Tuesday, January 25, 2011

The statements and the cosmetics business

The statements released by HoMin and their fathers show exactly where they stand regarding the cosmetics business. They all point to the cosmetics business as the cause of the lawsuit. As matter of fact, the fathers' statements describe the problems with the cosmetics business in detail, how the conflict really blew up after a meeting between the parents and the CEO of SM. For your information, that meeting was recorded, and SM submitted the transcript of the recording as evidence to the court for their lawsuit.

Some fans dispute the credibility of the statements because it came from HoMin/SM side, but the statements are signed documents released to the public, which puts liability on HoMin and their parents for the contents of the statements. They can be sued for libel for what's written in them, but there was no response from CJS's side regarding the statements, not even a single press release refuting the claims in the statements.

There are also rumors questioning the authenticity of the statements, another attempt at discrediting the statements, but I am not even going to waste keystrokes explaining those since they're all hearsay without any proof. HoMin and their parents never expressed any objection to the statements, so the statements must be from them, period.

Many fans argue that CJS won't break TVXQ just for a measly cosmetics business, but part of the answer to that is in Changmin's father's statement. He quotes a phone conversation with one of the parent talking about listing the cosmetics business on Kosdaq - the Korean Stock Exchange - through backdoor listing.

Backdoor listing is a way for a company to get listed on the stock exchange without satisfying strict and complicated listing requirements by merging the business with an already listed company. It's an easier and faster way to list a company that may not meet the listing requirements.

As long as the company is legit and produces profit, there's nothing wrong with making money from company stocks.

The problem with CJS's cosmetics business was that it was aiming to artificially raise the value of the company by using TVXQ's fame, and although it may not be illegal, it's definitely shady. There's also talk of insider trading by sharing information, which could be considered illegal.
Some fans probably read an article about Korean singer Rain and his involvement with J.Tune Entertainment, and how his reputation took a big hit among Korean investors and general public. Here's an article about it from AllKpop.

I have no idea if Rain was right or wrong, but it is a fact that his reputation was greatly damaged because of his business, and same thing could easily have happened to TVXQ. Rain is still taking the rap from the public because of what happened with J.Tunes.

So how much were the parents looking to get from listing the business on Kosdaq? According to the conversation quoted in the statement, 10's and 100s of millions of dollars, which I think was enough motivation to break the group especially since that money can be earned in lump sum.

Having said that, that still does not give enough reason for SM to interfere with the business. I personally think there's nothing wrong with artists making money off of their fame, and I even think it is their right to do so. Then why did SM oppose the business?

I will write about the reasons in my next post.


  1. i almost forgot about Rain's case and how much it damaged his reputation, i think it was his bad management and lack business sense that result in his failure.

    back to JYJ's case, i think the cosmetic is the main reason why they start having dispute with SM but i also do think there're something with the profit distribution (not according to the contract cause i think the profit distribution of the contract is quite ok). I mean there're maybe some expense extravagance by SM (all companie use this tactic all the time)... We'll never know the true

  2. @Kendalove

    I do think there were problems about profit, after all it's the main/common problem in every company, (and im sure such problems exist in JYP/YG as well)
    but how big they were that JYJ decided to leave SM?

    If SM's profit distribution problem was that severe, Im sure lot of groups would break their contracts... we know that JYJ is the first one to do so (since SES, HOT and even Shinwa finished their contract)

    about their japanese activity, I do believe it cost a lot, and their success at the beginning of their japanese debut wasnt enough to overcome it.
    Everything in Japan (apartment, cars, gas, food, etc etc) cost a lot for Korean currency. even Arashi/JE boys that sold a lot still rode train even years after their debut, and many of them needed few years until they could buy their own apartment. They also dont have to hire morning make-up staffs.

