Is this the way the Kakao-SM Deal Crumbles?

You thought we were done with this saga, huh?

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So for the past few days I’ve actually been fighting with myself over when is the perfect time to write what is sure to be only my first of several newsletters about what is happening with SM Entertainment, its artists, Kakao Entertainment and the South Korean Prosecution, because I feel like if I start now I’m going to have do another half a dozen editions about what’s to come after this week. But then executives got arrested, and now the Kakao founder is being summoned by the Financial Supervisory Services (FSS), so here we are once again.

I’ll get back to talking about my planned topic, English-language usage in K-pop songs, later this week! (Hopefully, please see the notes about this newsletter and my life at the moment.)

A quick explainer for those not as tuned-in as yours truly… So far in 2023, SM Entertainment earlier had prominently became the battleground between giants Hybe Corp. and Kakao, ousted founder Lee Soo-man, and was taken to court by talent over contract issues. I’ve written several newsletters about all of this, and spent a brief stint doing TikToks and some Twitter spaces (before I left the platform)  about them before I realized maybe I’m not sure actually what I want my TikTok brand to be so stopped that for now. (Stay tuned to see if I make a comeback!)

If you want to read the Notes on K-pop related posts, here’s a quick link to all heavily related to SM Entertainment.

One big thing that I was keeping an eye on was the fact that in February in the middle of all this mess, before there was any sort of settling between the parties Hybe asked the financial regulators in South Korea to investigate the Kakao-SM deal due to some stock irregularities. That was before the Kakao-Hybe deal led to Kakao taking over management and Hybe getting SM artists onto Weverse app artists, and now we get MESS.

@tamartoksThe fight for dominance of #kpop giant #smentertainment continues to heat up as #hybe and #sm’s sides each counteract one another & Hybe may lose its tender offer but, but counters with petition to regulators. #news #businessnews #biznews #reporter #southkorea

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After several raids on both Kakao and SM offices earlier this year,  this past week saw warrants served for Kakao execs for potentially manipulation SM Entertainment stock amid the battle with Hybe and on Thursday, Kakao Chief Investment Officer Bae Jae-hyun was arrested. On Friday, Kakao founder Kim Beom-su was summoned for questioning on Monday.

Kakao’s lawyers are, of course, denying any wrongdoing.

Also, just a note re reporting… Bloomberg says no other warrants were issued aside from Bae’s at that time, while Donga says three were issued. As per Joongang, the prosecution did file three arrest warrants, but only Bae was ultimately arrested. Some of these disparities may get cleared up over the next few weeks, but at the moment it’s confirmed that Bae was indeed arrested, and that other warrants were issued so future arrests may happen and/or plea deals with promises of cooperation may have been struck. (Also, if you can’t access Bloomberg, Yahoo often aggregates their pieces.)

Right now, both Kakao and SM Entertainment stocks are dropping, and I’d be pretty shocked if the SM-Kakao doesn’t end up at the very least being fined to high hell by regulators, and/or the deal ultimately is forced to be dissolved. Other options I can see happening, in very Kdrama/Succession style ways, are either a) Hybe ends up saving the deal somehow b) other investors beg Lee Sooman to come back. These are all just my personal theorizing, and I was 100% wrong with how the Hybe-Kakao battle would go because I thought they Hybe deal was actually quite attractive for SM, so I wouldn’t stay too tied to my predictions. I’ll probably have a more thorough analysis after a few more weeks of this investigation details being made public, but for the moment… I am just humming the Le Sserafim “I’m a mess” line anytime I read the words “Kakao’ and “SM” in the same headline.

Update October 23: There are concerns the this situation may actually lead to Kakao losing control of Kakao Bank, it’s very own financial institution.


Oh, all this also is coming amid artists changing around their contracts with the company, including perhaps the company’s most prominent idol-turned actor, EXO’s Do Kyungsoo aka D.O, who will remain working with SM for EXO but is setting up his own company with a former SM employee (also Kyungsoo, it’s called Soosoo which is adorable!) There are also reports the EXO’s Chanyeol and Sehun will be having their individual activities managed elsewhere, while still remaining with SM as EXO, but TBD because that’s been denied for now. This comes amid rumors that, due to EXO’s Baekhyun spearheading the contract dispute between SM and EXO’s CBX trio, SM artists have had their contracts revised with fairer terms.

