SM Entertainment founder launches rival agency
K-pop pioneer Lee Soo-man has launched a new agency after leaving SM Entertainment, the influential entertainment company he founded almost 20 years ago.
Under his leadership, the Seoul-headquartered firm developed the systematic training model that would become the blueprint for K-Pop idol development, launching acts such as H.O.T., Girls’ Generation, EXO, NCT, and aespa.
However, Lee’s relationship with SM Entertainment dramatically ended in early 2023 after a management dispute. As a result, he sold his stake in SM to the company’s rival, HYBE, sparking a battle for control of the company. HYBE ultimately abandoned its controversial move to take over SM, with parent company Kakao gaining control.
Lee then established his new company, Blooming Grace, which focuses on environmental, social and governance contribution projects and cultural technology development. Blooming Grace filed a trademark application for a new company called A2O Entertainment in May.
A2O Entertainment unveiled its first slate of trainees through a promotional video released last week
A2O Entertainment unveiled its first slate of trainees through a promotional video released last week via YouTube and Weibo (a Tencent-owned social media platform in China), introducing artists categorised into three groups: Rookie HTG (High Teen Girls, 16 and older), Rookie LTG (Low Teen Girls, 15 and younger), and Rookie LTB (Low Teen Boys, 15 and younger).
The launch floated a new music genre that the agency dubbed ‘Zalpha-Pop,’ targeting the Zalpha generation (Gen Zs and Alpha, born from the mid-1990s to the 2010s). The agency’s YouTube page has already attracted over 5,000 subscribers and nearly 95,000 views.
Throughout their training, the rookies will showcase performances on the A2O Channel, either as solo acts or as units, the agency said.
Lee’s venture is reportedly subject to a three-year non-compete clause set by HYBE, which would mean his production activities are currently restricted to overseas projects.
The Korea Herald said this explains the significant presence of Chinese trainees in A2O’s lineup, while The Korea Times reported that A2O held auditions for trainees in China and Japan last June.
Reports indicate Lee attempted to negotiate the removal of this three-year restriction but was unsuccessful.
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SM Entertainment earnings soar in ‘highest-ever’ quarter
K-pop giant SM Entertainment has reported its highest-ever quarterly earnings for Q3, bolstered by concerts and record sales.
The Seoul-based company, which is home to acts some of the world’s biggest K-pop acts, reported KRW 48 billion (€34m) in operating profit – a 77% surge year-on-year (YOY).
Revenue followed suit with a 40% YoY increase, soaring to KRW 188.7 bn (€133.9m), while net profit reached KRW 37.1 bn (€26.3m), jumping 68% YoY.
SM says increases across the board can be attributed to the rise in music and recording sales by NCT DREAM, aespa and RIIZE, as well as the increase in artist activities such as offline concerts.
The entertainment agency is also home to acts including Girls’ Generation, Super Junior, EXO, NCT and Red Velvet.
The Seoul-based company reported KRW 48 billion (€34m) in operating profit – a 77% surge year-on-year
SM has also revealed a consolidated operating profit of KRW 50.5 bn (€35.8m) for Q3, a staggering 70% YoY increase, as well as a revenue surge of KRW 266.3 bn (€188.9m), a 12% YoY increase. Both figures recorded the highest quarterly performance.
Meanwhile, net profit increased by 189% to KRW 84.2 bn (€59.7m), compared to KRW 29.2 bn (€20.7m) during the same period last year. Operating margin for Q3 recorded 19%, a YoY increase of 6.5%.
SM’s subsidiaries include live entertainment company Dream Maker, advertising, production, travel and talent company SM Culture & Contents, entertainment management agency Keyeast and music publishing subsidiary KMR.
Looking towards the future, SM CEO Cheol Hyuk JANG said: “We have a packed line-up of activities through the end of the year, from aespa, Red Velvet and Taeyeon to TVXQ’s 20th anniversary album and concerts. We are also planning on showcasing a strong lineup of artists and content in the coming year as well. Through our music publishing subsidiary KMR, we’ll actively seek out global songwriters, focus on securing a stable supply of high-quality songs and eventually secure a new stream of revenues for SM through royalties made from selling music to external labels and agencies.”
Earlier this year, internet company Kakao Corp became the second-largest shareholder in SM Entertainment.
