The "multi-label" system introduced by HYBE exposed its vulnerabilities through the ADOR–NewJeans turmoil. While it has the advantage of expanding diversity and dispersing the revenue structure, it revealed the limitation of high dependence on artists belonging to each label. Depending on market reactions or disputes, the amplitude of each label's revenue swings widens, underscoring the problem of unstable performance.
According to the industry on the 3rd, the NewJeans side began work on drafting a statement of reasons for appeal on the 30th after losing the lawsuit seeking confirmation of the validity of terminating the exclusive contract. NewJeans belongs to ADOR, a HYBE label, and the court ruled that the termination of the exclusive contract is valid. ADOR says it will support NewJeans' activities, but as the dispute drags on, the timing of their return has become uncertain.
The industry views this as a case that showed the structural limits of the "multi-label" model. It is a method in which one company (HYBE) holds several independent music agencies and production companies and manages each artist or intellectual property (IP). HYBE generates revenue from seven key labels, including BigHit Music, which houses BTS, and ADOR. All are independent corporations in which HYBE holds more than half of the equity.
◇ADOR's first-half revenue evaporates 72% on-year… HYBE stands firm
The problem is the high dependence on each label's artists. Except for KOZ and Pledis Entertainment, HYBE labels are built around one or two groups. ADOR also has only NewJeans. If an activity hiatus occurs, the label's revenue and value are bound to take a direct hit.
In fact, ADOR's first-half revenue this year was 17.2 billion won, down 72% from 61.4 billion won in the first half of last year. New advertising and concert contracts have also been disrupted, making it hard to expect revenue in the second half. HYBE has the capacity to absorb losses, but individual labels can be easily shaken under this structure.
The multi-label model also has the advantage of boosting a company's competitiveness with different genres and concepts and broadening the diversity of the industry ecosystem. If each label staggers its activity periods, HYBE, as a de facto holding company, can secure a stable revenue flow. Labels' revenue and operating profit are reflected in HYBE's consolidation financial statements and affect overall results.
Despite the ADOR–NewJeans situation, HYBE posted 1.2062 trillion won in revenue and 87.5 billion won in operating profit in the first half of this year. It diversified its revenue structure with BigHit Music at 189 billion won, Pledis at 163.1 billion won, and Source Music at 387.4 billion won. Thanks to this, it recorded solid results despite a hiatus by NewJeans, which had emerged as a core IP.
◇"A holding company's involvement in management is legal… A clash arising during a corporate structure shift"
Balancing creative autonomy and managerial oversight to reduce unexpected activity gaps is cited as a task for the multi-label model. It is also why the ADOR–NewJeans situation is seen as a transitional phenomenon that emerged as entertainment companies are reorganized into corporate structures.
A lawyer who has advised on numerous entertainment cases said, "If a holding company determines there are problems in a subsidiary's management, it can look into them and even replace the leadership, but this case grew as issues around artists' and fandom sentiment and creative autonomy became entangled," adding, "If the balance between label autonomy and the head office's management system is not achieved, creative direction will be distorted or internal conflict will recur."
HYBE CEO Lee Jae-sang said at the shareholders meeting in Mar., held after the ADOR–NewJeans situation erupted, "The value of the multi-label system is firm," and added, "We will focus on expanding the established multi-label system worldwide to embed multi-home and multi-genre."
◇Will the "support without interference" principle of the multi-label model be realized
Some say the "HYBE-style multi-label" system, in which the influence of HYBE Chair Bang Si-hyuk is not excluded, needs change. If a chief producer intervenes in the production direction of affiliated labels, controversy over overlapping concepts among groups may arise. Kakao Entertainment, which operates multi-labels as independent corporations like HYBE, is said not to offer opinions on music to EDAM Entertainment, which houses IU, or Starship Entertainment, home to the group IVE.
An industry official said, "The original intent of the multi-label model is for agencies to focus on creation, such as discovering and producing artists, while the parent company that owns them handles non-creative areas such as distribution and finance."
The official added, "Kakao Entertainment also does not intervene in label creation partly because it does not have a K-pop master like Chair Bang Si-hyuk," but noted, "Given that Bang openly reveals participation in producing Source Music's LE SSERAFIM and Belift Lab Inc.'s ILLIT, labels under the system are not free from Bang's influence."