Years of rivalry, mutant teammates. EXO and BTS, two Korean boy bands nicknamed the Earth Group and the Heavenly Group, may one day become "a family", which was unexpected by viewers and mixed tastes among fans.
On February 9, HYBE, a subsidiary of BTS, announced its participation in the acquisition of SM Entertainment, a subsidiary of EXO. In addition to discussing the acquisition of 14.8% of the shares of SM Entertainment's single largest shareholder and founder of SM Entertainment, Li Xiuman, it will also publicly acquire the shares held by SM's minority shareholders.
SM Entertainment, the earliest Korean gold prospector in China's entertainment market, its combination H.O.T, Oriental Shenqi, Super Junior, EXO and other pioneers in China, forming the backbone of China's Korean Wave.
SM22 family concert lineup
HYBE, the most successful representative force of Hallyu to the United States, to some extent led the current trend of Korean groups to the United States.
One is the biggest beneficiary of gold panning in China, and the other is the biggest beneficiary of gold panning in the United States. After the acquisition news was announced, some people even snorted the CP of Li Xiuman and Fang Shihe, the founder of HYBE, or regarded this complex business war as a bloody drama "Harem Manfang Biography", with "Chapter 1, Return to China; Chapter II, Wounded; Chapter 3, Marriage..." and other unfinished plots.
"You can believe in fairy tales", but you can't ignore the huge forces behind this event and the evolution of the pattern.
One explanation points to the fact that this is clearly a secret war between South Korea's two Internet giants. For example, HYBE is closely linked to South Korean Internet giant NAVER, and the Weverse fan community opened by HYBE acquired the live broadcast platform V Live as its second largest shareholder, which is inseparable from NAVER's support. BEFORE HYBE'S ENTRY, SOUTH KOREAN INTERNET GIANT KAKO, WHICH IS IN A FUSS, ANNOUNCED THE ACQUISITION OF 9.05% OF SM ENTERTAINMENT, BECOMING ITS SECOND LARGEST SHAREHOLDER.
One voice believes that fairy tales, which are one of the foundations of the idol industry, are crumbling. Under the current turmoil, the return plan of SM Entertainment's artists may be postponed. KEY, a SHINee member who released solo album "Killer" on February 13, was also helpless when asked about the Encore concert during the live broadcast: "I also want to open it, but who should I say it to now... I don't know, our company is in a mess right now. ”
Ten years ago, there were undoubtedly "three big things" in the Korean idol industry, with a market value of more than one trillion won at one point, the first of the three in terms of historical influence and collective influence; Twenty years ago, SM was the big brother of the idol industry, grabbing the Japanese market, and at that time when Korean singers did not have any Japanese market share, its singer BOA was already invited to the Red and White Song Festival twice.
In 2023, SM may become part of HYBE. Although everything has not yet settled, an era has slowly come to an end.
Where is there any white knight
"Why people are different"
According to SM's management's plan, SM should now smoothly enter the 3.0 era they planned.
On February 3, SM Co-representatives Lee Sung-so and Cho Young-joon released a video with a voice: "Lee so-man's executive producer contract is terminated, thank you for your support as a shareholder." In the video, they also announced that SM will enter the 3.0 era, the 1.0 era and the 2.0 era will be centered on Li Xiuman's production, and the 3.0 era will be composed independently by 5 production centers and internal and external labels.
At this time, not too many people smell the smell of danger, and many fans believe that this decentralized label is more conducive to the development of future artists. The label system of independent operation and benign competition is currently being implemented by HYBE, JYP, YG, and in the past few years, Li Xiuman's personal will has been too obvious in the return of his artists——
Li Xiuman's ambition for the meta-universe has allowed SM groups to have a high-concept worldview narrative in recent years, while taking the collage style route and the lyrics are also "ungrounded" songs are often accompanied by "ugly" on hot searches, and the performance of sound sources is also declining. The meta-universe concept should be matched with the continuous burning of money, and at the same time, the group EXO, MV, which has debuted for many years, is packaged by the company with the concept of "minimalism".
