Categories: NEWS
By Published On: March 17th, 2023

Hybe’s Withdrawal from the SM War and Its Remaining Tasks

Hybe announced on the 12th that it would suspend the SM acquisition process. The company stated that it would no longer engage in bleeding competition since it had reached an agreement on cooperation with Kakao and the platform business. Hybe and SM each own the top two fan platforms in the industry. Hybe has developed its platform business centered on the fan community “Weverse.” Seventy-nine teams or individuals, including Hybe Labels and artists under YG Entertainment, have set up shop there. It generated revenue of KRW 221.2 billion and net income of KRW 7.8 billion in the first quarter of last year alone. The monthly active user (MAU) count reached 7 million. Although membership is free, Weverse generates revenue by selling artist-specific paid memberships, albums, and goods via Weverse Shop.

SM is also using its subsidiary Dear U’s real-time communication platform “Dear U Bubble” to gather fans. Artists under SM and JYP, among others, use the service. It recorded sales of KRW 49.2 billion last year and achieved KRW 16.4 billion in profit, the first surplus since Dear U’s establishment. MAU has also increased to 1.45 million. If fans subscribe to their desired artists, they can receive “private messages” sent by them. SM also operates a separate fan community called “Gwangya Club” and plans to unify its fan platforms in the future.

Since Weverse and Dear U are competitors, it may take some time to come up with specific collaboration plans. Both Hybe and SM are holding back their words, stating that they are preparing to make practical cooperation possible. It is expected that the specific details of cooperation will be completed after the new board is formed at the SM shareholder meeting on the 31st. An industry insider speculated that they might have agreed only on a broad outline of the cooperation since the issue is closely tied to the interests of each company, adding that “fierce additional negotiations between the management of both companies could continue.”

Hybe’s contract with Lee Soo-man, which requires KRW 184 billion for compliance, is another issue that is holding the company back. Attention is being drawn to how to deal with the 15.78% stake acquired from Lee and the former SM head, Gallerya SM. If Hybe wants to hold more than 15% of SM shares, it must report the merger to the Fair Trade Commission. Since Hybe has already stepped down from management, there is no reason for the company to hold SM shares at the expense of a burden.