[Exclusive] Min Heejin's 'internal whistleblowing' was about HYBE's 'pushing albums' scheme

 May 17th, 2024

Min Heejin confirmed to have sent a protest email to HYBE after being encouraged to 'push out the album' by 10,000 copies of NewJeans albums.

Public opinion criticizes 'record hoarding' in effect.

Min Heejin, CEO of ADOR: "The answer to the whistleblower's questioning (about HYBE) was an audit. There was no answer, and I immediately thanked him If I hadn't filed the whistleblower, I don't think I would have done this (press conference). You're getting a little frustated because I keep sending whistleblowing letters and raising issues. He's not listening. Boy, that won't work. I'm being filmed now, right?"

Lawyer Soo-geun (legal representative) of Sejong Law Firm: "We were renegotiatinin g the contract between shareholders (HYBE - Min Heejin, CEO of ADOR). I asked (CEO Min Heejin) not to file a whistleblower or anything like that because I had to negotiate between shareholders," he said. "(CEO Min Heejin) said, "If I don't get this right, I don't have to negotiate a contract between shareholders, or I don't have to fix it. But I have to file a complaint and work on myself. That's why I did it."

CEO Min Heejin and her legal representative mentioned the whistleblower against HYBE several times at the press conference on the 25th of last month.

According to the legal community on the 17th, in an e-mail (document) sent by CEO Min Heejin to HYBE management, CEO Min was advised by HYBE to 'push out' 100,000 albums to pushing out ("tackle") from HYBE, but refused to do so and proceeded with a complaint of 'internal accusation'.

According to the document, CEO Min Heejin said, "The big problem with HYBE is that is following the ills of the existing industry and continuing to engage in immoral acts without any sense of criticism," added, "It is not fulfilling its social responsibility as a representative company in the entertainment industry."

CEO Min Heejin said, "The most representative thing is HYBE's 'pushing out the record', adding, "It has already been strongly criticized by public opinion for deceiving shareholders, members, capital markets and fandom, and the fact that HYBE, a leader in the industry, is using the blind spots of regulation to push out the record is a serious problem."

"NewJeans has been encouraged by HYBE to 'push out the album," she said. "NewJeans was encouraged to push out 100,000 copies from HYBE, saying it could break the Spanish record when releasing "Get Up," but they flatly refused because it violates the philosophy of ADOR business."

Regarding the reason for refusing HYBE's recommended 'pushing out the record', CEO Min Heejin said, "We were concerned that the pure No. 1 records that NewJeans has achieved could be tarnished and that various busines opportunities that have occured will be damaged."

She also said, "If the isue of 'pushing out the record' in the future receives public attention as a bigger problem, even NewJeans, who flatly refused to push the records', that it could surpass other groups' record. This shows HYBE's serious lack of ethical awareness."

In addition, she said, "As far as I know, it is already prevalent within the HYBE Label, but I would like to ask you to carefully investigate whether there is a transaction that can be seen as 'pushing out the record' including whether there is a transaction with conditions for return for the subsidiary, and to deal with it in a transparent manner."

At the same time, CEO Min Heejin called for collection and response, pointing out ▲ discrimination between labels in business areas excluding production such as distribution, business, and managment of HYBE ▲ excessive business intervention in the operation of each label ▲ pushing certain labels and a 'military-style soccer' culture ▲ HYBE's lack management ethics.

"Pushing out albums" has become a practice in the industry as album sellers and distributors purchase album sales (sales during the week of release) on a large scale and agencies compensate or support sales through fan signing events and other events. In order to focus on the "inital sales" figure, fans are buying more albums than necessary with the aim of participating in the event, and artists are mobilized for the event, leading to a vicious cycle.

Noh Jong-eon, a lawyer representing the existence of the law firm, said, "If HYBE's 'pushing out' actually went ahead, it is not only a serious problem that shakes the foundation of the K-pop industry, but it is also an issue that shows how those with capital and power abuse their power to violate young people's dreams and passions. Pushing out albums is a typical form of 'purchasing albums' and is distorted by criminal acts that disrupt the distribution order, preventing other idols from developing and growing, and providing distorted information on music sales to stock investors, which can cause damage to stock investors."