Li Xiuman, who is titled "chief producer", has no control over his artists in addition to music. For example, at the Red Velvet MV filming site, he helped the female idol cut his bangs and let the artist give advice, but if the opinion was really raised, he would call for three and a half hours to train. In the past few years, he has even been dubbed by fans as "wanting to debut", not only frequently appearing in the short video challenges of his artists, but also putting his own small card in the SM family concert last year.
The first picture in the first row
The 3.0 era is indeed "decentralized", and this center is Li Xiuman.
Although it is difficult for art-related industries to leave the "dictatorship" of individuals, the operation of the label is indeed the most market-tested way to ensure a virtuous circle of creativity. At the beginning of the "decentralization" news, many people in the industry and big fans were optimistic about this reform idea.
Things got complicated on February 7. On this day, South Korean Internet giant Kakao announced that the company acquired a 9.05% stake in SM Entertainment, becoming its second largest shareholder.
Kakao, which can be simply and crudely understood as "Korean Tencent". Kakao started from chat software, gradually covered mobile payment, games, entertainment, taxi and other network industries, its Kakao Talk is the largest instant messaging application in South Korea, Kakao Pay is currently the largest payment tool in South Korea. In addition, Kakao owns Melon, the leading music streaming media in South Korea. Kakao founder Kim Beom-so also became the richest man in South Korea in 2022 according to Forbes with a net worth of $9.1 billion.
But Li Xiuman does not seem satisfied with this acquisition. On February 7, Li Xiuman's legal agency company Hwawoo issued an official position: "In the case of a dispute over the right to operate, the issuance of new shares and the conversion of social bonds to a third party for the purpose of affecting the company's control, such as the management's right to operate or defense of control, is an infringement of shareholders' right to subscribe for new shares and is illegal." ”
On the day of the announcement, Lee returned to South Korea from the United States.
The scene became chaotic. Three days later, Li Xiuman's "White Knight" appeared. White Knight is a financial term generated during a company's merger, when the company becomes the target of other companies' mergers, the company's management in order to hinder the occurrence of malicious takeover, to find another "friendly" company to merge, this "friendly" company is called "White Knight".
HYBE and Lee Xiuman issued a joint statement on the 10th, saying that they signed a contract to acquire 14.8% of the shares held by SM Entertainment founder and former chief producer Lee Xiuman for 422.8 billion won. At this point, HYBE will become SM's largest single shareholder. A relevant person on Li Xiuman's side said: "Although Li Xiuman transferred his shares to HYBE, he also owns SM's management rights and has reached an agreement (with HYBE). ”
But half a day after the joint statement was released, the "white knight" seemed to let go of Li Xiuman's hand. In the afternoon of the same day, HYBE added an explanation to the statement: In the next three years, Li Xiuman can only carry out production business overseas, and the content of his continued exercise of management rights or return to SM as a producer is not true, nor is the content of exercising SM's management rights or intervening in personnel arrangements.
In this way, Li Xiuman added a touch of pathos to the story, and even the shouts of departing employees were in vain to increase sadness.
Yu Yongzhen, who has been working at SM for more than 25 years, said on February 10: "Under the current circumstances, we cannot work together. An SM that is not produced by Mr. Li Xiuman is not a real SM. It is difficult to agree with the part of the SM 3.0 era outlook published by the current management on the 3rd that excludes the production of Mr. Li Xiuman. ”
I wonder if Yu Yongzhen will remember EXO's debut song, which was written and composed by him: "MAMA, can you please tell me why people are different?" ”
SM shareholder scramble
"Take a step back and look at the present era"
As we all know, Li Xiuman is committed to maintaining "family love". SM's artists are unified under the "SM TOWN" brand, and generally release SM Town music compilations and hold concert tours every year.
