English transcription by: Jimmie@TheJYJFiles
Son Sok Hee:
Today’s Part 4 of the show will focus on the latest news from pop culture. Popular group Dong Bang Shin Ki is in the midst of a conflict with their management company. And it is creating quite an impact in pop culture, so we will be discussing it today.
Dong Bang Shin Ki members Youngwoong Jaejoong, Micky Yoochun and Xiah Junsu; they might not be familiar names to our listeners, but amongst the teen population they are extremely famous people. These three people have filed an injunction request for the invalidation of their exclusive contracts against their management company SM Entertainment. The length of their exclusive contracts is 13 years, which they argue make them lifelong contracts. They claim that they haven’t received just compensation from their management, once again raising the issue of the unequal relationship between singers and their management companies, sometimes dubbed slave contracts, which in any case is thickening the intrigue and shock with regards to unfairness in the industry.
Dong Bang Shin Ki is not only a high-profile group in Korea but also in Japan. In any case, because this is a conflict between Korea’s biggest company and one of the most famous groups, I am curious about the details and background to it all.
We have via connection Yang Seong Hui from the Culture Department of the Joongang Daily. As I said earlier, the three members have announced that they have filed an injunction request for the invalidation of their exclusive contracts. Why all of a sudden now?
Yang Seong Hui:
They filed the injunction on the 30th of last month and speculations of disbandment have started to come out, but the members have pointed many months before already that that their exclusive contracts are unfair and have asked SM to revise it but since SM refused after a certain point they have gone to court. As you mentioned before, because Dong Bang Shin Ki is at the height of their fame in Japan, to the extent that they were able to stand on the stage of their dreams (the Tokyo Dome) and be accepted as top-class singers, this news has come as a big shock to fans and the music industry. And this legal battle between Korea’s biggest management company and best idol group comes not long after the suicide of actress Jang Ja Yeon, after which the Fair Trade Commission revealed its model contract and stated clearly that the contract between celebrities and their management cannot exceed 7 years in length.
Son Sok Hee:
But those of the three members exceeds [7 years], right?
Yang Seong Hui:
Yes. And only three of the five have participated in this lawsuit.
Son Sok Hee:
Then, the remaining two people, U-know Yunho and Choikang Changmin, what’s their reason for not participating in the lawsuit?
Yang Seong Hui:
Well, I have been told that they are consulting with each other on their respective positions. As for the exclusive contract, it is 13 years in length. If we add in the years for military service, the length becomes 15 years of which 10 currently remain to be fulfilled, which would amount to the retirement age for idols and so [JYJ] are concluding that this is no different from a lifetime contract. In order to break away from the contract, one must pay three times the costs of investment as well as two times the potential earnings as a penalty fee, and [in the case of DBSK] this amounts to several hundred million USD. In other words, ending the contract is extremely difficult. In addition, if you look at the original contract, if [DBSK] didn’t sell more than 500,000 units of an album they couldn’t receive a single penny in profit and if they sold more than 500,000 they would receive on their next album a commission of 10,000 USD each, but the only album that sold more than 500,000 units so far is last year’s ‘Mirotic’. And looking at the [financial] records from February, the amount that each member received from album sales represents 0.441~1 percent of the total made from album sales. Also, the members say that they were completely unaware of their contracts’ provisions with regards to their Japanese activities.
Son Sok Hee:
It goes without saying that their management company, SM, is one of the largest companies.
The explanatory documents we discussed here yesterday said, “up to July of last year the members earned 11 million USD in cash alone.” This considering, many are saying that DBSK have made enough money. What do you think about this?
