K-pop: Korean company SM Entertainment ends its production agreement with Lee Soo-man

SM Entertainment, one of Korea’s leading entertainment agency groups, announced on Friday that it will be terminating a contract with Lee Soo-man a year early at the end of 2022.

“SM Entertainment [..] will sever ties with its chief producer Lee Soo-man at the end of this year,” Yonhap News Agency reported on Friday.

Lee was one of the key figures in the early discovery of Korean pop talent in the mid-1990s, developing the agency system that hatched many idol groups and remained one of the biggest names in the direction of the K-pop industry. The four main agencies are brands in their own right, put on gigs for their stables of performers, and maintain a much more visible presence than music management companies in most other countries.

Lee has been behind the success of acts such as BoA, TVXQ, Girls Generation, Shinee, EXO, Super Junior, NCT and aespa.

SM Entertainment’s board of directors said on Friday it would prematurely end an agreement with Like Planning, a music production company wholly owned by Lee. SM Entertainment outsourced production and paid millions of dollars in royalties a year to Like Planning.

The arrangement was criticized by institutional shareholders, including Align Partners Capital Management, as undermining SM Entertainment’s profitability and shareholder value.

Lee is also the largest single shareholder of publicly traded SM Entertainment with an 18% stake.

The rift surfaced a month ago and when it appeared that Lee might be looking for the exit himself, SM Entertainment shares jumped around 20%.

“With the production system established for 25 years, Lee is working well, he is confident that good junior producers will get by without too much difficulty. He added that it is also reasonable to humbly accept the advice of minority shareholders to step down (as chief producer),” SM Entertainment said last month.

Separately from the Like Planning line, Lee has been in talks for over a year to sell his stake in SM Entertainment. Earlier this year, it was reported in Korean business circles that CJ ENM had become the last remaining candidate to buy Lee’s stake in SM Entertainment. But no agreement has been announced or reached.

It’s unclear whether the formalization of the Like Planning-SM Entertainment split makes it more or less likely that Lee will divest his SM Entertainment shares.

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