Since 2011, family concerts have usually ended with the company's original idol group H.O.T's "Hope": "Let's paint the world we create together, paint it in the sky." It's dazzling, it's so beautiful, let's create it with our hands that are firmly grasped. ”
The lyrics are hopeful, and it sounds like the idol is full of confessions to fans. The tearful fans in the audience probably forgot that when three former H.O.T members who broke away from SM formed J.T.L to promote the new album, they were banned by major media at the beginning. Former H.O.T member Jang Woo-hyuk once wrote "20 won (less than 2 cents) royalties" in the lyrics, alluding to the small royalties they received for selling records.
Under the warmth, it is full of entanglements and games of interests. Just like Li Xiuman this time declared that he was "out of the game without knowing it", what he did not disclose was that his dispute with S.M directors and even shareholders has a long history.
In October last year, SM Entertainment issued an announcement that it would terminate the contract of Li Xiuman's personal company, Like Planning, the chief producer. Like Planning, the wholly owned holding company of Lee so-man, pays 6% of its sales to Like Planning every year, and Over the past 20 years, Like Planning has collected about 150 billion won in fees from SM Entertainment.
In the first half of 2022, more than 11 billion won in fees went to Like Planning, and SM Entertainment's net profit was 38.6 billion won in the same period.
Such a large flow of funds is also a squeeze on the income space of the remaining shareholders of SM Entertainment. Over the years, shareholders have protested this many times. As early as 2019, KB Assets, the majority shareholder of SM Entertainment, made requests to SM Entertainment to acquire the company under Li Xiuman's personal name, but it was rejected, which caused investors to lose confidence and sell, causing SM Entertainment's stock price to plummet by 7.34% in one morning.
Even though the contract was terminated at the end of last year, according to Align Partners, one of SM's shareholders, there was a clause in the contract to pay royalties for previously produced, circulating content. The ex post settlement agreement is still in effect, and SM is still paying royalties as agreed. "Former chief producer Li Xiuman actually has no labor obligations, and will charge a 6% patent fee for the current release of record source revenue until 2092, and a 3% patent fee for management income by the end of 2025."
Yes, 2092, not mistaken.
With such an important income, Li Xiuman's "only" 18.46% of the shares also seems reasonable. Some people concluded that every time Li Xiuman sold shares in the past two decades, almost all of them were at the time when SM achieved phased success in implementing global localization.
In 2005, Oriental Shenqi and BoA achieved great repercussions in the Japanese market, SM's stock price soared rapidly, in June of that year, Li Xiuman's shareholding ratio decreased by 6.63%, and sold another 800,000 shares in November of that year; In 2010, SM's market capitalization exceeded KRW trillion for the first time, and after selling 500,000 shares in December 2010, Lee so-man sold 400,000 shares in January 2012 and returned KRW 25.5 billion through two sales, which was the height of Girls' Generation's popularity in Korea, Japan, and China.
Since 2019, Li Xiuman's shareholding has been stable at about 19% and is still SM's largest shareholder. However, both his shares and the position of SM Entertainment's second largest shareholder have been watched by many giants.
In 2020, South Korean media reported that South Korean Internet giant NAVER will spend 100 billion won to acquire SM Entertainment's shares and become the second largest shareholder of SM Entertainment after Lee Xiuman. In the second year, NAVER was silent, but other giants were eager to try, and after the news spread that Kakao would acquire SM shares, CJ ENM and HYBE also participated in the acquisition war, and some media said that SM's value would soar to 4 trillion won.
CJ ENM was the one who went the farthest. In November 2021, Korean media reported that CJ ENM will sign a contract to acquire SM Entertainment as early as the 22nd, and the transaction object is the shares held by Lee Xiuman. After the completion of the transaction, Li Xiuman will continue to be responsible for the overall operation of SM's entertainment content business.
Looking back at the present, HYBE won 14.8% of Li Xiuman's shares, and is still in the process of acquiring minority shareholders. Kakao, seeing that the melee could not end for a while, released the news that he would buy another medium-sized entertainment company, CUBE. Previously, KaKao signed an 80 billion won (G) I-DLE (CUBE'S GIRL GROUP) CONTENT CIRCULATION CONTRACT, AND AS SOON AS THE NEWS CAME OUT, CUBE ENTERTAINMENT SHARES SOARED DIRECTLY.