SM says increases across the board can be attributed to, in part, to the increase in artist activities such as offline concerts
SM Entertainment says the capital raised through the deal will fund its new business strategy dubbed “SM 3.0” – establishing multiple production centres and labels as well as a music publishing-specialised subsidiary, and investing in the metaverse.
At the end of last year, the Seoul-based operation announced plans to launch a headquarters in Singapore, in order to strengthen its presence in Southeast Asia.
Months later, it was announced that SM and Kakao would launch an integrated division in North America.
The division will combine SM’s global intellectual property and production capabilities with Kakao’s music distribution network and multi-label system, “with the goal of firmly establishing itself as a global K-pop key player”.
The aim is to promote artists from both companies, including Kakao-owned Starship Entertainment’s girl group IVE, as well as SM’s girl group Aespa and boy band NCT.
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SM Entertainment and Kakao integrate in N.America
K-pop giant SM Entertainment and its biggest stakeholder Kakao Entertainment are launching an integrated division in North America.
The division will combine SM’s global intellectual property and production capabilities with Kakao’s music distribution network and multi-label system, “with the goal of firmly establishing itself as a global K-pop key player”.
The aim is to promote artists from both companies, including Kakao-owned Starship Entertainment’s girl group IVE, as well as SM’s girl group Aespa and boy band NCT.
“We will accelerate the global advancement and growth of Kakao Entertainment and SM Entertainment’s artists”
“Through the North American integrated corporation, we will accelerate the global advancement and growth of Kakao Entertainment and SM Entertainment’s artists, and based on this, we will expand the growth potential of Kakao Entertainment’s music business, which encompasses planning, production, and distribution of music and artist IP, to the global market,” says Kakao Entertainment America CEO Jang Yoon-jung.
Jang Yoon-jung will lead the new North American company. He will be in charge of Kakao’s global strategy officer and SM’s chief business officer.
Earlier this year Kakao became the largest shareholder in SM Entertainment after a months-long corporate battle against SM rival HYBE to take control of the K-Pop agency.
HYBE, the South Korean music agency behind BTS and Ariana Grande, is also looking to expand in the US to secure a global foothold. It was reported in June that the Seoul-based company is looking to raise around 500 billion Korean won (approx USD $380m).
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HYBE calls off SM Entertainment takeover bid
K-pop behemoth HYBE has abandoned its controversial move to take over rival SM Entertainment.
HYBE, which is home to acts including BTS, Tomorrow X Together, NewJeans, LE SSERAFIM and Seventeen, says it has taken the decision due to the market “overheating”, amid competition with South Korean internet giant Kakao.
“HYBE assessed that the market situation had overheated due to competition with Kakao and Kakao Entertainment, which could negatively impact HYBE’s shareholders’ rights,” it says in a statement. “The two companies ― HYBE and Kakao ― also reached an agreement to seek cooperation on platform businesses.”
The Korea Times reports that Kakao will now work toward a controlling stake in SM and its management rights, while continuing to seek cooperation with HYBE on its platform business. Kakao offered SM shareholders 150,000 KRW (€108) per share, compared to HYBE’s previous offer of 120,000 KRW (€86) per share.
“Kakao and Kakao Entertainment respect HYBE’s decision to stop the move to acquire SM Entertainment”
“Kakao and Kakao Entertainment respect HYBE’s decision to stop the move to acquire SM Entertainment,” says a Kakao statement. “As a partner sharing mutually positive impacts, Kakao and Kakao Entertainment will continue various strategic cooperative relations with HYBE and SM Entertainment to help stoke the global status of K-pop and K-culture.”
Seoul-based SM Entertainment says that it “welcomes” HYBE’s decision to suspend its takeover bid. Last month, HYBE purchased a 14.8% stake in SM, in a move led by HYBE’s global team that involved acquiring former chief producer Lee Soo-Man’s shares in SM – days after the announcement of the SM 3.0 business strategy and development plan.
It pledged to buy another 25% stake in a separate notice, leading SM Entertainment CFO Cheol Hyuk Jang to release a video denouncing HYBE’s “hostile takeover”. Days earlier, SM had sold KRW 217.2 billion ($172.8m) shares – a 9.05% stake – to Kakao Corp.