Below is the full text of the email (document) sent by Min Heejin, CEO of ADOR, to HYBE management

Dear HYBE management

On April 3, 2024, ADOR Inc. called on HYBE/Belift Lab. Inc. to express its position and take corrective action against NewJeans for damaging the brand value of NewJeans due to ILLIT's plagiarism dispute.

(Refer to the following mail and attachments)

The controversy over the dispute over ILLIT plagiarism is only a small part of the problems that have occured between NewJeans and HYBE. NewJeans' legal representative earnestly asked ADOR to request correction of HYBE, saying that the degree of obstruction and discriminatory and unfair treatment that HYBE has been conducting against NewJeans is serious and is not tolerable. Thus, ADOR, who is in charge of NewJeans' management, would like to state the NewJeans legal representative and ADOR's position in this regard as follows.

Even though the previous e-mail was sent to HYBE, including Belift Lab. Belift Lab only provides an answer that it is preparing for an answer, and there is no clear answer from HYBE yet. NewJeans legal representatives and ADOR are waiting for HYBE's response. In addition to the previous e-mail, w are sending it to HYBE management because the content we want to convey through this e-mail is not limited to ADOR/NewJeans, but about HYBE's ethical management and sustainable management.

HYBE's major problem is that it continues to engage in immoral behavior without any awareness of criticism while following the ills of the existing industry. It is not fulfilling its social responsibilities as a representative company in the entertainment industry, and its governance structure is alse not transparent, which continues to cause direct and indirect damage to NewJeans.

1. The most representative example is HYBE's 'pushing the record'.

'Pushing out a record' refers to an unfair act of inflating sales by placing a large order using a distributor or overseas subsidiary or by improvising fan events in order to artificially inflate sales volume for the week of release, that is "initial sales volume."

This is sending false information about an artist's performance, disrupting fair market order, such as making a team appear to be growing that is no longer growing, or inflating the performance of a project.

In particular, the impact on the stock market by pushing out records is even more serious, not just inflating numbers, but seriously distorting the growth and future of companies and the entertainment industry.

It has already received strong criticism from the public for deceiving shareholders, members, capital markets, and fandom, and if this continus, it will ultimately become an unhealthy issue that destroys the entertainment industry's ecosystem from its roots. Nevertheless, the fact that HYBE, an industry leader, is using regulatory blind spots to pus out records is a serious problem.

NewJeans was encouraged by HYBE to 'push out an album'.

NewJeans was encouraged to push back 100,000 copies by HYBE, saying it could break the aespa initial record fo the release of the 2nd EP "Get Up" album, but flatly rejected it because it violates ADOR's business philosophy.

The reason ADOR refused was because they was concerned that the pure first place records that NewJeans had achieved so far without business opportunities could be tarnished, and that various business opportunities would be undermined. For reference, NewJeans' legal representatives asked ADOR about the pushback issue when it was raised in the community, and ADOR confirmed that NewJeans did not push back.

In the future, if the issue of 'pushing out the album' attracts public attention as a bigger problem, even NewJeans, who flatly refused to push ot the album just because they were members of HYBE, may be misunderstood as using 'pushing out the album' to package their performance. As a result, ADOR, who is responsible for managing NewJeans' management, wants to prevent not only the sales of the album but also the hard work that has been growing without using tricks, from being denied. It is already a serious damage to NewJeans that they are not fully recognized for their value even though they have outstanding performance without 'pushing out the album'.

Above all, the biggest problem is that it can break the belief that success can be achieved only with music and performances and contents without expediency. This dampens the vision and hopes of the market.

We hope that the perception that 'those who don't do it are stupid' will no longer spread.

Even groups like NewJeans, who have high album sales without 'pushing out albums', were encouraged to do so, saying that they could surpass other groups' records. But what about the other groups?

It cannot help but be said that this shows HYBE's serious lack of ethical awareness. 

In response, we strongly criticize the absurdities and contradictions of the existing entertainment industry and strongly urge improvement and prompt correction of HYBE's two-faced attitude that aims to promote the entertainment industry.