NCT 127 dancing in front of SMTown Coex burning
Gotta say… Whoever asked fans to green screen NCT 127’s Fact-Check performance had to expect this... (Source)

So, yea, 2023… Not the best year for SM (and fans are memeing it!), but let’s see what the hell happens next. For the artists and fans’ sakes, I’m hoping the company is able to keep operating as usual, but it’s quite an exceptional year so who really knows at this point.

Some personal news…

Some life changes are going on at the moment, including a new editing contract that will be taking on all my 9-5 time until the end of the year, and maybe beyond. And so as I adjust to this new schedule+freelancing, I’m not going to hold myself too tightly to my preferred weekly Monday release schedule (which I’ve been bad at generally lately, hence this late Saturday night post!) but will still be aiming for at least one newsletter, plus some random additions, each week. Please treat me kindly if I’m irregular on this newsletter for a few weeks as I adjust to some life changes, I’m sorry in advance.

What I’m listening to

I saw Enhypen last week, and still am reliving the glory that is Go Big or Go Home. I just really, really fucking love this song.

I did not really have many expectations for Jini’s solo album, to be honest, but the former NMIXX member has one of my favorite b-sides of the month, and maybe potentially the year. Her EP, An Iron Hand In A Velvet Glove, in general is a very enjoyable pop listen, but I think I’ve had Here We Go Again on repeat all week in a way that hasn’t hit me a lot this year. It’s at first glance pretty straightforward, but then there’s some great, quirky vocalizing and alteration going on especially in the chorus, and the funky strings then jumping into faded synths… I love this far more than I expected to coming into this album.

Excited to see what’s next for her after this, and kind of hope she switches to promoting this over the single C’mon featuring Aminé (!?!?), which I’m sadly not as enthralled by. There’s a lot of money in this release, and there seems to be at least some decision makers who think that Jini is a big bet for K-pop domination, and potentially American crossover, so I think that’s pretty fascinating, and something to keep an eye on.

I’m also kind of confused… Like… I know it’s pre-debut but is this NCT Japanese team called “NCT New Team” or they’re just not sharing what the team name is yet… Anyhow, pleasantly surprised with this song. Feels very early NCT Dream, which makes a nice connection to the earlier teams, while still feeling very 2023 with some of the sleek production choices. Also, as someone who didn’t watch the pre-debut show, it’s a nice touch to label their jerseys.

On a more somber note, I’ve been thinking a lot about Akmu and Lee Sun Hee’s Hey kid, Close your eyes lately.

What you’re listening to

Paid subscriber Jessica Tang wants to rec two songs, Honestly by Limelight and Lucid by Odd Eye Circle.

Re Honestly, Jessica says: “My favorite thing about this song is how the hook at :54 repeats in different ways. At :54, it's a dance break with few lyrics. At 1:55, it plays behind a post-chorus. Then at 2:31 it plays behind the main chorus for the finale of the song. Also I've heard a rumor that Mashiro and Yeseo from Kep1er will join Limelight when Kep1er disbands, which is crazy to me. Has this ever happened before - where a group is recording songs knowing that they're going to add two more-famous members in the future?”

So about that question, yes, that’s actually quite a common rumor when it comes to Produce and Boys/Girls Planet show contestants! Usually groups don’t debut until after the members are done with their time in those MNET-produced groups (like Le Sserafim, for example, debuting with two former IZ*ONE members), but it’s not the most surprising rumor. There were rumors, for example, that Choi Yena would join Everglow, though obviously that didn’t end up happening as she’s a soloist nowadays.

What I’m reading

For the Notes on K-pop bookclub, I’ve been reading Tabitha Craven’s This Is Not a Book about Benedict Bumberbatch, and have been enjoying it immensly!

What I’m watching

Paramount+ released a documentary called Crush about the Halloween Itaewon disaster, and I’m hearing that it is, sadly, not accessible currently in South Korea, and it’s unclear if it’s being blocked for political reasons or streaming rights reasons.  I haven’t watched yet at they time of posting, but it’s on my weekend watch list.