In February Bloomberg reported that SM had seen its profits soar 70% thanks to the return of concerts and live events, posting an operating profit of 25.2 billion KRW (€18.3 million) in Q4 2022. Sales rose 18.2% to 256.4bn KRO, with its number of concerts in the three-month period up 35 times on the same quarter in the Covid-hit 2021.
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K-pop concerts’ return boosts SM profits by 70%
K-pop powerhouse SM Entertainment has seen its profits soar 70% thanks to the return of concerts and live events, as controversy grows over its “hostile takeover” by rival HYBE.
Bloomberg reports that Seoul-based SM posted an operating profit of 25.2 billion won (€18.3 million) in Q4 2022, with sales rising 18.2% to 256.4bn won. Its number of concerts in the three-month period was up 35 times on the same quarter in the Covid-hit 2021.
SM, which is home to acts such as BoA, TVXQ, Girls Generation, Shinee, EXO and Super Junior, says it expects profits from concerts and music operations will continue to grow in the first half of 2023, with boy band NCT Dream and pop duo TVXQ! holding more than 50 concerts.
NCT Dream recently completed a Japanese tour, including their first dome shows at Kyocera Dome Osaka, which pulled in 120,000 people over three days. The final show was transmitted through WOWOW, Japan’s largest satellite channel broadcaster, as well as live viewing, which broadcasts live performances at 140 movie theatres nationwide, and was also broadcast live on the global platform Beyond LIVE.
The band will tour Asia, Europe and the Americas from March, while girl group Aespa are also planning another 10 concerts in Japan in the first six months of the year.
“As soon as SM’s new vision ‘SM 3.0’ was announced, the largest shareholder sold his stake, and a hostile takeover attempt by a competitor started”
Earlier this month, HYBE became the largest shareholder in SM Entertainment with the purchase of KRW 422.8 billion shares — a 14.8% stake.
The move was led by HYBE’s global team and involved acquiring former chief producer Lee Soo-Man’s shares in SM days after the announcement of the SM 3.0 business strategy and development plan.
HYBE, which has pledged in a separate notice to buy another 25% stake, is home to acts including BTS, Tomorrow X Together, NewJeans, LE SSERAFIM and Seventeen through its subsidiary labels, such as Big Hit Music, Pledis Entertainment, Source Music and ADOR.
However, over the weekend, SM Entertainment CFO Cheol Hyuk Jang released a video denouncing HYBE’s “hostile takeover”.
“As soon as SM’s new vision ‘SM 3.0’ was announced, the largest shareholder sold his stake, and a hostile takeover attempt by a competitor started,” he says, as per Koreaboo. “This is an attempt that ignores not only the fierce deliberation and efforts of the 600 SM employees who have dreamed of becoming the No.1 entertainment company in the world, but also the values and pride of SM that it has pursued together with the fans and artists.”
“HYBE is raising not only its own concert ticket prices but also those of the labels it has acquired, which illustrates the impact monopoly will have on the industry”
Jang also raised competition concerns over the acquisition, adding that it will lead to higher ticket prices for concerts.
“If HYBE takes the majority of the market share by acquiring SM’s managerial rights, K-pop would lose opportunities for a greater advancement forward,” he said. “Ultimately, K-pop fans will be the ones that will be most affected by the monopoly.
“SM puts reasonable prices to concert tickets to allow broader scope of fans to enjoy cultural performances. Meanwhile, HYBE has taken advantage of its position in the K-pop market to almost double the concert ticket prices as reported in the news several times recently. HYBE is raising not only its own concert ticket prices but also those of the labels it has acquired, which illustrates the impact monopoly will have on the industry.
“The consolidation of SM and HYBE will accelerate ticket price increase, adding burden to fans who love and support K-pop and K-pop artists. The concert ticket price hike is just one example. The monopoly created as a result of HYBE’s hostile acquisition of SM will cause more diverse and direct problems, including decreased diversity of artists, music and concerts.”
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HYBE becomes top shareholder in rival SM Entertainment
K-pop behemoth HYBE has become the largest shareholder in SM Entertainment, the rival South Korean company thought to have kickstarted the wave of popularity around Korean pop culture.
The purchase of KRW 422.8 billion shares — a 14.8% stake — was reported today (10 February) and helps strengthen HYBE’s position as a leader in K-pop. Reportedly, the company pledged in a separate notice to buy another 25% stake.