As far as we know, it is already prevalent within the HYBE Labels, but we would like to strongly investigat whether ther is a transaction that may appear to be 'pushing out the record', including whether is a transaction with conditional return for the subsidiary, and deal with it in a transparent manner.

2. HYBE is restricting the opportunity to select the best partners through fair competition among labels in all areas of its business except for production, such as distribution, business, and management

A 10-year exclusive distribution contract recently signed between HYBE and UMG is hampering NewJeans' future operations. It is said that it can lower distribution fees in the short term, but a contract that only allows a fast-growing artist like NewJeans to trade with a specific label for a long period of 10 years is not reasonable. While it makes sense to induce competition among companies through a short contract period to get the best terms, HYBE-UMG contracts have essentially bloked NewJeans from finding labels that migh offer lower distribution fees or offer better terms for NewJeans.

In addition, even if the distribution fee has been lowered, the label pays HYBE an internal distribution fee of almsot the same size in addition to the external fee paid to UMG, so it's actually similar to Jammasa from the labels point of view. Not matter how well you achieve in the future, it doesn't make sense to NewJeans that you will have to pay a significant amount of distribution fees for the next 10 years.

The problem doesn't stop there. An even bigger problem is that the level of service provided by UMG's labels isn't high, so isn't the level of satisfaction.

It's not just ADOR, it's a clomplaint from all labels in HYBE.

In other words, for the next 10 years, even if unsatisfactory services do not improve due to this agreement, we will have no choice but to see UMG-affiliated labels. Therefore, this long-term contract not only lowers the motivation for UMG-affiliated labels to improve their services, but also undermines the overseas competitiveness of ADOR/NewJeans.

A long-term contract between HYBE and UMG does more harm than good to NewJeans, and it is unfair that labels and artists have to bear the full risk of it.

When negotiating the contract with UMG, it must have been clear that NewJeans was a good card to use in negotiations from HYBE's point of view, but we cannot help but wonder what kind of service level and benefits NewJeans has gained from HYBE.

3. The big problem is that HYBE is not prioritizing the imporvement and advancement of its main business, label operations

Regardless of the HYBE business organization's ability or quality of service, HYBE is currently urging the label to carry out a variety of businesses with HYBE, including authority over perfomance and MD, and agency authority over advertising and record/music distribution.

However, it doesn't matter much from the labels' point of view whether the business operator is an internal affiliate or an external company, because the label values the business operator's ability to carry out the business.

Having experienced that HYBE's business performance fell short of ADOR's expectations on a few occasions, ADOR had to find other external partners while securing its own resources for performance, advertising and MD businesses for better results. But it wasn't an easy process to sort out relationships with existing internal operators.

For example, in the case of the advertising business, NewJeans was in a situation where various advertising proposals were flooding in from outside due to its high topically from its debut, so it was in a situation where it was only necessary to manage well the advertisers who were voluntarily brough in without any artificial advertising sales. However, issued raised by the Brand Synergy Business Team, which is in charge of the advertising business, led to frequent unnecessary disputes not only with advertisers but also with labels.

Whenever this happened, ADOR raised issues several times,. However, these issues did not improve, and it was only barely cleared up after a fatal incident. A conflict of interest arose in the process of pursuing a new contract between a foreign luxury brand and Le Sserafim, which was under contract with NewJeans, and the Brand Synergy Business Team was found to have signed contrats with both ADOR and the brand for different lies.

It is natural for the Brand Synergy Business Team to treat all labels of ADOR and Source Music fairly. However, the Brand Synergy Business Team was biased toward a specific artist, and it was only after the circumtances were revealed that they accepted ADOR's complaint and were able to conclude by returning a three-month agency fee.

In the process, it was also entirely up to the label to meet the brand in person to determine wheter it was true or not and to judge whether it was true.

Despite paying the same fee rate as an external business operator and experiencing an unfair situation with a clear reason for the contract's destruction, the contract destruction process was not easy because it was an internal business team belonging to the same affiliate. Rather, after the destruction, we had to hear a groundless rumor that ADOR was a tricky label inside the company.