    TVXQ was accomodated with van, drivers, apartment, make-up staffs... (+korea-jap plane tickets, hotels, etc) it sure cost a lot and I believe it was difficult for the company at the beginning of their jap debut since they didnt sell well.

    even purple line, the #1 oricon chart, get the rank because the other artists that day didnt sell better. But according to the number it's only average, less than 30000 if im not mistaken.

  3. Precious... you really know how to keep me in suspense, don't u ?? XDD
    I actually have no clue why SME oppose the business. I thought the SME's reasons is simply because it ll tarnish TVXQ's name. Or maybe this cosmetic business is run by 'mobs/mafias' tht has no credibility in running the business...
    Ok.. I dont wanna add stupid assumptions anymore...

    Waiting for your next post ^^
    Thanks for the update

  4. @ kendalove

    There's always a possibility of manipulating paperwork, but SM is a publicly traded company that gets audited from a 3rd party accounting firm on their finances, so it's a lot more difficult for them to fix the paperwork. SM submitted the finance paperwork to the court as well, so if there's any fixing, the court should find it.

    @ lapis.lazuli

    Yup, people think SM made tons of money from TVXQ, but I believe the break even point for them was sometime in 2008. You also need to consider that their profit was also shared with Avex.

  5. @ ayeopan

    Tarnishing TVXQ's reputation was the main reason, but I am going to post details about it.

  6. @precious, again, thank you for your post. I found myself returning in suspense as to what you will write about.

    And I agree fully to what you said to @lapis.lazuli about SM breaking even just recently. Yoochun said it himself in his song that in the beginning of their career in Japan, they weren't selling that well. Anyone who has experience in business know that you need a certain number of years before you actually break even on an investment, and then after that gain profit out of it.

    Like it or not, SM didn't only invest in them during their trainee years, but they also invest huge amount during their early years as Tohoshinki. Considering the struggle they went through, a shorter contract could probably mean the end of their career in Japan. SM and AVEX are not stupid. If they only have a 2 or 3 years contract, they would be the first group dropped, which would have been a good strategy to cut losses.

  7. @Precious,

    After you finish what you intend to do, maybe you can look into latest financial report from SM. I believe it will give us all some clues. I have seen some fans analyzed it and draw some conclusion from it. Since I don't quit understand that analysis so i won't say anything now.


  8. @lapis.lazuli @Precious

    i agree there're always backdoor expense in every business especially it's showbiz, everybody in SM aware of that as well. I think JYJ want out of SM to get more freedom, more control over their career and more money as well. The cosmetic business, as some point, is a rebellion and the main point why they filled the lawsuit.
    Back to the financial problem, it could be a disadvantage for SM since some expense couldn't be listed in paper and if JYJ can prove it, they're upper hand. I think that's the reason why JYJ demand testify from an SM accountant.

  9. @ kendalove

    Actually that SM accountant was requested by SM as their witness. The judge suggested to put her as a witness for the CJS's lawsuit (remember there are two lawsuits being handled by one court) because the judge determined her testimony will be better suited for CJS's lawsuit since they're questioning the accounting.

    @ hyeonmu
    According to the SM testimony, SES couldn't sign with Avex because of Avex's demand for longer contract. It was an investment for Avex as well, and like you said, they won't sign a Korean group just for a short term.

    @ karenteh

    It will probably take at least 1-2 months before I finish posting everything, and if I decide to post more stuff, I may check out the report.

  10. wait so, what is the state of this cosmetics business? did they or will they possibly make "10's and 100's of millions" from this?

    that is actually a lot of money. i would be tempted too, even if its practically illegal. good thing homin had better sense than me lol.

  11. Hi Precious^^
    Thanks for the update. I'll wait for your next post.

    In the mean time, have you heard about yoonjae.com's closing on Jae's b-day? Many people are bashing the owner of the site as she stops supporting Jaejoong and closes the site right on Jae's birthday. She has her reasons though (as posted on http://yoonjae.com/) but I can't read it ㅜㅜ (I can't even use Google translator for it ㅜㅜ) Can you briefly translate it for me? Thank you^^

  12. Aww I just re-read my comment and ... I don't mean to see you as a machine translator, no! So please translate it if you have time, or feel interested in it.
    If you don't, just ignore that request. You've done a lot for us^^

  13. http://www.koreatimes.co.kr/www/news/biz/2011/01/123_79209.html

    They don't elaborate but they do mention that SME had been in the red until 2008 and only started making a profit 2009.

