'Protecting SM Shares and Expanding the Label'... Bang Si-hyuk and Lee Soo-man's Interests Align

HYBE Builds America's Top 3 Genres: Pop, Country, Hip-Hop
Acquires SM Shares to Add K-Pop Label
Lee Soo-man Sells Shares Amid Kakao and Align's Joint Offensive

[Asia Economy Reporter Hwang Yoon-joo] Analysis suggests that the background behind Bang Si-hyuk, chairman of HYBE, acquiring the shares of Lee Soo-man, the largest shareholder of SM Entertainment (SM), was largely driven by a 'label expansion' strategy.

On the 10th, HYBE announced that it would acquire 14.8% of the 18.46% stake held by Lee Soo-man, SM's largest shareholder and general producer, at 120,000 KRW per share (totaling 422.8 billion KRW). At the same price, HYBE plans to secure an additional 25% stake through a public tender offer by March 1.

HYBE stated in an official position, "The acquisition of SM is intended to combine the global capabilities of both companies to become a game changer in the global popular music market." It further explained, "Before signing this contract, Bang Si-hyuk, founder and largest shareholder of HYBE, and Lee Soo-man, general producer, shared concerns about the future of K-pop and reached a consensus on ways to seek solutions, resulting in this share purchase agreement (SPA) as one of the outcomes."

Industry insiders and market experts place more emphasis on the alignment of interests between HYBE and Lee Soo-man rather than HYBE's role as a 'white knight.' Lee Soo-man had been reluctant to sell his shares until now. HYBE has continuously invested under the strategy of label expansion. It is analyzed that HYBE seized the opportunity to expand domestic labels through SM.

A representative of an asset management firm explained, "Lee Soo-man wanted to sell his shares at a high price, but under pressure from the SM board, Kakao, and the Align Partners alliance, if he were completely excluded, the value of his shares would disappear," adding, "In the end, he joined hands with HYBE."

HYBE owns Big Hit Music (groups BTS, TXT), Source Music (Le Sserafim), Pledis (Seventeen, Fromis_9), ADOR (NewJeans), and Belift Lab (Enhypen) domestically. Recently, its label expansion strategy both domestically and internationally has become prominent.

Chairman Bang Si-hyuk of HYBE and key stakeholders of QCM

In 2021, the U.S. subsidiary (HYBE America) acquired 'Ithaca Holdings,' home to artists such as Justin Bieber and Ariana Grande. On the previous day (the 9th), HYBE America announced that it acquired 100% of QC Media Holdings shares through its local subsidiary QCM Holding Company. The acquisition amount was 314 billion KRW, and HYBE plans to raise acquisition funds through a paid-in capital increase of 339 billion KRW at its U.S. subsidiary.

This company owns famous hip-hop labels including Lil Baby, Migos (Quavo, Offset), and Lil Yachty. With this acquisition, HYBE now possesses all three major U.S. genres: pop, country, and hip-hop.

Lee Hwa-jung, a researcher at NH Investment & Securities, evaluated, "HYBE has continuously sought to strengthen its profit base and the Weverse platform by securing high-quality K-pop IP. With the acquisition of QC, it has also secured a foundation in the urban hip-hop genre. Acquiring SM shares will solidify its position as the largest operator possessing all top-tier K-pop IP."

As HYBE now holds all three major U.S. genres and all top-tier K-pop IP, its presence in the global mainstream is expected to grow further.

[Image source=Yonhap News]

On the 3rd, SM announced its future core strategy 'SM 3.0,' which involves shifting from a single producing system to a multi-label system. The strategy is to produce IP based on internalized producing capabilities by establishing five independent production centers and a virtual artist and IP production center.

The expected benefits of switching to a multi-label system are threefold. First, the IP debut cycle is expected to shorten. Previously, one team was created every 3 years and 6 months, but now two teams can be produced annually. Second, an increase in album releases is anticipated. Previously, there were 31 releases per year, but now over 40 are planned. Lastly, timeliness is expected to improve. The IP release delay rate had approached 25%, but under the multi-label system, it is expected to drop below 5%.

Above all, the explosive influence resulting from the integration of K-pop global fandom platforms is drawing attention. Currently, the K-pop fandom platforms are centered around HYBE's 'Weverse' and SM subsidiary Dear U's 'Bubble.' Analysts predict that HYBE's acquisition of SM will further amplify its impact in the global market.

Lee Seon-hwa, a researcher at KB Securities, evaluated, "Weverse hosts a total of 78 artist teams, with monthly active users (MAU) reaching 7 million," adding, "As the artist pipeline strengthens, the IP value applicable to Weverse's communication model will increase."

This content was produced with the assistance of AI translation services.