a prerequisite is that the business management structure is regulated. It is scary to think of an SM as such. After all, K-pop did originate from SM.”