    I wonder what investments they made got them into so much financial grief in 2008 and prior?

  14. @fye

    I couldn't really say what type of investments SME had been in that had them in the red, but it could just be the natural flow of business. Plenty of companies bounce between red and black all the time, and when it's a company that's open to shareholders, a lot of that relies on how much the stock is valued at; also remember the Great Recession that "began" getting major news attention in '08 affected more than the US, so I wouldn't be surprised if many Korean companies, including entertainment, were going into the red because of that. But that's just a theory; whatever it was though, I can't imagine it was anything shady considering they get regularly audited.

  15. @ S

    I think CJS overestimated the value of the company, and I don't think it's doing that well currently. I really don't know too much about it.


    There could be many reasons for the company to be losing money, but like douknow said, it's not really uncommon. What's important is that the article recognize that SM is one of the exception that's doing really well compared to other entertainment companies. YG even failed to get listed. To be fair to YG, the conditions became more strict because of many failures of other entertainment related businesses.

  16. @ pumpkiepie

    LOL, where do you guys get those news?

    I'll just summarize what's said on that site.

    Basically the owner of the site cannot operate the site any more because s/he decided to support TVXQ only. S/he understands quitting the band for money, business and family, but was disappointed at CJS for betraying their friends to justify their actions and playing victim, and s/he knew it all along.

    There's a message to JJ as well saying that it was really easy to write the post. LOL

    The most funny thing about that post is that there's a link for the complaints (top right hand corner), and it links to JJ's tweet. LOLOL

  17. @ Precious

    HOORAY!!! i want to think of this as a new beginning, as people are starting to learn what is true and who's been telling the real story all along. NICELY DONE yunjae.com

    thanks for translating =)

  18. re: yoonjae.com

    "There's a message to JJ as well saying that it was really easy to write the post. LOL"

    "the most funny thing about that post is that there's a link for the complaints (top right hand corner), and it links to JJ's tweet. LOLOL"

    OMG! rotf! thanks for the summary, Precious.

  19. Wow you guys talked about yunjae sites...in fact besides yoonjae.com (YJP), ERO and HEROJAEJOONG also changed their domain names and support current TVXQ.

    I know ERO was also yunjae fansite but not sure about the other one.

    YJP was active since 2004, considered the largest n the longest yunjae fansite. They knew what happened all along but still took them 2 years to make this decision. YJP will comeback on 6th Feb, for sure they will change their domain name.

  20. Hi Precious,

    Thanks for the summary. I don't know how I should feel after hearing all these things. I'm glad that, as you say, the truth will reveal itself eventually. I believe in Yunho and Changmin from the beginning. It's just that it's hard to accept JYJ didn't dream the same dream with Homin and they are receiving consequences for what they've done.

  21. @ precious: thanks for the summary.At first i thought it was a hoax, since its not like it...

    @ S : I agree w/ u :)

    @ karenteh: Really ??!! Even HEROJAEJOONG support current tvxq ??!! Wowww... now thats awesome! I check EROYJ site and yes... the domain has gone... Do u know whts the new name for their site now ?

  22. @ precious,pumpkiepie,karenteh
    tks abt those fansite infos. glad to know there are some sites still to support HoMin!

  23. @ adrenalinss
    there are some sites STILL to support HoMin??
    :) I think so many new fans and websites're coming to support them more and more

  24. @ nouka
    Notice that adrenalinss' post was made in January. With TVXQ's comeback, now there are more supporting sites popping up everywhere like you say. :)

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