KaKao may acquire CUBE News
The pull between the giants is still ongoing.
HYBE catches cicadas, Naver behind
“did you see my bag”
The entry of HYBE can indeed be understood as Kakao and Naver, two Internet giants who have been fighting for many years, another short encounter in the field of pan-cultural entertainment.
If the crude understanding of Kakao is South Korea's Tencent, then NAVER is South Korea's Baidu. BUT THE DIFFERENCE IS THAT THE SAME SEARCH ENGINE STARTED AND BEAT GOOGLE IN THE LOCAL MARKET, BUT NAVER CAUGHT UP WITH THE CAR OF MOBILE INTERNET DEVELOPMENT IN TIME, EXPANDING ITS BUSINESS IN ENTERTAINMENT (STREAMING MEDIA, MUSIC, WEB COMICS), E-COMMERCE AND OTHER FIELDS, AND THE E-COMMERCE FIELD RANKED AMONG THE TOP TWO IN SOUTH KOREA - IN OTHER WORDS, THIS "KOREAN BAIDU" ALSO STACKED A LAYER OF "KOREAN ALI" BUFF.
Two Internet companies have the largest traffic entrance in the current Internet environment. Just as domestic Tencent and Ali seize the upstream, middle and downstream positions in the pan-cultural entertainment industry, so that content and traffic form a virtuous circle and drive the capital cycle, while expanding their own cultural influence, Kakao and Naver have also been bidding in different pan-cultural entertainment fields over the years, and have been fighting all the way from Japan and South Korea to Southeast Asia and North America in the field of web comics.
KPOP's four major Korean entertainment companies have also formed a confrontation situation between two camps, namely Kakao-SM-JYP and Naver-HYBE-YG.
In 2020, SM Entertainment and JYP Entertainment established a joint venture "Beyond LIVE Corporation", which is the first joint venture between the two companies. The following year, JYP Entertainment became the second largest shareholder of SM subsidiary Dear U. Since 2019, Dear U has been using the fan community platform Bubble as its main service, developing separate Bubble services for JYP, FNC Entertainment, Jellyfish Entertainment, WM Entertainment and other companies. SM also had several separate negotiations with Kakao in 2021, and the acquisition looked inevitable.
In direct competition with Dear U is Weverse, HYBE's fan community platform. In 2021, Naver announced the transfer of its V Live service to HYBE and the integration of technology into the Weverse platform. Since then, YG has also announced BLACKPINK's presence in Weverse — after all, Naver is also YG's second-largest shareholder.
The above seems to be the formation of two major confrontation camps. But the variable is that HYBE itself has long been a commercial entity that has elevated the influence of "entertainment companies" to another level. In the pre-IPO prospectus, HYBE targeted platform companies like Naver.
"Platform stories" are also narratives that are more attractive to Korean investors than artist stories and entertainment content, which is why the four major Korean companies have formed two camps, and their short-term battlefields happen to be on the community platform.
In 2021, the Korean securities community judged that it is time to look at entertainment companies from a medium- to long-term perspective, and the era of stagnant stock prices caused by artist risk in the past has passed, and in the future, it will not only rely on a single stream artist to support sales, but also diversify the profit structure with the platform. To put it bluntly, being an artist is a high-risk and high-yield job, and capital needs the company to find more businesses that can continue to give stable income.
In addition to the platform story, HYBE has also continued to acquire artist companies in recent years, using scale to hedge artist risks, not only sitting on boy groups, girl groups and HIPPOP singers, but also buying Ithaca Holdings, the record company owned by Justin Bieber and Ariana Grande.
In HYBE's most popular "product" - BTS, the concept of "IP operation" has also been achieved to the extreme, covering multiple fields such as webcomics, mobile games, and NFT goods.
