HYBE'S RESPONSE TO THE LETTER MIN HEEJIN SENT RE "ALBUM PUSHING"

Title | HYBE dismisses "Unfounded Allegations" by Min Hee Jin Regarding 'Album Pushing' Suspicions [Full Text]

Article | HYBE has addressed the accusations of album pushing, raised by ADOR CEO, Min Hee Jin.

[TN: Album pushing refers to the unethical practice of artificially inflating album sales figures especially during the first week]

On the 17th, HYBE addressed recent allegations by stating, "Labels under HYBE do not engage in album pushing," and clarified, "We have repeatedly responded to ADOR's claims, as shown in the SNS conversations between HYBE CEO Park Ji-won and CEO Min."

HYBE further emphasized, "CEO Min has consistently cast baseless doubts on the album sales of various artists, both within and outside the company, including Seventeen, Tomorrow X Together, Enhypen, Le Sserafim, TWS, ILLIT, IVE, and RIIZE, suggesting unfair practices whenever sales figures are announced."

Regarding IVE's recent album sales, HYBE noted that ADOR's Co-CEO met with external analysts, continually questioning the validity of the numbers.

Below is the official statement from HYBE:

Today, ADOR released a statement, including a second email sent to HYBE on April 16th. In response, HYBE provided a detailed reply based on accurate facts on April 22nd, which is included below. This response confirms that HYBE does not engage in album pushing.

HYBE has verified that the evidence presented by ADOR was obtained through a collaborator who was either coerced or previously engaged to obtain desired responses. Additionally, conversations between CEO Min Hee-jin and Co-CEO L-- reveal that raising concerns about album pushing was part of a strategy for a corporate takeover.

As disclosed in court today, conversations such as "collection of evidence for album pushing + preparation for public opinion warfare," "whether the Fair Trade Commission investigates or not, it doesn't matter," and "as long as we get headlines" have taken place.

[Reference Material] Full Text of HYBE's Response to ADOR Min Hee Jin's Internal Allegations

Dear ADOR Min Hee-jin, CEO

On the 17th, HYBE stated, "Labels under HYBE do not engage in album pushing," and clarified, "We have already responded to ADOR's claims multiple times, as shown in the SNS conversations between HYBE CEO Park Ji-won and CEO Min."

HYBE emphasized, "CEO Min has repeatedly cast baseless doubts on the album sales of various artists, both within and outside the company, including Seventeen, Tomorrow X Together, Enhypen, Le Sserafim, TWS, ILLIT, IVE, and RIIZE, suggesting unfair practices whenever sales figures are announced."

Regarding IVE's recent album sales, HYBE noted that ADOR's Co-CEO recently met with external analysts, continually questioning the validity of the numbers.

Below is HYBE's official statement:

"First and foremost, we express our regret that ADOR has raised unilateral claims through lengthy inquiries on April 3rd and 16th, during a crucial period when ADOR should have exerted its best efforts to achieve successful results with NEWJEANS. The inquiry on April 16th raised unfounded suspicions related to HYBE's management, which were irrelevant to NEWJEANS and not based on facts. Although presented as actions benefiting NEWJEANS, it appears they stemmed from CEO Min's hidden intentions or motives. Based on several facts uncovered during the preparation of this response, HYBE has become convinced that promptly conveying HYBE's position is the best way to protect NEWJEANS' precious values, and we hereby respond as follows."

HYBE does not engage in 'album pushing.'

'Album pushing' refers to the unethical practice of artificially inflating album sales figures, particularly during the first week of release, through tactics such as placing mass orders through distributors or overseas subsidiaries or orchestrating fan events solely to boost sales numbers. HYBE has clarified multiple times in responses to ADOR that HYBE does not engage in such practices, as shown in the SNS conversation records between HYBE CEO Park Ji-won and CEO Min.

Despite this, CEO Min has persistently raised unfounded suspicions regarding the album sales of various artists, both within and outside the company. Specifically concerning IVE's recent album sales, ADOR's Co-CEO has also met with external analysts recently, consistently questioning the validity of the numbers.

CEO Min even claims that NEWJEANS was encouraged to engage in album pushing by HYBE. However, this was merely part of a friendly conversation, and there is no official album pushing. In fact, HYBE operates with a clear principle of not engaging in album pushing for the sake of first-week sales competition.

