NewJeans Faces Potential Contract Termination Penalty Estimated at Up to 620 Billion Won

The girl group NewJeans has sent a notice to their agency, Ador, indicating their intention to terminate their exclusive contract, raising significant interest regarding the potential penalty they may incur. Previous estimates from Min Hee-jin, the former CEO of Ador, and other board members suggested that the penalty could range from 450 billion to 620 billion won. This penalty is the amount an artist must compensate their agency if they terminate their contract before its expiration.

According to KakaoTalk conversations obtained by Chosun.com on the 24th, Min and two former Ador executives discussed the potential penalty amount in March if NewJeans were to terminate their contract with Ador. The conversations revealed that they calculated the penalty to be between 450 billion and 620 billion won. These discussions were made public during the legal proceedings regarding a request for an injunction against HYBE, which Min initiated.

During the conversation, one of the executives estimated that if the average monthly revenue per member was set at 200 million won and the termination date was considered to be the end of June, the remaining contract period would be 62 months. This would result in an individual penalty of approximately 12.4 billion won per member, totaling 620 billion won for all five members. Min responded, questioning the accuracy of the figure, to which another executive suggested that the average monthly revenue should be set at 200 million won per person. The first executive clarified that they were calculating based on settlement amounts, estimating that the revenue per person would be between 150 million and 200 million won, leading to the penalty range of 450 billion to 620 billion won.

When calculated with an average monthly revenue of 200 million won, multiplying by the remaining contract period of 62 months results in a total penalty of 1.24 trillion won per member. Multiplying this by the five members leads to the maximum penalty estimate of 620 billion won.

The executive further expressed concerns, stating, "No matter how I think about it, the damage from the members leaving would be too significant for us. We would have to forfeit past albums and all contracts with brands would remain with Ador."

This estimation aligns with industry expectations regarding NewJeans' potential penalty. According to the Fair Trade Commission's standard exclusive contract, the penalty is calculated based on the average monthly revenue over the previous two years multiplied by the remaining months of the contract. This is because the penalty reflects the expected revenue the agency would lose during the remaining contract period.

According to the Financial Supervisory Service's electronic disclosure system, Ador's revenue last year was 110.3 billion won. Considering that NewJeans debuted in July 2022 and that the typical contract duration for K-pop idol groups is seven years, it is estimated that they have about five years remaining on their contract. Thus, industry insiders estimate that NewJeans' penalty could range from a minimum of 400 billion won to a maximum of 600 billion won.

Legal experts predict that if NewJeans proceeds with a lawsuit to terminate their contract, it may be challenging to prove Ador's liability. Attorney Jo Kwang-hee from Law Firm Won stated, "Given NewJeans' demands, it is unclear what specific terms of the contract Ador has violated. If the court does not find sufficient grounds to suspend the contract's validity, NewJeans' contract will remain in effect." He added, "Most of the demands in the notice pertain to HYBE. While it may seem that HYBE and Ador are one entity, they are legally distinct corporations. NewJeans cannot terminate their contract with Ador simply because HYBE has made mistakes."

Jo also noted, "The fact that NewJeans calculated the financial implications based on leaving the company could give the impression that NewJeans and Min are on the same team, which may raise concerns about potential pre-contact (tempering) issues."

In response, Min's team clarified during the injunction proceedings that the estimation of damages was a rough method for assessing Ador's corporate value. They emphasized that Ador's management was also concerned about the potential damage from the members' departure and that there was no intention to terminate the exclusive contract between Ador and NewJeans.

Previously, on the 13th, NewJeans sent a notice to Ador stating that if their demands, including Min's return as CEO, were not met within two weeks, they would terminate their exclusive contract. However, with Min resigning from her position as an internal director on the 20th, her return has become impossible, making it unlikely that NewJeans' demands will be accepted by the 27th.