BTS documentary
In addition, on the hot concept "meta-universe" in recent years, HYBE and Naver have also laid out. In 2020, HYBE invested about 38.88 million RMB in Naver Jet, the operating company of the virtual community Zepeto, and in 2021, Naver Jet made an equity investment in blockchain company Superblock to secure its NFT business.
The exchange of fire between the two camps continues. The competition for the fan platform community may be seen in SM's acquisition war.
Old time tickets, new era boats
"Now is the beginning, infinite me"
Regarding the meta-universe, Li Xiuman can even say that "obviously I came first" - long before the concept of "meta-universe" itself became popular, Li Xiuman was already doing things about the meta-universe.
This is inseparable from Li Xiuman's multidisciplinary background. In the early 70s, Li Xiuman debuted as a singer, and then active in the industry as a host. In 1980, in the high-pressure political environment of South Korea at that time, he formed Korea's first heavy metal band. After not being active for a year, he went to the United States to pursue a master's degree in computer engineering.
Perhaps that's why SM's core philosophy is "Culture Technology." Li Xiuman believes that after the 90s dominated by IT, there will be a more sophisticated and complex CT era. Based on this, he also proposed the "three-stage Korean Wave" development theory. The three stages are: the first stage of exporting Hallyu cultural goods; the second phase of expanding the market by partnering with local companies or artists; Established a partner company with a local company to teach the third stage of Korean CT to local people.
At an industry forum in 2011, Mr. Lee stressed that what is important today is "made by," not "made in." For example, K-pop stars may also be Chinese (made in), but it is SM's CT (made by) that shapes the stars. The "four sons who returned to China", who changed the pattern of domestic entertainment after 2014, proved the success of the "second stage" in Li Xiuman's layout.
In 2016, SM held the "New Culture Technology" release, announcing that it would launch a large boy group NCT, which is already part of the "third phase of the Korean Wave" planned by Lee so-man. At the press conference, Lee said that NCT is a new concept combination launched under the "Korean Wave Localization" strategy, with no limit on the number of people, and different teams for different markets.
According to Li Xiuman's original plan, NCT will launch its first team in the spring of 2016, and start with this, launching the Seoul group and Tokyo group in the first half of the year, and the debut of the team in Beijing, Shanghai and other major cities in the Chinese speaking circle in the second half of the year. Since then, SM will continue to launch teams that will operate in major cities in various regions of the world, including Southeast Asia and South America.
Li Xiuman hopes that NCT can "expand indefinitely" and bring SM's successful experience in idol cultivation to cities around the world, so that each city has its own "NCT", and NCT members can also graduate and rotate. So far, however, the experiment should have been a preliminary failure.
The NCT DREAM, which attempted to "graduate at the age of 18", was fixed in the mass protests of fans. The few squads that have been active so far have not been able to achieve "unlimited expansion" on a global scale.
NCT is Lee Xiuman's fourth failed attempt to achieve graduation. Perhaps because he came from an engineering background, he always hopes to reduce people's uncertainty in the idol industry, and instead uses systems and systems to ensure the stability of a combination. But repeated facts prove that fans are always drawn to those unpredictable "uncertainties", drawn to specific people, and small and concrete interactions between people, rather than paying for high-concept combinatorial narratives.
High-concept combinatorial narratives have existed in SM portfolios since EXO in 2012. EXO gave the members the setting of "superpowers", superpowers come from "aliens with superpowers guard the tree of life", and "MAMA" in the debut song also appeared in the virtual world "Wilderness" created by SM today.
The Fire Phoenix of Park Chanyeol in EXO
Since then, from f(x) to Red velvet, from NCT to aespa, every song can belong to a huge worldview, intertwined. The planners appropriated a variety of elements from ancient mythology to contemporary popularity, so that SM's group has its own "mythical" setting while also having the reality of the present.
AESPA, which debuted in 2020, is even more "heavy industry". AESPA borrows the concept of Avatar and assumes that all data uploaded by humans in the real world can form a virtual avatar similar to its own. All the new songs since AESPA's debut are the stories of humans fighting their virtual doppelgangers in the "wilderness". SM also created four avatar avatars for the four members and reminded them that you are an 8-member girl group.