HYBE conducted a comprehensive investigation to address the issues raised, including whether there were any returns due to album pushing for all albums sold last year. We transparently share the findings.

In 2023, HYBE artists released 17 new albums and sold a total of 43.6 million copies (including about 10 million pre-orders). As a result of the recent investigation, it was found that there were returns of 70,000 copies for each of the two past albums, totaling 140,000 copies, which accounted for 0.32% of total album sales. Considering the favorable album sales at that time, there were upward revisions in demand forecasts. However, as the market situation changed, higher errors in demand forecasts occurred than in the past. Returns were processed for two albums as the practical staff allowed returns not specified in the contracts. Immediately after confirming the return transactions, the company strengthened internal controls to prevent informal agreements for returns, and no additional return transactions occurred thereafter.

ADOR also expressed its position, defining album pushing as "artificially inflating sales volume, particularly first-week sales, by placing mass orders through distributors or overseas subsidiaries or by artificially creating sales volumes through fan events." This definition implies that NEWJEANS' activities during the release of the 2nd EP 'Get Up' constitute album pushing.

Initially, UMG, a Japanese distributor, expressed reluctance to purchase over 90,000 copies of the album. However, through negotiations involving ADOR, an additional 60,000 copies were sold to UMG, totaling 150,000 copies, which could be considered a mass order by ADOR. As a result, the current inventory held by the distributor is as high as 110,000 copies. To absorb some of the increased quantity, ADOR held a fan signing event attended by all NEWJEANS members on August 20, 2023, which could be considered a hastily organized fan event.

Such activities fall under the realm of promotional acts of business operations, and claiming that it is album pushing when done by others lacks credibility.

HYBE expresses serious concerns about the speculative behavior and intentions raised without proper confirmation, which can be easily misunderstood as 'album pushing.' If ADOR truly believed that album pushing existed within HYBE and posed a significant problem in the K-Pop market, they should have first conducted sufficient confirmation of the facts.

2. The UMG contract benefits everyone.

The contract with UMG is a significant achievement, resulting from extensive and strategic negotiations aimed at maximizing the benefits for HYBE, its affiliated artists, and the broader community, including WEVERSE. UMG acknowledges the prominent status of BTS and other artists under HYBE’s domestic labels, HYBE Japan, and subsidiaries like BMLG and QC Media. The favorable rates negotiated in this contract would not have been possible with the distribution quantities of individual labels alone.

This contract enables HYBE’s domestic, Japanese, and American labels to enjoy substantial reductions in distribution fees. ADOR will also benefit from these reduced fees for album and music sales in 2024. The anticipated reduction in distribution fees for ADOR is nearly 5% of related sales revenue, significantly improving profitability.

However, CEO Min claims that NEWJEANS has lost the chance to secure even lower distribution fee rates in the future due to this contract. This claim is unfounded, based on speculative future value and bargaining power of NEWJEANS, assuming they missed the opportunity to negotiate better terms with overseas distributors. It remains questionable what evidence supports the notion that individual labels under HYBE could achieve more favorable conditions than the current UMG contract.

3. ADOR has already benefited greatly from the enhancement of label operations.

Even before NEWJEANS debuted, they had the opportunity to meet with the management team of a leading global sports brand CEO, which eventually led to their selection as brand models. This was made possible by HYBE's exceptional support and investment, operating a multi-label system even before NEWJEANS' debut. This success is a testament to the enhanced operations of the label.

Despite strict limitations on the activities of Korean artists in China at the time of NEWJEANS' debut, HYBE managed to arrange special debut promotions for the group on China’s largest music streaming site. This is another example of how NEWJEANS has benefited from HYBE's multi-label system. Additionally, NEWJEANS' performance at Lollapalooza Chicago in August 2023, just one year into their career, was facilitated by HYBE's operational capabilities. HYBE also dedicated core staff from its concert production studio to ensure NEWJEANS had the best possible stage. Furthermore, during the production of their second mini album, HYBE's business analyst team assisted in the purchasing process, saving 1 billion won and increasing ADOR's operating profit.

While enjoying the benefits and efficiencies brought by the multi-label system, CEO Min should stop her hypocritical attitude of criticizing her colleagues while benefiting from the system.

