Lies about the contract

There are many wrong and/or twisted information on the web regarding the contract. I've visited a few sites to get information about it, and found out that most of the blogs and fan sites have translations from Korean fan sites that are biased towards JYJ.

Here are some examples from a site

I. TVXQ has received $0 for their album sales prior to July 2008, and only a negligible amount after that date.

This info is accurate, but what it fails to show is WHY they didn't make any money for the album sales. The truth is, when an artist sells less than 400,000 copies of CD's, there's no profit to take. There's a link below that explains why. Check it out.

Prior to the fifth and final round of amendments on July 1, 2008, the Contract read that for any album or single with sales not exceeding 500,000 copies, SM would be entitled to 100% of the profits, leaving the members with nothing. From the time of TVXQ's debut in late 2003 and until TVXQ's release of their 4th Korean album "Mirotic" in September 2008, no Korean album had sold more than 500,000 copies. Therefore, prior to July 2008 TVXQ has had absolutely zero income from their album sales.

This info regarding the contract is also true, but if SM's 100% profit equals $0 or close to that, then there's nothing to complain about, right?

On July 1,2008, SM amended the Contract to give each Member 1% of total sales for each album that sells over 200,000 copies. For any albums that sell fewer copies, the members are to receive 0.6% to 0%. SM has not honored even these outrageous terms, as it has not paid TVXQ a single cent since February 2009.

It is true that JYJ didn't get paid any money for their activities in 2009, but again, it doesn't explain why they didn't get paid. I'll elaborate on it on yet another post, but simply put, SM asked JYJ to come in to get paid, but JYJ hasn't complied yet, so you can't blame SM for that (according to the court testimonies from both sides). SM is ready to pay them so come and get it. *

In sum, SM has kept 100% of all sales that TVXQ has generated with the sales of their albums and singles prior to July 2008, and has kept 95% or more of the sales after that date.

This is such an ignorant claim, when you sell a CD for 10 bucks, and if TVXQ gets paid 5%, which is 50cents, does SME profits $9.50? Of course not. Who pays for the cost of producing and selling CDs? Promo fees? Music Videos? The fact is, the remaining 95% of sales are mostly used up to pay for the various costs. Check out this link to see how much a US artist who sells millions of CD's make. Guess what? A million seller makes less than 1% of sales from CDs.

http://entertainment.howstuffworks.com/music-royalties6.htm
 

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II. TVXQ has received $0 for the sales of concert DVDs and albums featuring recordings from such concerts.

Under the Contract, the Members are not entitled to receive any share of the profits generated from sales of concert DVDs and "live" albums.

This is true. When you work out a contract, you give up some, and gain some. This must be one of those "give up" section.

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III. TVXQ has received $0 for their appearances on TV programs.

Under the Contract, Members are not entitled to receive any share of the profits made through their TV appearances if the appearance is of a temporary nature. As all programs on which TVXQ appeared have featured the Members as "guests"and therefore by nature have been temporary, SM has kept all profits that TVXQ has generated from these TV appearances.


Again, unless you know how much they get paid as a guest, you can't say if it's right or wrong. I know that the appearance fee for a weekly music show is about $260.00 (sourced from news articles). WOW!!! SME kept all of $260.00, but wait, aren't there operation costs to appear on TV? Who pays for that? I'm sure other TV shows pay more than that, but I highly doubt guests guest appearances are paid much. Most of guest TV appearances are for promotional purposes, and you don't get paid much accordingly. That's why when two sides signed the contract, they agreed to use those profits as costs of doing promotion. 

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IV. For all other possible sources of revenue, SM subtracts from the total revenue all expenses, including salaries of other staff, stage preparation expenses, rent, travel expenses, food expenses, and the like, then gives TVXQ only a fraction of the remaining amount.


Yup, SME deducts those costs from gross revenue, then gives TVXQ a fraction of the pure profit. Wait until you find out what that fraction is.

As for all other sources of income, the Contract states that TVXQ is entitled to varying percentages of the "net income." The Contract defines "net income" to be the amount remaining after the applicable "operating costs". The "operating costs" are defined to include such expenses that are traditionally expected to be covered by the employer, including but not limited to 1) salaries of the staff (manager, clothing coordinators, makeup artists, dance crew, and the like), 2) performing stage preparation costs, 3) living expenses, including rent and water/electricity bills, 4) travel expenses, including plane ticket costs, 5) meal expenses, and the like.



Now this is totally twisted. The above statement say that employers normally pay for the costs, really? Let me work for an employer who pays my electricity bills & living expenses. Those sound like normal operating costs to me. And the way it works is, you deduct those operating costs, then from the NET PROFIT, SME and TVXQ takes their share. It also fails to mention how they share the profit.

The distribution works like this according to the contract:


SME:TVXQ = 40:60 (Korean activities)
SME:TVXQ = 30:70 (Overseas activities)


Suddenly those figures look pretty good, doesn't it? The fraction of the profit is 60% & 70%!!! SME gets 40% & 30%, and we all know most of TVXQ's activities were in Japan, so this contract is actually pretty good!!!


Even after all these "operating costs" are deducted from the net income, the Members are only entitled to a small percentage of the remainder while SM keeps the rest.

Yup, small percentage. Like I said above, 60% to 70%. SM keeps the rest, 30%-40%


So like I listed above, not everything is as easy to figure out as it looks. You need to understand the industry, and you need to read every single line of the contract to figure out what's going on. I will add more info to this post as I find more info, and update the links with more detailed explanations.

Also, don't forget, there are other sources of income that they didn't list, like commercials, picture books etc.

Those sites basically list sections of the contract that LOOK bad, and once you analyze them, even those are not bad. So to really know if a contract is good or bad, you need to read the WHOLE THING!!!