Li Xiuman has publicly said that he will build the SM Culture Universe (SMCU) like DC and Marvel and become the DC of the music industry, and aespa is SMCU's first public product. Since his debut, he has released several concept analysis videos and comic materials to complete his worldview. Lee firmly believes that "the future is the world of robots, celebrities and Avatar. ”
In Li Xiuman's imagination, "As long as customers are willing, then AI robots that look exactly like their idols will always accompany us in our virtual world." In addition, artists and fans can interact and communicate in the virtual world. ”
But a myth is, at this stage, are users really attracted by an AI robot that will not collapse because of the idol's own "humanity"?
Since its debut, although AESPA has had a big hit, "Next level", which is nicknamed the "kpop national anthem", is in hand, but every time it returns, it is inevitably accompanied by a "ugly" hot search, and its lyrics will only be confused if they do not understand its world view. Today, although AESPA is still a major seller of the five-generation girl group, if you look at the sound source results, it has lagged behind the new girl group New Jeans, which will be born in South Korea in 2022.
Melon's streaming media exceeded 500 million views
Compared with KPOP's concept play in recent years, love the image of "girl crush", and produce some complex "collages", New Jeans looks like a return to basics from styling to songs. From the MV scene to the dance choreography to the lyric content, it is like five little girls who simply like music get together, choreograph their own music, and think about common problems in adolescence, such as the first heartbeat, the separation that will eventually come, and self-identity, without too many complex world views to speak of.
The reason why New Jeans is mentioned is precisely because the producer behind it, Min Hee-jin, has a certain concept that runs counter to Lee so-man.
"I hate the worldview that K-pop talks about." Min Hee-jin has said that for her, New Jeans is a combination of quick topic points. The new song "Ditto", released at the end of last year, achieved the second best result in the history of the girl group on the Melon chart, which is a response to the doubts they encountered when they released their debut album and the likes they received.
《ditto》
Min Hee-jin also talked about the inevitable "processing" of the idol industry in this interview. "It is basically excavated and nurtured for minors, so it has the characteristics of an industry that relies on the company's system for education and development." But she wants to be at New Jeans and try not to force packaging. "I think that not being ashamed of the process of learning and inspiration and showing the growth process naturally is the beginning of resolving the contradictions of the long-blamed K-pop industry."
In fact, there is no right or wrong in the game of human nature and "non-humanity". Li Xiuman's painstaking efforts to create a virtual world are actually for a larger ambition that runs through his entire process from gold panning in China to gold panning in the metaverse.
It even contains slightly nationalist ambitions, pointing to the ambition of making South Korea a great power in the "other world." In a 2020 speech on the theme of "The Future of Entertainment", Li Xiuman said: "In the future, celebrity-related business will be more important. The development of big data and robotics will play an important role in the celebrity economy, especially chatbots evolved through AI technology. ”
"Robots have previously interacted and learned from each other, and the networks established between robots will form a super-giant virtual world. In this world, there will be countries with a small population like South Korea, because there are quite a few seed users, there are multiple robots per capita, and there are more than 500 million people in the virtual world, which has a stronger comprehensive national strength. ”
This is exactly the future that the Internet giants who are robbing SM's equity are trying to strive for. Although the vast, unified virtual world is not yet formed, they need to grab a piece of territory there first, even if no one has seen what it looks like yet.
Unlike what SM did when it panned for gold in China two decades ago, this requires extremely strong technical barriers. Even though Lee Xiuman predicted this early on, SM has been walking on this road and walking ahead of almost all Korean idols, it is difficult to change the fact that this is a game of Internet giants after all.
The more important reality is that the former "king of KPOP" is old. In a certain sense, Li Xiuman was ahead of the times and predicted the times. However, when the new era really came, the port was full of people, and 71-year-old Li Xiuman stood there, clutching the ticket of the old era, but could not find the ship that really belonged to him.