[비즈한국] “The largest domestic startup organization has expressed concern over the notification of exclusive contract termination by NewJeans, an affiliate of HYBE352820, claiming that the principles of trust and responsibility have been undermined.”
An official statement released on the 23rd by the Korea Startup Forum (KSF) drew significant attention after being reported by various media outlets. The KSF stated, “The recent conflict regarding investment contracts between HYBE and its subsidiary is a grave case that could seriously undermine the principles of trust and responsibility, which are the bedrock of the investment ecosystem,” adding, “We express deep concern that this could hinder the legal stability of the investment environment and threaten the survival foundation of the startup ecosystem.” It is unusual for a startup organization, rather than an entertainment-related group, to voice a position on a conflict between an entertainment company and its artist.
The KSF is an organization comprising 2,483 startup companies in Korea. While it has actively voiced opinions on startup-related legislation and regulations, this is the first time it has commented on a dispute involving a specific entertainment company. However, an investigation by BizHankook revealed that HYBE Chairman Bang Si-hyuk is listed as a member of the KSF board of directors. HYBE is also a regular member of the organization, paying annual membership fees of over 12 million won.
Why is the Conglomerate HYBE in a Startup Organization?
What is the reason behind the 'conglomerate' HYBE being a member of a startup organization? According to the KSF membership regulations, startup companies can join as 'regular members,' while large corporations or financial institutions are classified as 'special members,' who pay annual fees without voting rights at general meetings. However, HYBE is a regular member, paying annual fees of over 12 million won. As a 'director,' HYBE Chairman Bang Si-hyuk also possesses voting rights at general meetings.
A KSF official acknowledged that Chairman Bang Si-hyuk is indeed a director but stated that the secretariat had initiated the drafting of this statement. Furthermore, the official stated that the content of the statement was circulated for review without a separate board resolution. The official explained, “We collect and voice opinions on agendas that are helpful to startups or necessary for the ecosystem. The release of this statement (regarding NewJeans) was not in the form of a resolution, but was conducted by notifying the board of directors and the steering committee and then circulating it. Upon checking, the notice regarding the posting of this statement was not sent to Chairman Bang Si-hyuk.”
When asked about the circumstances under which HYBE, as a large corporation, became a regular member with voting rights and why Chairman Bang is participating as a director, the official stated, “HYBE has been a KSF member since around 2018. The board of directors also includes institutions or law firms that are not startups. You can essentially consider those who hold the startup ecosystem as being on the board of directors.”
An official from another company, who is a KSF director, told BizHankook, “I didn’t even know this statement was posted. I don’t know the circumstances under which it was announced.”
BizHankook attempted to reach Han Sang-woo, CEO of Wizdome and Chairman of the KSF Board, as well as Vice Chairmen Koo Tae-eon (CEO of Tech & Law Ventures), Kim Min-ji (CEO of V-Dream), and Lee Joo-wan (CEO of Megazone Cloud) to hear about the process behind drafting the statement, but could not receive any responses.
Entertainment Representative Groups Criticize NewJeans One After Another
Recently, entertainment-related groups have issued a series of statements criticizing NewJeans. The Korea Management Federation (KMF) stepped forward on December 3rd, followed by the Korea Entertainment Producers Association (KEPA) on the 6th, and the Korea Music Content Association (KMCA) on the 13th.
Regarding NewJeans' announcement on November 27th that they would “terminate their exclusive contract due to ADOR’s breach of contract,” these groups criticized that if contracts were terminated based on unilateral claims, it could shake the foundation of the popular culture and arts industry. In particular, the KEPA and KMCA emphasized suspicions of ‘tampering,’ claiming that NewJeans had contacted external companies before their exclusive contract period ended. HYBE is currently a member of the KMCA board.
The standard exclusive contract for popular culture artists stipulates that if one party breaches the contract, the contract can be terminated. Moreover, last August, HYBE itself unilaterally notified the termination of the shareholders' agreement, claiming that former ADOR CEO Min Hee-jin had breached it. Noh Jong-eon, a lawyer at the law firm Jonjae, pointed out, “NewJeans is not the first case where an artist has notified an agency that breached their contract of termination. Additionally, HYBE was the first to notify former CEO Min Hee-jin of contract termination. Yet, only NewJeans is being criticized for undermining the foundation of the contract.”
It is also difficult to view the conflict between HYBE, its label ADOR, and NewJeans as ‘tampering,’ which involves external entities approaching artists in advance. This is because allegations of unethical management by HYBE and discrimination against NewJeans emerged first. Internal reports shared by HYBE executives, such as the ‘Weekly Music Industry Report,’ mentioned that they could ‘just discard New and form a new plan,’ and a transcript was released where a HYBE PR director stated that NewJeans’ performance in Japan was “a bit worse than expected.” Lawyer Noh Jong-eon noted, “In the injunction lawsuit between HYBE and former CEO Min Hee-jin, Min Hee-jin’s breach of trust was not recognized. Furthermore, former CEO Min and NewJeans are separate entities. Ultimately, there is no evidence of tampering.”
Experts point to the reality of the absence of organizations representing artists. Culture critic Kim Heon-sik remarked, “I see the NewJeans situation as similar to the TVXQ incident. At that time, JYJ also faced difficulties appearing on broadcasts and events. Currently, there is no artist’s perspective in the ‘music industry’s position.’ Organizations like the KMF are all on the side of corporations. Even without evidence of tampering, these groups keep mentioning it. By that logic, artists would have to endure even if management is at fault. Because of this aspect, negative perceptions of K-pop are growing overseas, which I believe will eventually result in management risks.”