This is my interpretation of various clauses of the contract.
It's basically saying the contract is exclusive, TVXQ only works for SM.
The infamous 13-year term.
If you haven't already, read my post regarding the 13-year term.
It also shows that the original term was 10 years.
Clause 1~3, 8
There's not much to talk about here.
Explains how the profit is distributed after the contract expires.
This is one of the controversial sections used to bash SM.
When you glance over them, the clauses actually look pretty bad. SM owns every conceivable rights to the contents created by TVXQ, and contents created for TVXQ. SM has rights to sell, reuse, lend, rearrange, pretty much do anything with them, but SM does not have to pay TVXQ a single pen... oh wait, it doesn't say anything about the loyalty payment!!!
Let's look back at clause 4. It says that TVXQ will get paid for their work even after the contract is terminated, and it will pay according to the terms agreed in this contract. You've seen the distribution of the profits table, if you haven't yet, click HERE to read my detailed explanation. The loyalties are clearly defined there, and they are paid even after the contract is expired.
Many websites out there cleverly leave out this fact, and some of the news/articles/posts even claim that TVXQ does not get paid for their work just because SM owns the rights to the songs.
When you get a job and create a product for a company, it is the company who gets the rights to the product, and there's nothing different here. In most companies, you don't even get paid for the sales, but in TVXQ's case, more the company uses the product with the rights given by above clauses, the richer TVXQ gets. Only negative with such clauses is the restriction to the artist's artistic freedom, but I'd say you shouldn't have auditioned for an entertainment company like SM if that's what you wanted. There are other paths a musician can take.
Don't see any problem here since the artist has a veto power.
I'll skip this part. Nothing too important here, and the profit distribution is already explained.
There are articles that claim TVXQ pays for operating costs from their own pocket, but this section clearly shows that's not the case. I mean it's not even funny that there are people who believe such contract even exists.
The operating costs are first deducted from gross revenue to calculate the net profit, and SM and TVXQ splits their shares from that amount. Pretty much a standard way of calculating the net profit, and you don't even have to have a degree in economics to see that.
The operating cost sections are from the original contract, so it's not part of the current contract (not 100% clear. that part is fuzzy actually), but there's no reason to believe that the method of calculating the net profit is changed since that clause is mentioned in the contract.
Breach of Contract
In my opinion, this is the one part of the contract that may be considered unfair. The damage compensation payment has too much room for manipulation because the amount is not set in stone and the calculation method is kinda vague. Also, there's no penalty clause if SM decides to break the contract, so it is one sided.
On the other hand, I do understand the need for the breach of contract terms to be this way. The way Korean entertainment companies are structured, their initial investment is much higher than American record labels, so the companies need to protect their investment by making it difficult for artists to break the contract.
Also, this clause will only matter if there is a conflict between the two sides. When everything works out well, this clause means nothing. I have signed a few contracts with damage clauses, but I usually don't even know what they are.
There are a couple SM artists who stopped working because of personal reasons.
Kang-In from Super Junior had personal problems, and couldn't continue on with his career. He had problems twice in relatively short period of time, so what SM did was to send him to serve in the military. According to the contract clauses above, he is liable for damages, but I didn't see any news about SM demanding payment. Instead, by serving in the military which he had to go through anyways, Kang-In may have another chance at his career. Two years of time can considerably tone down the negative public opinion, and in Korea, serving in the military is a big premium in the male artist's image.
Another artist is Stephanie from the Grace. She went through injuries, and rehab for about 2 years. Her dream was being a ballerina, so she auditioned and joined the Los Angeles Ballet. Obviously SM didn't object to that since the Grace is making a comeback with Stephanie as a member.
You can see that SM is not an unreasonable company. If the contract was the real problem with CJS, they should have tried to negotiate with SM and improve it instead of filing a lawsuit. According to the CJS lawyer's statement in the court, 3 of them couldn't ask SM because there were the weak. Well, I wonder how the contract was modified 5 times already then. Details of the court sessions will be covered in the future.
When I write about the Korean Fair Trade Commission, I'm going to explain why the damage clauses are written in such way.
Nothing much here
First of all, I'd like to say there's no such thing as a contract that's 100% fair to both sides in this world. Actually, that is why you sign a contract in the first place, to avoid potential disputes by having the rules and agreements on the paper in detail.
Except for Article 11, I don't see anything on the contract that can be considered totally unfair. There are clauses that may look excessive, but anyone who ever signed a contract as an employee knows that such contracts are usually written to mostly protect the employer's interest, but we sign them anyways.
In my opinion, the contract has some clauses that can be disputed, but it is definitely not a SLAVE CONTRACT, at least not enough to break up one of the biggest band in Asia, TVXQ.
BTW, I think every one of you have signed an unfair contract at one time or another. Have you ever gone to a hospital and signed a liability waiver? Now that's a totally unfair contract. Most of them can be summarized as "The doctor is not liable even if you die during the operation."