CEO Min claims that ADOR's consent should have been obtained in advance regarding the contract between the artist and a luxury brand. However, the contract naturally followed after a friendly relationship was formed through the artist's participation in the brand's fashion show. Before ADOR's artist, Hyerin, became a global ambassador, BTS’s J-Hope and the group itself had already served as global ambassadors. Using the same logic, ADOR should have obtained consent from Big Hit Music before signing with the brand, as they had already signed an ambassadorship agreement.

Above all, questioning the strategic decision-making of the label regarding the parent company's new business ventures is unreasonable. These ventures are part of long-term growth strategies, similar to other growth companies investing in the future. HYBE's current success is the result of continuous strategic planning and investment. ADOR and NEWJEANS are also products of such growth strategies and investments. Criticizing long-term investment and decision-making without understanding the specifics of the business and without assuming any responsibility is unreasonable.

4. Shared Services provide equal services among labels.

Suspicions have arisen regarding the timing overlap between the press releases announcing the partnership with UMG and the press release for New Jeans' Tokyo Dome fan meeting. The coordination of press release distribution with international partners is a standard practice that accounts for factors such as time differences and market regulations. On that particular day, nine press releases were distributed, which means there were seven other releases from various labels and artists. However, none of these labels have made the unreasonable claim, as CEO Min did, that "releasing important material on the same day was intended to undermine our label's achievements."

Over the past year, our communication team has written and distributed 273 press releases for New Jeans alone. When compared to Big Hit Music, which has issued 659 releases for both group and individual activities of BTS, and Pledis Entertainment, which has released 365 press releases for groups like Seventeen, it is evident that the promotion of New Jeans has not been neglected. Our PR team works diligently to promote all labels and artists without any discrimination.

The assertion that New Jeans' growth was not highlighted in press releases stems solely from CEO Min's insistence on emphasizing only ADOR's performance. Performance information should be presented in a balanced manner based on numerical data. While it is true that New Jeans and ADOR have shown significant growth, it is also factual that other groups, such as BTS and Seventeen, generate much higher sales. By CEO Min's logic, these groups should have been more prominently mentioned. Nevertheless, CEO Min has persistently demanded one-sided revisions, and our PR team eventually partially accommodated her claims.

In 2023, our legal team supported a total of 655 reviews of ADOR's contracts and consultations. Given that Big Hit Music conducted 888 reviews and Pledis Entertainment carried out 770 during the same period, it is clear that the legal services provided to ADOR are not lacking. Furthermore, in addition to regular tasks such as handling malicious comments about artists, our legal team has been very proactive in supporting ADOR, including filing lawsuits against individuals targeting CEO Min personally and handling various defamation cases against media outlets. No other label within HYBE, including any individual, has received such extensive support from the legal team.

Industry trend reports are internal documents that gather and analyze subjective consumer responses and issues beyond quantitative indicators like chart performance, and then propose suggestions for improvement. They do not represent HYBE's official stance or evaluation of artists. It is entirely up to each label to decide how to interpret and utilize this information. These reports can include a wide range of opinions and sometimes suggestions for improvement, which is their purpose. If CEO Min expects every analysis report to be filled with praise, one might question how such reports would contribute to ADOR's development. Despite this, since CEO Min requested early last year to "not review (evaluate) content (music, performances, music videos, etc.) related to New Jeans," we have refrained from including any qualitative evaluation content related to New Jeans. Consequently, we have avoided including any trend analysis or qualitative evaluation content at all.

5. Refuting Allegations of Plagiarism and Unethical Claims

Claims of similarity regarding ILLIT are based on a flawed generalization. We regret that Ms. Min, who is recognized as an expert in the entertainment field, is alleging plagiarism based on internet postings.

Before addressing the issues raised by the opposing party, we thoroughly reviewed all internal documents from BELIFT LAB and confirmed there was no intention to imitate New Jeans' work. The opposing party's claims are largely based on online opinions suggesting similarity. However, similarity cannot be established solely based on online allegations. If that were the case, the same logic could be used to argue controversies surrounding New Jeans' lyrics for "Cookie" or other similar issues. While the internet allows many stories to circulate, it is well understood that not all these stories are factual.

Our company has never engaged in marketing activities that mention or compare New Jeans. A review of the press releases distributed during ILLIT's debut confirms that ILLIT's marketing did not mention New Jeans or any other senior artists. Comparative marketing with senior artists is considered taboo within HYBE.

