SM Hired A Social Media Company To Manipulate Public Opinion Against HYBE

source: https://m.entertain.naver.com/now/article/312/0000672063

NOTE: text messages are being translated

It has been revealed that during its management dispute with HYBE early last year, SM Entertainment hired an external company to manipulate public opinion on internet forums and community bulletin boards. This is the first known instance of an entertainment company ordering and paying for public opinion manipulation to create negative sentiment against a rival in a management conflict. With Kakao founder Kim Bum-soo being arrested on charges of manipulating stock prices to block HYBE’s acquisition of SM Entertainment early on the 23rd, it has become evident that artificial manipulation extended beyond stock prices to public opinion as well.

Contract for Viral Marketing

According to exclusive Telegram conversations obtained by our newspaper on the 23rd, the public relations agency ‘Astrape’ created a chatroom called ‘Str’ on February 27th of last year, which included employees from the viral marketing company they hired and SM executives and employees. This task force aimed to generate favorable public opinion for SM Entertainment during its dispute with HYBE, by spreading positive information about SM and negative information about HYBE. The group consisted of six people: two SM employees, the Astrape headquarters manager, and three viral marketing representatives.

The formal contract between SM and Astrape was an advertising deal to promote 'SM 3.0' on portal sites like Naver, totaling 1.38814 billion won. 'SM 3.0' was a plan to enhance shareholder value to compete with HYBE. Given past criticisms of SM for neglecting shareholder value, this initiative also aimed to boost stock prices and counter HYBE's public offering.

However, SM did not just spend 1.38 billion won on promoting SM 3.0. Astrape suggested a 'media mix' strategy, which included viral marketing beyond standard promotion. This comprehensive service included spreading favorable content and negative news about the rival, thus pushing the contract price higher than typical banner ads. Conversations between Astrape Director Park and CEO Hwang confirmed that the contract included viral marketing aspects under the guise of banner advertising.

Public Opinion Manipulation

Even before the contract was signed, Astrape knew SM's focus would be on viral marketing. Specific discussions began on March 1st, after the contract date. An SM employee requested quick viral promotions for community posts, and Astrape Director Park promptly engaged their viral team. SM employees actively managed the dissemination of favorable articles and requested lists of target communities for reporting purposes.

The viral companies did not just share positive articles about SM; they actively spread negative public opinion about HYBE. SM provided detailed guidance, called 'angles,' on how to frame these articles. For example, they highlighted the potential negative impact of HYBE's acquisition on SM artists, falsely claiming that HYBE's past acquisitions led to the disbandment of groups like GFriend and Pristine. This guidance aimed to create anxiety and opposition towards HYBE among fans and shareholders.

Secrecy and Execution

The viral companies took significant precautions to ensure their activities were not detected. Conversations between employees revealed concerns about the visibility of their viral efforts, with adjustments made to avoid detection. Viral articles were posted in multiple community forums, often posing as genuine fan concerns, to shape public opinion against HYBE and favor SM.

The period of active public opinion intervention lasted about a month, coinciding with HYBE's entry and exit from the acquisition battle. Even after HYBE announced it was abandoning the acquisition on March 12th, efforts to maintain favorable public opinion for SM continued until the general shareholders' meeting.

SM’s Official Response

SM Entertainment officially stated, "We conducted online marketing activities through an outsourced agency to publicize the homepage created for SM 3.0 shareholder proposals and proxy voting." They acknowledged the inclusion of sharing related articles in internet communities as a minimal part of the campaign, emphasizing that these activities aimed to communicate the company's position to shareholders and stakeholders legitimately.

Conclusion

This case highlights the extent to which SM Entertainment went to defend its management rights and manipulate public opinion during its conflict with HYBE. The coordinated effort involved significant financial expenditure and strategic use of viral marketing to shape sentiment in favor of SM and against HYBE, reflecting broader implications for corporate ethics and regulatory oversight in the entertainment industry.