There were unnecessary warnings and perceptions that these procedures violated HYBE's internal regulations because they proceeded with external transactions despite the fact that external operators decided that they were necessary for competitive performances or MD businesses.

If the quality of HYBE's infrastructure is deemed insufficient, it shout be an urgent priority to enhance the competitiveness of the business entities. However, HYBE only manags the label's performance indicators as indicators that are favorable for consolidated sales, or HYBE's size, rather than looking for ways to promote and improve the competitiveness of operators.

The distracting management problem of not being able to focus on the main job is also evident in the performance of HYBE's new corporations.

In 2021, Ithaca Holdings was acquired for an astronomical amount of 1 trillion won, but since then, HYBE's global business has not shown any results. Businesses such as platform/game/voice AI/blockchain have also shown sluggish performance, despite large investments and manpower. 

As the 2023 business report shows, the performane of new businesses such as HYBE America (-142.4 billion won), HYBE UMG LLC (-23.4 billion won), Weverse (-4.4 billion won), HYBE IM (-20.9 billion won), Superton (-6.7 billon won), and Binary Korea (-3.8 billion won) are all in the negative territory.

HYBE's 2023 earnings report has been busy correcting insolvent businesses, even as additional businesses, rather than core businesses of their essence, continue to suffer serious deficits. 

The foundation of the entertainment business lies in the label business which fosters and manages artists.

In 2023, NewJeans achieved an extraordinary increase in performance in less than two years, unprecedented in the 30-year history of the entertainment industry. However, IR/press release do not even mention the overwhelming growth of NewJeans. Rather, there was an incident where biased IR script content was discovered and corrected.

Why does this happen so often only in NewJeans?

4. Improvements to HYBE's Shared Service, which supports ADOR/NewJeans, are urgently needed

As we emphasized earlier, the essene of the entertainment business is the label business, and HYBE is right to play a role in helping the label business thrive.

HYBE's Shared Service is currently avoiding the essence without understanding the multi-label system. It is difficult for the Shared Service in a multi-label system to become a support organization that simply performs common functions according to instructions, that is, pursuing military-style efficiency.

Every year, ADOR pays HYBE the equivalent of the "entire cost of labor" for services such as legal, human resources, finance, public relations, and IT. However, despite efforts to support fast-growing businesses and improve production and operations, the label is less satisfied with the services HYBE offers compared to the high fees.

Despite the need for carefully considered support from the label and artist's point of view given the condition and growth that inevitably varis from label/artist to label, it does not have a balanced attitude between HYBE Labels - between the labels, or beandtween a label another label, as mentioned in number 3. 

As everyone knows, NewJeans has been an extraordinary success since its debut. However, HYBE's PR has remained lukewarm, despite having to publicize the success story as it is. Despite repeated objections to HYBE PR's attitude, it has been consistently found in IR/PR scripts. There have been cases where foreign and domestic reporters have contacted ADOR directly saying, "The HYBE PR team seems to be more passive in NewJeans PR compared to other artists in HYBE, or asked him to provide relatd materials.

In addition, the 'Industry Trend Review' document, which is circulated internally every week by Kang Myung-seok, editor-in-chief of Weverse Magazine, continued to contain biased and biased content, and ADOR has raised an objection, saying, "You need to write facts such as figures and indicators and maintain at least a minimum level of objectivity."

We also raised an objection to CEO Park Jiwon, but we received feedback saying "don't read it" and "think of it as an individual's opinion" from Kim Jooyoung. We don't know why the content of an individual without public confidence that lacks objectivity should be distributd to company executives as if it were representative, and because of the bias of the content, there are even doubts about whether it was ditributd for propaganda/spreading with a kind of purpose.

Considering the impact and ripple effect that one individual's error in judgement about the market may have on those who move from other industries and are unfamiliar with the entertainment industry, it is difficult to just ignore it and dismiss it as a trivial matter.

However, even in a recent document, we was told that there is still a self-comforting attitude of choosing and reviewing only the reactions you want, ignoring the negative reactions, in relation to the controversy over ILLIT's plagiarism. ADOR had already requested a refusal to receive it, but after receiving the informtion from other recipients recently, we not sympathize with the review.

