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SM Entertainment Co., Ltd. finalized its decision to terminate its contract with its own founder Lee Soo Man’s production company called Like Planning. The entertainment firm confirmed late last week that it is cutting its ties with the music production firm.
SM Entertainment said the contract termination with Lee Soo Man’s Like Planning would take effect on Dec. 31. This is said to be a year earlier than the initial schedule.
According to Yonhap News Agency, the agency that has been managing popular idol groups such as Super Junior, Girls Generation, TVXQ, EXO, Shinee, NCT, Red Velvet, and aespa, has been outsourcing some of its productions to Like Planning which is being paid billions in Korean won for royalties every year.
SME’s board of directors agreed to the discontinuation of its contract with Like Planning. This will mark the end of the two company’s business relationship, which has been going on for 20 years now. In any case, despite the decision, Lee Soo Man remained the largest shareholder in SM with his 18.73% share.
NME reported that the early cancellation of Like Planning’s contract with SM Entertainment comes amid Align Partners Capital Management’s claims that the agency’s ties with Lee Soo Man’s wholly-owned company have been damaging shareholder value. The investor, which holds 1.1% shares in SME, went on to demand contract termination with Like Planning, and this was in August.
The capital management firm further said the royalties being paid to Like Planning have been sabotaging the value of shareholders. It explained that in the first two quarters of the year alone, SME already paid ₩11.4 billion to the production company. This amount is said to be about 29.6% of the total operating profits that SM Entertainment earned, which was ₩38.6 billion.
“Cutting ties with Like Planning is expected to increase SM Entertainment’s operating profit up to 60 percent,” Korea JoongAng Daily quoted Align Partners spokesman as saying in a statement last month. “We expect that the move will give SM Entertainment the push it needs to break free from the one-person-oriented structure to a more stable and sustainable one.”
