SM Entertainment founder Lee Soo Man could receive more than 50 billion won (approx. $37 million) in royalties over the next decade despite ending his producing contract with the K-pop agency, according to shareholder activist fund Align Partners.
On February 9th, Align Partners disclosed documents showing that Lee’s private company, Like Planning, remains entitled to royalties under a separate agreement, even after its producing contract with SM was terminated on December 31st, 2022.
Under the agreement, Lee would receive 6% of revenue from previously released music until 2092 without providing additional services, along with 3% of management revenue through 2025. Align Partners estimated that payments could exceed 40 billion won in the first three years and 50 billion won over 10 years.
The activist fund, which had pushed SM to end its longstanding arrangement with Like Planning, argued that continued payments could constitute improper financial support for a related party and a breach of directors’ fiduciary duties. It called on SM’s board to halt the payments.
SM CFO Jang Cheol Hyuk acknowledged shareholders’ concerns but said the company could not terminate the agreement without Lee’s consent.
“We understand shareholders’ dissatisfaction, but the current contract remains valid and must be honored,” Jang said.
Lee stepped down from SM’s board in 2010 but continued collecting royalties through Like Planning. The company received approximately 148.6 billion won from SM between 2000 and 2022, equivalent to roughly 35% of the agency’s operating profit during that period.
The dispute comes amid a broader power struggle over SM’s future. Earlier in February, co-CEOs Lee Sung Su and Tak Young Jun announced plans to replace Lee’s exclusive producing system with a multi-production structure featuring five production centers and independent labels.
Meanwhile, Kakao agreed to acquire a 9.05% stake in SM for approximately 217.2 billion won ($173 million), making it the company’s second-largest shareholder. Lee challenged the deal in court, arguing that the issuance of new shares and convertible bonds to Kakao was unlawful.
Meanwhile, speculation emerged that HYBE Chairman Bang Si Hyuk could step in as Lee Soo Man’s “white knight” through a tender offer for SM shares. Responding to a Korea Exchange inquiry on February 9th, HYBE confirmed it was considering acquiring a stake in SM, including through a tender offer, but said no decision had been finalized.
>> Lee Soo Man Returns to K-Pop With Two New Groups, A2O SOUL and A2O LITE
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