Record Giant HYBE Audits 'NewJeans' Label as Infighting Returns to K-pop

K-POP - SEOUL  - South Korea's largest music company is auditing the management of one of its labels as it suspects they are planning to break away, the latest case of infighting in K-pop, one of the world's most popular and profitable music industries.

HYBE (352820.KS) houses multiple labels behind globally renowned groups including BTS and Seventeen, and its shares fell nearly 8% on Monday largely due to the internal dispute.

A HYBE representative told Reuters in an email on Wednesday that the audit was launched earlier this week on suspicion that Min Hee-jin, CEO of sub-label ADOR, was plotting to become independent and take over management rights of the artists the label represents.

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Min is credited with creating the popular girl group NewJeans, and together with other executives owns a 20% stake in ADOR. NewJeans is set to release a new single next month.

Earlier this week, Min denied HYBE's allegations in a statement to local media and accused the company of infringing on her intellectual property rights.

The law firm representing Min declined to comment.

The dispute is one of several to hit the industry in recent years as it continues to grow globally.

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Last year, the takeover of SM Entertainment (041510.KQ) by South Korean social media giant Kakao (035720.KS) triggered an internal battle over management.

Fifty Fifty, a girl group behind TikTok hit "Cupid," also saw their career fizzle out following a legal battle with its agency Attrakt in 2023.

The K-pop industry is suffering "growing pains" that are affecting its shares in the short term, said Soo-jin Lim, an analyst at Daishin Securities.

"After going through this process, things might move in a direction where agencies can better protect their artists and intellectual properties," Lim said.

In a report on Tuesday, analyst Oh Ji-woo at eBest Investment & Securities, said HYBE shares will be volatile for some time following the audit.

K-pop is one of South Korea's biggest cultural exports, accounting for nine out of the 10 most-sold albums in 2023 and selling tens of millions of units, according to the International Federation of the Phonographic Industry (IFPI).