SM Entertainment responds to INB100 in response to "unfair terms" in EXO-CBX deal

Regarding INB100, the agency of EXO subunit CBX (Chen, Baekhyun, Xiumin) stating that they cannot pay SM Entertainment (hereafter SM) 10% royalties on personal activities, SM dismissed the issue as "tampering."

In an official statement released today, SM clarified, "The exclusive contract between CBX and SM is still valid, but an agreement allows CBX to engage in personal activities through their private corporation, paying SM 10% of those earnings. Since the agreement, CBX has freely pursued various personal activities through their private corporation."

SM explained that the 10% royalty on personal earnings was a standard established during a previous contract dispute with EXO's Chinese members, and it was enforced through court arbitration.

SM also claimed that after INB100 became a subsidiary of One Hundred, it sent a notice indicating that it no longer needed to honor the agreement. According to SM, CBX wants to retain the rights and benefits of being EXO members without fulfilling their obligations.

SM highlighted issues related to the provision of settlement data, emphasizing that such data and individual activity details are proprietary and confidential. These details are negotiated individually with each artist, and disclosing them could have significant repercussions. SM expressed concerns that sharing copies of settlement data might lead to unauthorized third parties accessing them.

Regarding the claimed 5.5% distribution fee, SM clarified that this was a supportive gesture to help CBX negotiate better with distribution companies and that SM had no authority to set such rates. During the agreement process, CBX had requested the inclusion of the distribution fee condition, but SM explained that it was not within their power and excluded it from the final agreement.

SM also mentioned that when CBX's preferred distribution fee adjustment became difficult, they allowed Baekhyun's solo album to be released through CBX’s private corporation and covered the cancellation fees for Baekhyun’s Japan concert. SM asserted that CBX hasn't suffered any specific losses.

SM announced its intention to take legal action against CBX, stating that it would not tolerate CBX's repeated invalidation claims of both the exclusive contract and the subsequent agreement. They emphasized their commitment to EXO's group activities and criticized the misleading public statements by CBX's legal representatives. SM vowed to respond legally and uphold its principles against what it views as tampering with external parties.

Below is SM Entertainment's full statement:

"Regarding today’s emergency press conference held by INB100 about Chen, Baekhyun, and Xiumin (hereafter CBX), we express our deep regret over both the manner and content of the conference and wish to convey our position as follows:

Tampering Allegations Against MC Mong and Cha Ga Yeon

First and foremost, we want to clarify that the core issue lies in the improper inducement (tampering) by MC Mong and Cha Ga-yeon towards our artists. For a long time, they have been approaching several of our artists with valid exclusive contracts. Subsequently, CBX began seeking ways to nullify their re-signed contracts. Despite this, we listened to their concerns and eventually accepted CBX's request to conduct independent personal activities. Although our exclusive contract with CBX remains valid, we allowed them to operate through a private corporation, agreeing to receive 10% of the corporation's revenue. We made this agreement despite having no obligation to amend the valid contract because continuing a legal dispute with CBX would not be fair to other EXO members dedicated to the group's activities and to EXO's fans.

INB100’s True Ownership Revealed

As confirmed today, CBX's INB100 is not independently operated by CBX but has become a subsidiary of MC Mong and Cha Ga-yeon. While we had suspicions, today's press conference has confirmed the tampering. Last year, when we signed the agreement with CBX, we issued external messages to protect EXO, disregarding the tampering. Today’s press conference leaves us deeply disheartened. We hope our sincerity towards EXO is no longer distorted.

CBX Seeking Benefits Without Fulfilling Obligations

Following the agreement, CBX has independently engaged in contracts for music distribution and other activities and participated in concerts and broadcasts through their private corporation. The 10% revenue payment from personal activities was a reasonable standard set during a court-mediated dispute with EXO's Chinese members, which was also applied to the CBX case and agreed upon by both parties.

INB100’s Breach of Agreement

INB100 has since become a subsidiary of MC Mong and Cha Ga-yeon and sent us a notice indicating they no longer need to adhere to the agreement. This shows that CBX wants to enjoy the rights and benefits of being EXO members without fulfilling their obligations. CBX has repeatedly ignored legally binding contracts.

After receiving the notice from INB100, we chose not to address the issue immediately, considering the activities of other EXO members, such as D.O., Chen, and Suho, with their individual albums, concerts, and projects. However, CBX has distorted even our efforts to avoid disrupting these activities.

False Claims About Settlement Data

Since EXO's debut, we have conducted semi-annual settlements before the revision of the Cultural Industry Development Law and monthly settlements afterward. Artists have always had access to their income distribution and expense details, and upon request, could review additional accounting records. CBX had never raised issues about the settlement data until April 2023, when they suddenly demanded all settlement documentation, aiming to nullify the exclusive contract. This demand was not about settlement data but an attempt to invalidate the contract.

We initially refused to provide copies of settlement data, fearing they might end up with unauthorized third parties. The detailed activity records and settlement rates are protected as SM’s confidential information and trade secrets. Disclosing these could have significant repercussions. The core issue in the CBX case is tampering, and we emphasize that we are not obligated to comply with demands rooted in improper intentions. We will address settlement issues legally while ensuring confidentiality.

Efforts to Protect EXO Distorted

The claim about unfair distribution fees is false. During the dispute, we offered to support CBX in negotiating better terms with distributors, but we do not have the authority to set other distributors’ fees. CBX requested this condition in the agreement, but we explained our lack of authority and excluded it. Despite our efforts, when CBX’s desired fee adjustments became challenging, we allowed Baekhyun’s solo album to be released through their private corporation and covered the cancellation fees for Baekhyun’s Japan concert.

Additionally, CBX and INB100 secured favorable contracts with other distributors, ensuring smooth music distribution, meaning CBX hasn’t suffered any particular loss. In today’s press conference, CBX’s legal representative emphasized their independence and responsibility. However, their repeated invalidation claims against the contract and agreement are unacceptable.

Legal Action Against CBX

We will not tolerate CBX’s repeated claims to nullify valid contracts for personal gain. Despite CBX’s attempts to justify their actions through public opinion, we will respond calmly and legally, holding CBX accountable through the courts."