Not long ago, NewJeans distributed unprecedented news that Japan's first performance will be held at Tokyo Dome.

But, coincidentally, HYBE distributed the news of the signing of a UMG distribution contract on the same date and time, and reported that this was a good thing. After hearing about these articles, a legal representative for NewJeans has asked ADOR about the following information.

"Isn't it possible for HYBE PR team to distribute and control all the articles at the desk? If the UMG case is good news, it is common sense to separate it from NewJeans' big news and promote it in a way that continues to bee good news day after day. We wonder why HYBE promoted the greatness of UMG contract articles by distributing them overlappingly at a time when it is not enough to focus on NewJeans, which announces its comeback after a long time, and promote the big news of the shortet entry into Tokyo Dome."

Even if the dates coincidentally overlap, the reason for HYBE PR's existence is to find a way to maximize each other's benefits by collecting, organizing, consulting and coordinating all the news.

In particular, it contrasts considerably with HYBE's expliicit support for ILLIT, who is ocnsiderate even though they have different labels from NewJeans and are older than the averag age team, but are tied up only when promoting and expressed in the modifier "HYBE youngest daughter."

When we asked the CCO about the ILLIT plagiarism incident.

"There was a story about plagiarism before the debut, but after the stage and music were released as an official debut, we think such controversy has subsided."

It is an open face that plagiarism disputes have become a widespread issue. Aside from disputes, there are still damaging labels within a company that are caught up in unnecessary noise issues.

What's surprising is that even the heavyweight executive in charge of HYBE PR is casually conveying intentions biased against certain labels to affected labels.

HYBE seems to have to realize the very natural reason that "plagiarism disputes have become a topic of conversation and issues" and that there are objects that have been "damaged" as a result.

5. What are HYBE's management ethics principles? NewJeans legal representatives and ADOR bury in HYBE

HYBE's actions, such as the parent company recklessly taking advantage of well-established subsidiaries, emphasizing that it is the only one company, marketing in relation to the other party without their consent, and consistently maintaining a shameless attitude of turning the blind eye and ignoring them, ar said to be protesting against the long-standing irrationality of the entertainment industry at the time of its founding. Is it an attitude?

If you were really confident in your music, why would you need to stimulate the concept of NewJeans, you need to choreograph NewJeans, and use the buzz of NewJeans. Why can't you just play fair with your own work? Are you happy with the result?

NewJeans was so successful that the word "NewJeans Syndrome" was coined that NewJeans changed the K-pop trend, which also significantly changed the trend of music production from the existing girl crush style to the easy listening line, which is represented by the so-called "NewJeans style." With the title of market leadership and the success of multi-labels, it contributed greatly to HYBE's corporat image as well as its stock price. NewJeans influenced newcomers who debuted after NewJeans, regardless of gender, and HYBE joined the trend at a troubling level.

For what reason does HYBE change the flow of K-Pop and protect the leading ADOR/NewJeans, rather than the parent company coming forward to create the source and factor of the interference with NewJeans.

Who do organizations and people who have not contributed anything to the creation of NewJeans' unique identity carelessly use NewJeans as if it were public property and use it as if it were common, damaging the image of NewJeans that was carefully built up?

In order to raise ILLIT's unprecedented awareness, HYBE used the NewJeans, the most high-profile and popular team, to raise the buzz and generate comparative/contrast references to burn out the image, damaging NewJeans' reputation for value.

It has been confirmed this time that HYBE does not have a concept of artist RM or a basic concept of balanced respet for its creators/artists.

While we devastated that this happened to the parent company and not to another company, we ask how ADOR/NewJeans can be compensated for the damag they have already suffered.

NewJeans legal representative and ADOR hold HYBE responsible for unnecessarily exhausting and exploiting NewJeans' value, let alone caring for NewJeans, and demand realistic correction of what is contained in this letter.

In addition, we request a complete revision of the ILLIT marketing direction and concept.

Chairman Bang Sihyuk intention, who has long envied Min Heejin's creations in 2019 and proposed to recruit them with the heart of a successful fan, was based on the expectation that Min Heejin's creations could be easily stolen and utilized in the end.

