Hybe-ADOR controversy likened to another 'Fifty Fifty case'

▲ Hybe CEO Park Ji-won (L) and ADOR CEO Min Hee-jin. (Yonhap)

SEOUL, April 25 (Yonhap) -- Hybe on the 25th announced the interim audit results regarding ADOR, its subsidiary and NewJeans agency, with plans to prosecute ADOR CEO Min Hee-jin over suspicions of embezzlement. 

Hybe cited evidence of Min's involvement in plotting to seize control while discussing termination of contracts with NewJeans.

Considering the conversation logs released by Hybe, this situation leans towards a scenario akin to another "Fifty Fifty case" constructed by Min. Hybe's response strategy is to replace Min and protect NewJeans under a "two-track" policy. However, Min's side has yet to make a public statement regarding Hybe's interim audit findings.

▲ K-pop girl group NewJeans appears on this undated photo provided by ADOR. (PHOTO NOT FOR SALE) (Yonhap)

◇Conspiracy on Kakao Talk

Notably, according to the interim audit results disclosed by Hybe on the 25th, conversations on KakaoTalk revealed Min's attempts to extract ADOR's management rights and its affiliated intellectual property (IP) NewJeans. A deputy CEO of ADOR suggested various actions, including exercising a put option exit on January 2, 2025, turning ADOR into an empty shell, proceeding with rights infringement lawsuits, seeking financial investors, persuading Hybe to buy ADOR, and Min acquiring ADOR shares with cash out.

This scenario implies Min's exercise of a pre-arranged put option (the right to sell at a specific price) to secure cash, followed by NewJeans members initiating a rights infringement lawsuit against their agency ADOR, leading to contract termination. Given that only one team from NewJeans is currently affiliated with ADOR, members leaving through a lawsuit could render ADOR an empty shell. Subsequently, Min sought financial investors using the cash obtained from exercising the put option to repurchase ADOR from Hybe.

Min's response to this plan was described as a "big hit." However, it's not clear from the conversation logs whether Min's response beyond mere approval of the plan was discussed.

Hybe alleged through its press release that based on face-to-face investigations and submitted information assets, Min Hee-jin instructed management to pressure Hybe into selling its ADOR shares.

▲ This captured image, originally provided by Hybe and spread throughout online communities, reveals the conversation exchanged among the three executives of ADOR in a group chat on April 4, 2024. The representative director responds to the deputy's proposal in this image. (PHOTO NOT FOR SALE) (Yonhap)

◇10 months After the 'Fifty Fifty fiasco,' is K-pop industry facing another major tampering typhoon?

One notable aspect from Hybe's interim audit results is the discussion among ADOR executives about ways to prematurely terminate exclusive contracts with artists (NewJeans) to turn the company into an empty shell. This aimed at extracting the core asset of ADOR, NewJeans, with members who debuted in July 2022 having substantial remaining contract periods. From Hybe's perspective, this could be seen as an attempt at what's known as "tampering" (contacting before the contract expires).

After commencing the audit on the 22nd, Min Hee-jin released a statement stating that ADOR announced its official position after extensive discussions with NewJeans members and their legal guardians (parents), indicating a substantial consensus with Min. In particular, Min strongly raised suspicions of copyright infringement by Ailette, asserting that NewJeans' cultural achievements have been seriously undermined by Hybe. The conversation log released today also includes the phrase 'rights infringement lawsuit.'

This situation brings to mind the social impact of the Fifty Fifty situation that erupted just 10 months ago in June last year. At that time, the members of Fifty Fifty filed for an injunction to suspend the effect of their exclusive contract against the agency, which was dismissed, and Kina returned to the agency alone.

An industry insider remarked, "The core of this incident ultimately points to tampering." Additionally, the discord between Min and Hybe arising from his unwillingness to compromise and his dissatisfaction with compensation could be seen as multifactorial causes of this incident.

To leave the agency, NewJeans must either have a court accept their application for an injunction to suspend the effect of the exclusive contract or ADOR must proactively terminate the contract, which is not practically easy.

▲ K-pop girl group Fifty Fifty (Yonhap)

◇Hybe to soon contact NewJeans for discussions

Even before Hybe began its audit, there were discussions within the securities and music industries that ADOR's movements were unusual. Hybe reportedly obtained information and tips and subsequently launched an internal investigation.

After announcing the interim audit results, Hybe plans to report Min Hee-jin and others to investigative agencies for embezzlement, and subsequently hold a board of directors' meeting or an extraordinary general meeting to proceed with the management change process. If the ADOR board controlled by Min refuses to cooperate, Hybe is considering applying for court approval for an extraordinary general meeting. This process is expected to take about two months, including Min's dismissal and the appointment of a new management team.

Hybe's policy is to protect the members of NewJeans. Hybe CEO Park Ji-won stated, "We will do our best to heal the psychological wounds and provide emotional stability to the valuable assets of K-pop, the artists (NewJeans)." Hybe also intends to meet with legal guardians of the members soon to discuss ways to protect them.

▲ This image provided by a reader shows a protest truck deployed by fans of NewJeans outside the building of K-pop giant Hybe in Seoul on April 24

Last year, ADOR's sales generated over 1.103 trillion won. ADOR's operating profit contribution within Hybe last year was around 11%.

Within the music industry, there are voices calling for a reevaluation of Hybe's consistent emphasis on the "multi-label system." Competitors like SM and JYP also have similar dominance structures under a "center" or "headquarters" system.

Although the multi-label system has become a trend in the music industry, it is argued that it may have provided an opportunity for this incident by treating the company not at the department level but as a single entity.

Hybe CEO Park Ji-won expressed, "We deeply regret causing concerns to fans, artists, and members during the process of advancing the multi-label system." However, some argue that thanks to the multi-label system, they were able to respond forcefully when problems arose.

Kim Do-heon, a popular music critic, remarked, "Thanks to the multi-label system, even though NewJeans gained significant popularity, its contribution was around 10%. However, this incident will prompt discussions on how to prevent similar cases in the future."

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