Is HYBE Exploiting Its Labels? Questions About Huge “Tuition Fee” Lead To Demand For Tax Investigation

2 weeks ago 12

While HYBE wasn’t the one to coin the term, the multi-label giant is facing criticism for charging its labels inexplicable fees.

1 hour ago

A Korean news outlet reported that HYBE is collecting “tuition” from its labels, excluding BIGHIT MUSIC, which houses BTS. The “suspicious” fund flow setup has since triggered demands from Koreans who believe the transactions to be a form of racketeering.

Dealsite reported on November 6, 2024 (KST) that, in 2023 alone, HYBE collected ₩15.7 billion KRW (about $11.4 million USD) from ADOR, home of NewJeans, for music distribution and “other service charges”—thought to be sort of a “tuition fee” for “artist development.” The article pointed out that ADOR’s intercompany revenue was ₩3.10 billion KRW (about $2.24 million USD), a small fraction compared to what was paid as tuition.

Other labels billed for tuition included Source Music, reported to have paid ₩11.0 billion KRW (about $7.95 million USD), and BELIFT LAB at ₩14.4 billion KRW (about $10.4 million USD). Source Music’s intercompany revenue was ₩3.50 billion KRW (about $2.53 million USD), while Belift Lab’s was ₩9.30 billion KRW (about $6.73 million USD).

BIGHIT MUSIC was revealed to be the one label not being charged the said tuition fee.

Regarding the glaring difference between BIGHIT MUSIC vs. other labels, an insider commented, “Given that BTS, under BIGHIT MUSIC, has delivered unparalleled results, such as dominating the Billboard charts,” the fee has been waived.

HYBE recognizes revenue from providing various services, such as album production and sales, to its labels. In addition, HYBE compensates when using artists from those labels in its ongoing businesses. Given that BTS, under BIGHIT MUSIC, has delivered unparalleled results, such as dominating the Billboard charts, it seems that HYBE spends more on them and using them extensively in its business.

— Insider

The article has since been interpreted as HYBE extorting from its labels’ artists, while prioritizing and giving BIGHIT MUSIC preferential treatment. Another insider noted that such “unclear operational standards have led to conflicts,” referencing HYBE’s feud with Min Hee Jin, and noted that “this is an issue HYBE must address moving forward.”

The intention behind HYBE’s multi-label setup was to foster growth through the support of the parent company, independent management, and healthy competition between the labels. However, in reality, this original purpose is being overshadowed. The problem lies in the lack of clear standards for appropriate compensation, despite the utilization of human resources.

— Insider

Koreans remain fierce in demanding a tax audit to investigate HYBE.

“????”
“Insane. Such fraudsters.”
“LOL. HYBE is a sh*t show, for sure.”
“Why doesn’t BIGHIT have to pay? HYBE is not a multi-label company. It’s Bang Si Hyuk’s world where he can do whatever he wants.”
“Haha, ‘tuition.’ Yeah, right. It’s extortion, obviously. If the transaction is a clean one, there would not be a reason to make up weird names for it, like ‘service charges,’ when reporting it. It’s obvious HYBE is manipulating the expenses and coming up with vague receipts for them.”
“IDK, shouldn’t it be HYBE paying ADOR for the lessons it learned?”

“What kind of ‘tuition’ would ever cost over ₩10.0 billion KRW (about $7.23 million USD)? It makes no sense. Is HYBE talking about training fees for the trainees? Even that shouldn’t cost ₩10.0 billion KRW (about $7.23 million USD) per year. What exactly is the service charge for?”
“Tuition? What are they, a private school?”
“Tuition, LOL. Sounds like a ‘special’ kind of tax.”
“Wow, this is worse than what Lee Soo Man pulled at SM Entertainment.”
“Haha. This is no different from, like, a friend chicken brand headquarter scamming and extorting its franchise owners by creating a sh*t ton of brand-specific suppliers.”
“Wow…”

In fact, a viral petition to revoke HYBE’s status as a “Top Enterprise,” said to be the first step in bringing audits to investigate the multi-label giant, has since garnered over 47,284 signatures, hitting 95% of the goal.