Through its subsidiary labels, such as Big Hit Music, Pledis Entertainment, Source Music and ADOR, HYBE is home to K-pop acts including BTS, Tomorrow X Together, NewJeans, LE SSERAFIM and Seventeen.
The SM move was led by HYBE’s global team, which includes chairman Bang Si-Hyuk, CEO Park Jiwon and Braun and involves acquiring former chief producer Lee Soo-Man’s shares in SM Entertainment. In October 2022, SM announced that it terminated a contract with Lee Soo-Man a year early.
Seoul-headquartered SM is home to such acts as aespa, BoA, TVXQ, Girls Generation, Shinee, EXO, Super Junior and NCT 127.
The deal is targeted at “raising its competitiveness in the K-pop industry and producing a synergy effect,” Hybe said in its filing.
Shares of SM Entertainment today soared, rising more than 16% at the open in Seoul, while HYBE rose 6%
Shares of SM Entertainment today soared, rising more than 16% at the open in Seoul, while HYBE rose 6%, JYP Entertainment rose 2.5% and YG Entertainment gained 3.8%.
Today’s blockbuster announcement comes at the end of a busy week of business for both HYBE and SM.
On Tuesday (7 February), SM Entertainment sold KRW 217.2 billion ($172.8m) shares – 9.05% stake – to South Korean internet company Kakao Corp.
The following day (8 February), HYBE America announced it had acquired Quality Control (QC Media Holdings, Inc.).
The Atlanta-based entertainment company covers music (Lil Baby, Lil Yachty, City Girls and Migos are among its signings), sports, film and television founded in 2013 by CEO Pierre “P” Thomas and COO Kevin “Coach K” Lee. The deal, valued at $320 million in stock and cash, was led by HYBE America CEO Scooter Braun.
The rise and rise of K-pop will be discussed at the forthcoming International Live Music Conference (ILMC), taking place at the Royal Lancaster Hotel in London, between 28 February to 3 March.
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K-pop giant SM Entertainment sells $173m share
South Korean internet company Kakao Corp is to buy a 9.05% stake in K-pop behemoth SM Entertainment for a reported 217.2 billion won ($172.8m).
The deal will see Kakao Corp become the second largest shareholder in the entertainment agency, home to acts including Girls’ Generation, Super Junior, EXO, NCT and Red Velvet.
The two companies will team up to pursue joint management projects together including global K-pop auditions, management and music distribution businesses, according to Reuters.
“We hope to work together in competing in the heavily contested global music and content market through this investment”
“We hope to work together in competing in the heavily contested global music and content market through this investment,” says Kakao Chief Investment Officer Bae Jae-hyun.
SM Entertainment says the capital raised through the deal will fund its new business strategy dubbed “SM 3.0” – establishing multiple production centres and labels as well as a music publishing-specialised subsidiary, and investing in the metaverse.
At the end of last year, the Seoul-based operation announced plans to launch a headquarters in Singapore, in order to strengthen its presence in Southeast Asia.
The SM boss also revealed ambitions to slowly expand not just to other parts of Southeast Asia, but also to the wider continent, including the Middle East.
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S.Korea’s SM Entertainment eyes expansion
South Korean entertainment giant SM Entertainment is planning to launch a headquarters in Singapore, in order to strengthen its presence in Southeast Asia.
The Seoul-based operation, which is home to K-pop acts such as Red Velvet, Girls’ Generation, EXO, SHINee, NCT and Aespa, says that the new HQ will be tasked with “managing joint ventures in Indonesia, Vietnam and Thailand, as well as communicating with [its South Korea office] for other related ventures and plans.”
SM Entertainment founder Soo-Man Lee told CNBC that the company is already “in the midst of hiring more local talents, which will hopefully increase the full-time staff count.” The company is also “looking at hiring local undergraduates or fresh graduates for internships.”
On top of that, the company plans to launch retail businesses in Singapore, including cafes, merchandise stores and pop-up exhibitions.
The Singapore HQ will be tasked with “managing joint ventures in Indonesia, Vietnam and Thailand
The SM boss also revealed ambitions to slowly expand not just to other parts of Southeast Asia, but also to the wider continent, including the Middle East.