Yang Seong Hui:
11 million USD in 5 years may seem like a lot of money to the average person like you or I. But if you calculate how much each member received, it comes to 400,000 USD per year. If you consider that they are explosively popular and sought-after in Asia, in truth this is not equitable remuneration. According to reports by the media, SM made a profit of 32 million USD through DBSK but took 90% of it as investment fees. Also, we’ve previously talked about the penalty for breach of contract, but in the case of a rookie singer the payment to discharge a contract is around 5,000-10,000 USD and the penalty for breaching the contract is 3 times the discharge fee, but in the case of Dong Bang Shin Ki even if both sides decide to discharge the contract voluntarily through negotiations the penalty for breach of contract is in the hundreds of millions USD and SM won’t have to contribute a penny to this due to the unfair nature of the contract. Furthermore, 13 years is the longest contract length seen in Korea. In the case of idols, contract length is on average 7 years and at most 10 years, so it’s true that [DBSK’s] contract length is excessive.
Son Sok Hee:
When Dong Bang Shin Ki was first contracted, did SM make the contract length 13 years because it predicted [DBSK] would be successful and so wanted to bind them for as long as possible?
Yang Seong Hui:
It looks that way.
Son Sok Hee:
If you add the time at military service to the 13 years, is it correct to say that this is no different from a lifetime contract?
Yang Seong Hui:
Considering that idols generally retire when they reach 30, one is not wrong to see this as a contract for life.
Son Sok Hee:
So that’s why fans are labelling this a slave contract, but aside from this case involving Dong Bang Shin Ki are we seeing a rise in conflicts between entertainers and their management companies?
Yang Seong Hui:
Absolutely. It is especially severe in the case of singers. Idol singers in particular sign contracts at a very young age. Obviously they are the weaklings and are compelled to align their position with that of the big entertainment company and feel pressured to do so. Because if they are seen as being too demanding during the negotiating of the contract the entertainment company can threaten to not debut them, they have no choice but to do as they’re told. What needs to be said about management companies is that in Korea management companies discover and take on very young trainees into whom they invest their own money following an apprenticeship model; at this point, the initial investment amount is extremely high.
Son Sok Hee:
About how much?
Yang Seong Hui:
Tens of thousands of USD for every rookie. In the case of an idol group like Super Junior which has 13 members the costs are very high. They must be taught how to dance, foreign languages, and members who come up from the countryside need to have housing furnished for them and the company even pays for plastic surgery. The trainee period along takes 3-4 years, and so the position of the management companies is that drafting 7 year exclusive contracts and modifying them now and again after the trained stars get famous is impossible whilst running a management company. Who would run a management company under those restrictions? is their complaint. Management companies think it’s their first priority, when their stars get famous, to aggressively earn back their initial investments.
SoSon Sok Hee:
But maybe there’s also this…you said that each trainee takes several tens of thousands of USD to train, so to train a group of 10 would take several hundreds of thousands USD, correct? Perhaps it wouldn’t matter so much if the group was successful, but aren’t there also groups who don’t manage to make it big?
Yang Seong Hui:
In the case of SM, they have had plenty of failures too.
Son Sok Hee:
So does that mean the group that succeeds must earn back the initial investment for the group that failed in addition to their own investment?
Yang Seong Hui:
That is correct. In truth, no one knows the exact amount of the initial investment that goes into making these stars, and the loss these companies incurred through other projects/business dealings they try to gain back through the profits that their stars make. As you may already know, these management companies have very un-transparent financial disclosure structures; the stars themselves are unaware of how much they are burdened with, how unfair is the treatment they receive, which easily lead to frustration due to this systemic problem.
Son Sok Hee:
Then from the perspective of the stars, they would feel used, and even more so if like in this case this has been going on for 13 years under a unilaterally dictated contract; this would be a natural sentiment given the circumstances. It was also the case for Jang Ja Yeon. It was then that the issue of unfair contracts was raised and the treatment [of entertainers] has become a debated topic since. Isn’t that when the Fair Trade Commission came up with a model contract?
