EXO-CBX agency declares 'war' against SM Entertainment over distribution, royalties

The agency of EXO members Chen, Baekhyun and Xiumin declared a “full-on war” against SM Entertainment, calling out the latter for violating the agreement it made with the trio last year after a monthlong dispute over their exclusive contracts.

Members of boy band EXO's subunit EXO-CBX (from left) Xiumin, Baekhyun and Chen, along with EXO member Chanyeol, on July 25, 2023 [NEWS1]

The agency of EXO members Chen, Baekhyun and Xiumin declared a “full-on war” against SM Entertainment, calling out the latter for violating the agreement it made with the trio last year after a monthlong dispute over their exclusive contracts.

“We declare a full-on war against SM Entertainment, which has made a promise that it could not keep and committed what could be perceived as fraud,” said Cha Ga-won, president of the holding company of the EXO trio’s agency INB100, in a press conference held Monday in central Seoul.

According to Cha, SM Entertainment promised that it would ensure the three EXO members a 5.5 percent fee if they distribute their music through Kakao — the majority shareholder of SM Entertainment — under their new agency, as opposed to the 15 to 20 percent that companies outside of the Kakao umbrella are required to pay.

The deal was not stated in the written contract but was “verbally promised by then-CEO Lee Sung-su of SM Entertainment,” according to the three members’ attorney Lee Jae-hak.

The three EXO members began their solo careers at INB100, an agency newly founded by Baekhyun last July after settling their dispute with SM Entertainment a month prior, in January this year.

Representatives from INB100, the agency of EXO-CBX members Chen, Baekhyun and Xiumin, speak to reporters in a press conference held on June 10 in central Seoul "declaring full-on war against SM Entertainment." From left are: Lawyer Lee Jae-hak, attorney of the three EXO members and INB100; Cha Ga-won, majority shareholder of One Hundred, the holding company of INB100; and CEO Kim Dong-joon of INB100 and One Hundred. [NEWS1]

They are still signed to SM Entertainment, where the three artists all began their K-pop careers in 2012 as members of EXO, to continue their activities as part of the band, while their solo activities are managed by INB100. They have been using the stage names they used as members of EXO as well as the name of the trio, EXO-CBX, in promoting their activities.

SM Entertainment demanded a 10 percent royalty fee for the members using SM Entertainment’s intellectual property (IP), such as the naming licenses for EXO, EXO-CBX and other content owned by SM Entertainment in exchange for the lower-than-average distribution fee — which was written in the contract.

“A verbal agreement is an agreement that is seen as legally binding by the Korean legal system,” he said. “We have recorded files of the conversation between Lee Sung-su and Cha Ga-won as well as other forms of proof. Should SM Entertainment demand the 10 percent fee, then it should also carry out the other end of the deal it promised.”

INB100 also demanded that SM Entertainment fully disclose the breakdown of EXO’s earnings, re-enacting last year’s dispute that took place over the three members demanding SM Entertainment shorten the length of their exclusive contracts with the agency along with providing the documents of their earnings throughout their years at SM Entertainment.

Members Baekhyun, Ximuin and Chen of boy band EXO's subunit EXO-CBX [SM ENTERTAINMENT]

SM Entertainment only allowed the members to “come into the office and read the files” instead of providing them with copies of their own, which goes against the law, but the members decided not to fight “for the sake of EXO and EXO’s fans,” according to attorney Lee.

“It is clearly stated by the law that an entertainment company is required to provide the document upon an artist’s request, not make them come and just read the documents,” he said. “We made a compromise back then, but we want to take this chance to point out that what they did was just pretense.”

INB100 sent a formal letter of complaint to SM Entertainment demanding that it keep its word on the 5.5 percent fee and provide the members with the requested documents, but the EXO agency hasn’t given a response in over two months, which has led the agency to hold a press conference as a means to protect its artists, according to Lee.

The press conference was attended by INB100 CEO Kim Dong-joon, Lee of law firm Lin, representing the three EXO-CBX members, and Cha, president of construction company p_Arc as well as the majority shareholder and CEO of entertainment company One Hundred. The company owns INB100 along with other K-pop companies, including Big Planet Made and Million Market. Music producer MC Mong is the co-CEO of One Hundred.

A press conference is held on June 10 in central Seoul where EXO-CBX agency INB100 declared "full-on war against SM Entertainment." [NEWS1]

Cha helped Baekhyun establish his own company, One Signature, by taking out a 13 billion won ($9.45 million) loan with a penthouse she owns in central Seoul as collateral in June last year. She was also a board member of Big Planet Made when the company was accused by SM Entertainment of “trying to poach EXO members” from the agency. SM Entertainment later withdrew its accusation and apologized.

Kim is also the CEO of Big Planet Made. He served as the CEO of SM C&C, a content production subsidiary of SM Entertainment, from 2017 to 2023.

“Having been in the entertainment industry for 35 years, I have never seen a case where someone stood up to a massive agency like SM Entertainment,” Kim said. “We had to be brave, but we were desperate. We hope today’s press conference helps other artists to also stand up to unfair deals.”

SM Entertainment refuted the agency's arguments in a press release on Monday evening.

"We only offered to help CBX members get a better deal with the distributor," SM Entertainment said.

"We have no right over the fee that another company decides, which is why no such clause was included in the contract," it added.

"CBX was able to get a good distribution deal and suffered no damage."

EXO-CBX members and SM Entertainment locked horns for three weeks in June last year when the three EXO members demanded that agency SM Entertainment terminate the “unfair” exclusive contracts with the three members, and announced it to the press.

The two parties settled the dispute on June 19, 2023, and fixed "certain terms" based on an "equal relationship" between the two parties, according to SM Entertainment.

BY YOON SO-YEON [yoon.soyeon@joongang.co.kr]