The company made its first foray into the region earlier this year after partnering with the Saudi Arabian investment department.
The deal will see SM discover, nurture and produce local S-pop (Saudi pop) artists with the active support of the Saudi Ministry of Investment, with plans to establish a venue “that can hold music festivals year-round”.
SM also plans to build a metaverse platform to “share Korean and Saudi culture” and “actively promote local business… production of various contents, and production and sales of products using IP”.
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Korea’s SM Entertainment expands to Saudi Arabia
K-pop juggernaut SM Entertainment is expanding into the Middle East after partnering with the Saudi Arabian investment department.
The deal will see SM discover, nurture and produce local S-pop (Saudi pop) artists with the active support of the Saudi Ministry of Investment, with plans to establish a venue “that can hold music festivals year-round”.
SM also plans to build a metaverse platform to “share Korean and Saudi culture” and “actively promote local business… production of various contents, and production and sales of products using IP”.
“I am delighted to have signed a business agreement with the Saudi ministry of investment,” says SM executive producer Lee Soo-man. “I hope that through this agreement, me, SM, and Saudi Arabia can bear good results.
“I will discover local talents, produce S-pop, and build a music ecosystem that young people in Saudi Arabia can enjoy”
“With the CT (Culture Technology) system I built, I will discover talented local talents, produce S-pop, and build a music ecosystem that young people in Saudi Arabia can enjoy. Furthermore, I hope that it will contribute to the development of the future cultural industry in Saudi Arabia.”
K-pop artists on SM’s roster include NCT, Super Junior, Girls’ Generation, Shinee, Exo, Red Velvet, SuperM, TVXQ, Aespa and BoA.
Soo-man met with officials from the local Ministry of Culture during a visit to Riyadh, Saudi Arabia back in March, with further discussions taking place at SM’s Seoul headquarters in June.
“I am very much looking forward to working with Lee Soo-man and SM Entertainment, and we will actively cooperate,” adds Saudi deputy minister of investment Fahad Al Naim.
Last month, SM teamed with Los Angeles-based virtual reality concert platform AmazeVR to form joint venture Studio A. The JV will pool AmazeVR’s technology with SM’s extensive artist network.
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AmazeVR teams with Korea’s SM to launch Studio A
Los Angeles-based virtual reality concert platform AmazeVR has teamed with K-pop juggernaut SM Entertainment to form joint venture Studio A.
Based in Seoul, South Korea, the “industry-leading VR concerts production deal” will pool AmazeVR’s technology with SM’s extensive artist network.
Concerts will be distributed exclusively through AmazeVR and SM’s VR music metaverse services.
“SM is excited to expand our market to include metaverse content for artists using AmazeVR’s industry-leading VR technologies and proprietary concert creation tools. We’ve had a great interest in this market and see the opportunity for our artists in the metaverse,” says Sung-su Lee, CEO of SM Entertainment. “AmazeVR shares the same vision for this next generation of music.”
“We’re going to see some phenomenal VR concerts”
AmazeVR partnered with Megan Thee Stallion on her recently completed Enter Thee Hottieverse virtual reality concert tour, which took place in 10 cities across the US between April and July. Ticket-buyers were able to go to their local movie theatre, put on VR headsets and hang out in the “VR Hottieverse lobby” before watching the rapper. The VR concert performance featured a multi-song set that moved through a series of environments and featured custom wardrobes designed just for the show.
Leading entertainment company SM’s new girl group Aespa recently made their debut in the metaverse and played their first US live show at Coachella 2022. Other artists on SM’s roster include NCT, Super Junior, Girls’ Generation, Shinee, Exo, Red Velvet, SuperM, TVXQ, and BoA.
“We’re thrilled at the prospect of working with SM to collaborate with K-pop and other Asian artists, as well as other Asian music companies, through our new partnership.” says AmazeVR co-CEO Ernest Lee. “We’re going to see some phenomenal VR concerts. They’ve influenced K-pop globally, united the music industry across the continent, and brought unique and energetic performances to worldwide audiences,”
“Our JV partnership with SM Entertainment will deliver mesmerising, fully immersive VR concerts featuring mega K-Pop stars,” adds AmazeVR co-CEO Steve Lee.” Never before have fans been able to experience their favourite artists in such an intimate and personal way.”
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