The only instance when this taboo was broken involved ADOR. In March 2023, when New Jeans' "Ditto" topped the Melon Daily Chart, ADOR's VP demanded that HYBE PR include the phrase "Surpassing BTS" in the press release. Despite repeated objections from staff, ADOR insisted on this inclusion, leading to numerous articles titled "New Jeans Surpasses BTS."

Despite this, Ms. Min continues to claim that HYBE imitates New Jeans and exploits their popularity. We question if Ms. Min genuinely believes that ILLIT, RIIZE, TWS, etc., are all imitating New Jeans. Additionally, since joining HYBE, Ms. Min has repeatedly claimed that BTS also copied her concepts. Does she truly believe this?

Recently, L-- VP, an associate of Ms. Min, protested to the editor-in-chief of a media outlet that published an article titled "Rookie Girl Group ILLIT Surpasses New Jeans' Achievements," causing a stir in HYBE's PR department. Ms. Min's side repeatedly demanded corrections to the title and content of articles based on objective performance metrics of ILLIT and New Jeans, rather than press releases.

Demanding the disclosure of New Jeans' achievements, questioning media's actions based on factual figures, and raising issues over ILLIT's IP protection during New Jeans' comeback album and Tokyo Dome concert period are inconsistent and lack common sense.

Ms. Min's claims about the separation process from Source Music are based on her distorted interpretation and are incorrect. NEWJEANS did not fail to become HYBE's first girl group because of any unfulfilled promises by HYBE. Ms. Min insisted on taking full responsibility for creating the group and wanted to debut them under her separate label. Despite Source Music's opposition, HYBE respected Ms. Min's wishes, transferred the members to ADOR, and provided substantial financial support, enabling her to debut NEWJEANS as she envisioned. The debut schedule was inevitably delayed due to the company division and contract transfer processes, not because of HYBE's intentions.

Ms. Min herself acknowledged this process in a media interview published on March 24, 2022. She stated that the girl group project proceeded according to her plan and announced the third quarter of 2022 as the launch time. She mentioned, "Rushing into a debut can be a significant burden for young members. I chose the third quarter of 2022 as the launch time because I don't want to rush everyone." This interview took place two months before the debut of Le Sserafim on May 2, 2022, indicating that Ms. Min had sufficient time to promote the new girl group.

Ms. Min's version of events differs significantly from the understanding of the members who are well aware of the support and concessions HYBE provided to ensure ADOR's success.

In response to the email sent by Ms. Min, we would like to reiterate our deep regret and strongly express the following:

First, we would like to address the purpose behind sending protest emails that could have been clarified through internal communication, instead of portraying serious issues with HYBE's multi-label system.

Given the importance of NEWJEANS's comeback album and their Tokyo Dome concert, we intended to respond sincerely to Ms. Min's recent allegations. However, we now have evidence that Ms. Min aims to use these issues to seize management control from ADOR's executives and that her methods of executing duties and decision-making are flawed. Therefore, we believe it is necessary to firmly respond to this illegal attempt to take over management rights.

Ms. Min has continuously complained about HYBE's weaknesses, raised issues, and made unreasonable demands while justifying her goal of usurping ADOR's management rights. Despite the support from Source Music, which trained trainees cast by ADOR, provided capital, and assisted in establishing the company, Ms. Min has persistently made new demands even after her initial ones were met.

This pattern continued in compensation matters as well. Although compensation conditions were agreed upon at ADOR's founding, Ms. Min demanded additional compensation after NEWJEANS's debut. HYBE reluctantly sold 20% of its stake to Ms. Min and others, allowing ADOR's executives to hold company shares and providing additional compensation through options. Despite receiving higher compensation than anyone else at HYBE, Ms. Min demanded three times the performance bonus of HYBE's CEO during last month's negotiations, resorting to swearing and cursing.

These unreasonable compensation demands, coupled with Ms. Min's efforts to pressure HYBE into selling its ADOR shares without the consent of major shareholders and recruiting external investors, clearly indicate an attempt to secretly seize management rights. We cannot ignore the malicious intentions behind the emails sent by the opposing party, which concealed such activities while suddenly raising forced issues internally.

We deeply regret the unilateral claims made by the opposing party that deviate from the truth. Regarding the attempted illegal usurpation of management rights, we want to inform all relevant parties that we will take all necessary legal measures.