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On Monday, October 21, the Korean news outlet DealSite reported that HYBE Labels allegedly inflated the sales figures of the agency's latest gaming business subsidiary, HYBE IM's revenue. Many industry insiders speculated that HYBE reportedly used up to 4 billion won ($2.9 million) from ADOR.
According to industry sources, on October 17, this news was reportedly revealed through the internal transactions between ADOR and HYBE IM. At the end of the third quarter of this year, in September, the two agencies made a transaction of 4.2 billion won. While the 4.1 billion won sales belonged to ADOR, the rest, 900 million, was accounted for by HYBE IM.
The explanation behind this transaction was reportedly that both agencies are connected to gaming royalties. Regardless, suspicions began to rise in the industry. Many began to speculate that the label might be trying to pump up its revenue by leveraging ADOR, its subsidiary, particularly using the commercial success that NewJeans has garnered.
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What caught the eyes of the insiders was the nature of the transaction. Ideally, in a case where HYBE artists are seen appearing in a game, the subsidiary recognizes the copyright royalties and other purposes. However, the transaction between ADOR and HYBE IM was allegedly the opposite. In August 2023, HYBE IM updated its services and featured NewJeans in its game, Rhythm Hive.
Therefore, given that NewJeans is housed under ADOR and the gaming subsidiary used the agency's intellectual property, the revenue should be recognized by ADOR. However, given that the transaction reportedly seems like ADOR used HYBE IM and is paying for the same, speculations began to spark.
Market insider comments as HYBE Labels gets accused of inflating its revenue for its new gaming subsidiary through NewJeans' salary
Following the speculations that landed on the internet, DealSite put forth a market insider's opinion of HYBE Labels' current situation. The insider expressed that the label is supposedly trying to generate revenue through unclear transactions, not only from ADOR but also from its other subsidiary, HYBE IM.
The insider also added that this creation of revenue through unclear transactions could later affect the artists housed under the label. Therefore, this practice, if continued, would reportedly result in a reduced amount of compensation for the artists. The market insider stated,
"HYBE is already trying to generate hundreds of millions of won in quarterly sales from ADOR, yet the still-establishing HYBE IM is recognizing revenue for unclear transaction purposes. If this structure continues, it could lead to issues such as a reduction in the amounts that artists should be compensated."
According to DealSite, in response to the speculations and media reports, a HYBE Labels representative said:
"It is difficult to confirm specific details regarding the internal transaction disclosures."
HYBE Labels neither confirmed nor denied the accusations raised against the recent transactions between its subsidiaries. On the other hand, there has not been any confirmation regarding the legitimacy of the transactions and the agency's motives and methodologies behind its alleged sales inflation.