It was rude and irresponsible to unilaterally change/notify plans for the first HYBE girl group before Le Sserafim's debut, but that is not enough, and CEO Park Jiwon's plea to Min Heejin not to promote the Min Heejin girl group before Le Sserafim's debut still remains as a conversation record. We understand that it was the request of Chairman Bang Sihyuk.

If all of them reveal that they are rookies, there is no difference between now and then, when they made a bizarre and incomprehensible demand not to promote the NewJeans for the unusual reason that "it is clear what Min Heejin's team is prepaing for."

Externally, HYBE appears to be operating nationally by promoting a multi-label system, but looking back at the time when ADOR was founded, this is also not true.

Min Heejin as unilaterally informed by Source Music that her debut plans had been changed by HYBE.

The story was that Le Sserafim would be HYBE's first girl group, and the trainees from the debut group at the time would beome Source Music's next team. The trainees from the deut group at the time included the current NewJeans members.

Even if HYBE had first broken its promise and unilaterally changed the timing of tis debut, asking for understanding and voluntarily proposing the idea of establishing a separate label, it woul not have been easy, so they are the next team of Sourc Music.

Although Min Heejin was used to publicize the group as HYBE's first girl group and contracred trainees based on that publicity, HYBE easily betrayed its promises like a dedicated partner At that time, Min Heejin and other current executives and employees of ADOR became very disillusioned and resigned that we wanted to. However, we did not want to be perceived by the public and the remaining trainee as people who were not responsible and did not keep their promises.

At that time, they explained this intention to CEO Park Jiwon and delivered a proposal to establish ADOR to plan a separate debut.

Was the process of establishing ADOR a willing and easy process.

Locking back on the past several incidents, we can't help but think that there are no people around Chairman Bang Sihyuk who speak frankly enough to report even the industry trends that need to be objectively confronted.

We would like to speak clearly this time as the failure to correct the unreasonable demands from three years ago seems to have continued and reoccured into the current problem.

Not only ILLIT, but also Le Sserafim suffered from constant plagiarism disputes regarding the concepts and songs of the three albums they released. We heard from overseas producers and officials working with ADOR that they are discussing costs with HYBE for Le Sserafim songs due to plagiarism issues.

We think it is a time when reflection and improvement are more urgent than ever.

We got the news that HYBE is likely to be designated as a conglomerate group soon.

HYBE hopes to find a way to practice ESG management in accordance with its position without imitating the bad points of large corporations. And we hope you feel rsponsible for the multi-label system that you have been promoting externally, and set and implement improvement and future-oriented goals.

We believe in the suggestion that Chairman Bang Sihyuk preached internally and externally. "Eve if it is difficult to say when faced with the absurdity and irrationally of the business, we must say and correct our differences."

We hope you don't make the mistak of applying anachronistic logic such "It's good for a parent company to do well" and "If the result is good, the process is glorified" to K-pop and culture adn art projects leading the global entertainment industry.

These accidents rationalize outdated practices and vices that drive to specific people, specific organizations, such as "military soccer," eventually shoing down and destroying the organization and devastating the entire enterprise industry.

If you've created a multi-label regime for diversity and risk distribution, make it 'different'. And create a healthy business environment.

There is no need for respect for creators. It is not common sense for companies based on creation to mass-produce copycats, even for shareholders' rights and interests.

In terms of business, it is a foolish and short-sighted decision that ill ultimately result in the loss of both.

This is contained in an online town hall message distributed by Chairman Bang Sihyuk to the entire company at the time of HYBE's listing.

"My fundamental philosophy of company management has not changd, based on common sense and contributing to the evetual creation of a better world by trying to solve the problems needed to embody that common sense."

"It will be an opportunity to advance management by increasing the integrity and tranparency of the company's management."

Currently, HYBE seems more desperate than ever to practice ethical management in all aspects of creation and management.

As Chairman Bang Sihyuk said, "I hope you make an effort to solve the current problem."

We hope it will be a common sense, sound and transparent HYBE.

Please respnd to the requests for corretion by NewJeans' legal representative and ADOR by April 23, 2024.

Original article: Naver