CFO Of SM Entertainment Response To HYBE Acquisition: Like Backing In The Past

Jang Cheol Hyuk - SM Entertainment (screenshot)

JAKARTA - SM Entertainment released a video statement regarding the news of the acquisition that will be carried out by HYBE Labels. Today, Monday, February 20, SM Entertainment uploaded a video via their official YouTube channel with some information.

The video is titled The reason why SM rejects the takeover of HYBE contains a list of reasons for the rejection of the merger and the acquisition that HYBE will make.

Through the video, SM's Chief Financial Officer or CFO, Jang Cheol Hyuk said. "After the new SM 3.0 vision was announced, the biggest shareholder sold his shares and the takeover attempt began with competitors."

"This is an effort to ignore the considerations and hard work of 600 SM employees who dream of becoming the number one entertainment company in the world, but also the values and pride of SM being pursued with fans and artists," he continued.

Jang Cheol Hyuk called this acquisition move like a return to the past between SM and certain shareholders. Although HYBE declared SM independence but they considered this a nonsense statement.

With this acquisition, Cheol Hyuk considers SM to reduce SM value in business. The potential of SM artists to release albums will be even less. In addition, artists will join HYBE's Weverse platform so that SM-made applications are not used.

If HYBE takes over SM, it is undeniable that SM will submit to that governance. With a limited album release plan of up to 100 per year, HYBE has integrated artists from its label. As a result, SM artists will have low priority, said Jang Cheol Hyuk.

Then the synergy made for HYBE shareholders is not SM or K-pop shareholders. With the joining of the two largest South Korean agencies, Cheol Hyuk suspects that this will become a monopoly in terms of markets and income and will be a decline in the K-pop industry.

Cheol Hyuk gave an example of HYBE and SM earnings in the third quarter of 2022. Combined, these two agencies generate 70% album sales and 89% concert sales nationally and internationally.

K-pop fans are the party most disadvantaged by this monopoly, said Jang Cheol Hyuk.

One example given is the price of concert tickets. SM Entertainment always sets normal and relatively the same prices for their artists. In 2015, the ticket price for the Girl's Generation and EXO concerts was 110,000 won, Super Junior - EXO - NCT 127 in 2017 was 121,000, and aespa in 2023 was 154,000 won.

Meanwhile, HYBE set the concert price before the agency acquisition of 121,000 won. After the acquisition, they set a price of 165,000 won.

Last week, SM Entertainment employees voiced their rejection of HYBE's acquisition. Jang Cheol Hyuk reiterated 85 percent of employees disagreed with the move.

"The takeover of HYBE does not appreciate the hard work of employees day and night and SM employees say traditions and SM are experiencing setbacks," he said.

As many as 25 CEOs and executives also rejected HYBE's acquisition from any aspect. This is considered to injure SM Entertainment's efforts as a K-pop diversity.

We are aware of Lee Soo Man's contribution to SM as executive and founder producer. We are trying to maintain Lee Soo Man's self-esteem and SM's legacy and prepare for new steps for the shareholders. That's why Lee Soo Man's decision took us by surprise," said Cheol Hyuk.

"We ensure that SM 3.0 will benefit all shareholders, not just part of them," concluded the video narration.

HYBE announced the acquisition of Lee Soo Man's stake in SM Entertainment as the largest shareholder. They also plan to acquire some minority shareholders. This decision was rejected by SM executives.