Yang Seong Hui:
They made a model contract. But since this was made on an advisory basis it doesn’t have much power on its own and management companies are free to disregard it. At a gathering of the Korean Producers Conference, the entertainment management companies revealed their opposition to the model contract prepared by the Fair Trade Commission. Their common position was that binding a singer for 7 years is not sufficient in light of the initial investment and time that goes into singers. However, these days the fame of stars is growing, so the management company and producers don’t have all the power either.
Son Sok Hee:
Does that mean that singers actually have the upper hand?
Yang Seong Hui:
Yes, but in the case of idol singers the problem doesn’t arise from the time they get famous but lies in the fact that as rookies, before they become stars, they are powerless and so they acquiesce easily to whatever contract is placed before them only to find out afterward that there is no way of compensating for that [powerlessness], no? This is the game of the management companies.
Korea has a very distinct entertainment culture, where the management company that raises a star sees itself as a saviour of that star and so expects that successful star to feel obliged to pay back the company in acts of gratefulness. It’s a patriarchal culture unique to the entertainment industry. If seen in a positive light, it’s a family relationship, but there’s an aspect to it that endangers contractual relationships based on equality, fairness and legal legitimacy. The Fair Trade Commission set the contract limit at 7 years not to say that management companies keep their stars for only 7 years but to advise and encourage companies to re-evaluate the status of their stars after 7 years, modify the terms in accordance with this changed status and re-contract the person after negotiations.
Son Sok Hee:
So, according to what you’re saying, in the present situation the model contract is not sticking and it looks like there’s no other way, but is there another option to improve the current situation?
Yang Seong Hui:
Yes. I think that the fact that the business of entertainment management has become a subject of discussion is already a step in the right direction. By whatever means, we have to find a self-regulating solution. The Dong Bang Shin Ki controversy will inevitably have a negative impact on entertainment companies. Arriving at an equitable standard is in the interests of both sides and important. Whilst we’re getting excited about the Korean entertainment business and its quantitative contributions to the Korean Wave, it is in the interests of management companies and stars to create a market with transparent, healthy and fair rules.
What we need are practical laws and regulations to be made, but the management companies are insisting that the Fair Trade Commission’s 7-year rule is ignorant of Korea’s entertainment business.
In any case, what is most realistic and practical right now are mechanisms to oversee the laws and regulations. At the same time, it’s important in this process to not focus solely on the human rights of entertainers but also take into consideration the position of management companies. Management companies are an important player in Korea’s entertainment business, so we need to find a model where both sides consider it win-win to see each other as partners. And since stars these days have more influence and more highly developed sense of basic rights, conflicts ilke these are not likely to disappear but rather multiply.
Son Sok Hee:
So then there’s a chance that gradually the desired result will come.
Yang Seong Hui:
Precisely. Isn’t the United States, a country with a more developed model, known as the heaven of lawsuits? Agencies and entertainers sue each other all the time. I don’t think we should automatically conclude that all lawsuits or conflicts are bad, and in the case of Korea it is through these instances that legal precedents sympathetic to either side can contribute to a more transparent and fair management contract model that is the best fit for the Korean situation; this is the most important lesson/moral we can take from the Dong Bang Shin Ki controversy.
Son Sok Hee:
Yes. I might have briefly mentioned this in the last show, but early last year when I went to Japan, I visited a Japanese high school class. There’s no way Japanese high school students would know me, right? But when I said that I work at MBC and know Dong Bang Shin Ki the classroom turned upside-down. I ended up giving everyone my autograph. Hahahaha
Yang Seong Hui:
What’s regretful is that in Japan and Southeast Asia there are fans watching all this unfold with interest/concern. In any case, the fact that Dong Bang Shin Ki, who were instrumental in spreading the Korean Wave and bringing it to the level of where it is today, are compelled to halt their activities due to a problem internal to Korea can’t be positive for the progress of Korean pop music or culture, in my opinion.
Son Sok Hee:
Anyway, because I have a related personal experience I hope everything turns out well for Dong Bang Shin Ki. Thank you very much.
Yang Seong Hui:
Yes. Thank you.
Credit:TheJYJFiles
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