INTERVIEW Profit sharing pits K-pop singers against agencies
K-pop star Kang Daniel has had a legal dispute with his former agency LM Entertainment. Korea Times file
By Dong Sun-hwa
The K-pop scene is brimming with legal disputes.
In 2019 alone, legions of high-profile singers ― including Kang Daniel, formerly of defunct boy band Wanna One, and Minzy, an ex-member of disbanded girl group 2NE1 ― have taken legal action against their management companies, seeking contract suspension.
Legal battles like these have a lengthy history. Since the birth of K-pop in the early 1990s, numerous singers, such as three former members of boy band TVXQ ― Kim Jae-joong, Kim Jun-su and Park Yu-chun ― have filed complaints against their agencies.
Hence, music labels were accused of exploiting singers with “slave contracts.” This refers to a long-term and often abusive contract that does not guarantee freedom or sufficient revenue for the stars.
In 2009, the Fair Trade Commission (FTC) introduced the “standard insurance contract” to combat unfairness and reduce conflicts, offering model guidelines on profit sharing, contract terms and trademark rights, among others. Most agencies and singers today use the standard version for reliability.
Minzy has taken legal action against her agency The Music Works. Korea Times file
Nonetheless, rows keep erupting. For many stars, the profit-sharing issue is one of the biggest reasons behind their legal action. They tend to believe they are not receiving what they deserve from the companies. So should the agencies be blamed again this time?
Not really, according to Ahn Hyeok, a partner at Lee & Ko, who specializes in entertainment law. Rather, the dispute is a consequence of both parties' reckless spending, the lawyer said.
“Both K-pop labels and musicians do not consider cutting costs and end up losing total revenue that they share,” Ahn recently told The Korea Times at Lee & Ko's headquarters in Jung-gu, Seoul.
“A company deducts its spending on a singer from the profit he made. Then it shares the remaining amount with the star, according to the ratio they set when clinching the contract. But then, the singer airs a grievance, saying his share is not as big as he anticipated.”
Ahn said the stars often forget how much the agency spends on them. In fact, the company does virtually everything ― even buying a water bottle ― on the star's behalf.
“A few years ago, an entertainment company chief told me that many Korean celebrities do not bring any cash or credit cards with them when going out,” he said. “Their managers pay all for them. Most agencies still pursue this 'trend,' without trying to reduce expenses.”
The Hyundai Solati Moving Hotel, one of the vans celebrities ride. Courtesy of Hyundai Motors
A conversion van, or starcraft van, a luxurious, full-sized vehicle provided to most K-pop idols, also is costly. The lawyer said the van can require more than 36 million won ($31,000) of fuel a year.
But a label has no reason to cut the expenditure, because it merely deducts the spending from the star's income.
The companies' “babysitting” of singers goes back to the 1990s, when Bae Byeong-soo, manager of late actress Choi Jin-shil, made her a star with his “head-to-toe” management style. Following this success, his management method has long been thought of as a success formula.
“But now, both singers and companies should take an economical approach to increase their share and prevent clashes,” Ahn said.
Kang Jin-seok, an entertainment lawyer at law firm Yulwon. Courtesy of Kang Jin-seok
Kang Jin-seok, an entertainment lawyer at law firm Yulwon, based in Seocho-gu, Seoul, said another cause of dispute was both parties' lack of understanding of the contract terms.
“The number of musicians seeking legal counseling for the contract has risen, but many still skip the process, mostly because they are desperate about joining the company,” Kang told The Korea Times.
“Hence, they do not fully grasp the meaning of each term. This results in a difference in understanding between the singer and the agency. In particular, when it comes to cost deduction, the two are often at odds about who should be responsible for the cost according to the commitment.”
Since the standard insurance contract is a general guideline, it does not specify how to cope with all costs and cases. But it is challenging to make it more clear-cut, as it should be used by celebrities from different backgrounds. Thus, dozens of agencies require the stars to sign an “annex” to discuss issues unmentioned, which triggers another problem.
“If a label lacks understanding on the contract, it mistakenly includes terms in the annex that are inconsistent with those in the original contract,” Kang said. “For instance, the company states that a star cannot get payment until the firm reaches a break-even point.”
Kang underscored that education could help.
The Ministry of Culture, Sports and Tourism provides education to help people better understand contracts. gettyimagesbank
“The Ministry of Culture, Sports and Tourism offers courses to facilitate the comprehension of the contracts,” he said. “They educate industry insiders through specific cases.”
Ahn also presented a solution, saying agencies and singers should first strive to abide by the contract.
“Then, they have to closely communicate with each other and leave written 'evidence' of their communication through email or online chat,” he said. “They should use clear and straightforward words to discuss the cost or other issues, so the proof can be valid.”
Ahn also said the government needs to keep an eye on idol trainees or obscure celebrities who are more vulnerable to mistreatment.
“Although many entertainment companies have been working to reform themselves, some idol trainees and obscure singers are still victims of unfair contracts,” Ahn said. “The government should continue to scrutinize whether their rights are properly protected.”