How HYBE’s Legal Victory Over NewJeans/NJZ Could End Up Costing the Company

On Sunday (March 23), two days after a South Korean court ruled that ADOR, an imprint of K-pop giant HYBE, retains the right to manage the groundbreaking girl band NewJeans, the five-member act performed its first and possibly only concert in Hong Kong under a new moniker, NJZ — a result of its attempt to break free from the label. After debuting a new song, “Pit Stop,” the group announced to the sold-out crowd that it was going on hiatus “out of respect for the court’s decision.”

The pronouncement added another twist to a nearly year-long battle between HYBE-owned ADOR and its biggest act, who allege they were mistreated by the label. (ADOR disputes these claims.)

It’s a fight that could have industry-wide ramifications. The country’s five largest pop music organizations argued at a press conference in February that if NewJeans/NJZ was allowed to break its contract with HYBE/ADOR, it could “break the K-pop industry from the inside,” according to Seoul newspaper Korea JoongAng Daily.

A separate lawsuit to determine if NewJeans/NJZ can legally terminate its contract with ADOR begins April 3, but if the court sides with HYBE/ADOR and the group refuses to make new music, industry insiders wonder whether a legal win would be a pyrrhic victory for HYBE.

HYBE/ADOR and NewJeans/NJZ declined to comment on the financial impacts of the disagreement. An ADOR spokesperson said only that its exclusive contract with NewJeans/NJZ is legally binding and called the group’s performance in Hong Kong as NJZ and its “unilateral announcement of a suspension of activities” regrettable. The members of NewJeans/NJZ filed an objection to the court ruling against its independent activities on Monday (March 24).

HYBE is the company behind one of the highest-selling K-pop acts of all time, BTS. When members of BTS took time away from the group for military service in recent years, the company sought to diversify beyond its tentpole artist with other acts — often through imprints like ADOR — and such acquisitions as Scooter Braun’s Ithaca Holdings, Atlanta hip-hop label Quality Control and Latin music company Exile Music Group.

In its fiscal 2024, HYBE reported its highest revenue-generating year in its nearly 20-year history, having generated revenue of 2.25 trillion Korean won ($1.58 billion). But operating profit, a financial metric that subtracts operating costs like legal fees from a company’s gross profit, fell 38% from the prior fiscal year to 184 billion won ($128.7 million), a decline the company attributed to BTS’ temporary break, a shift in sales mix due to new debuts, and strategic investments in infrastructure and new businesses.

The controversy with ADOR and NewJeans/NJZ coincided with a steep decline in HYBE’s share price in 2024. HYBE stock was priced at 230,500 won ($172.33) on April 19, the day HYBE launched an investigation into whether ex-ADOR CEO Min Hee-Jin — who is a defendant in the lawsuit — usurped management of NewJeans/NJZ. Min was asked to resign, and in the weeks that followed, HYBE accused Min of trying to take ADOR independent and, with it, NewJeans/NJZ. On Sept. 23, after a YouTube video of the NewJeans/NJZ members demanding that Min be reinstated went viral, HYBE’s stock price plunged to a 52-week low of 158,000 Korean won ($112), down 31.5% from that April high.

While its share price has rebounded — on Tuesday (March 25), it was worth 240,000 Korean won ($163.49), 14.5% from a year ago — the dispute with NewJeans/NJZ may lead to sunk costs.

As with A&R across the music industry, the model for producing a K-pop supergroup is costly at the outset. It can cost between 1 billion Korean won ($681,000) to 10 billion won ($6.8 million) up front, according to a K-pop executive quoted in Korea JoongAng Daily. K-pop companies first pay off debt, then investors, before paying the artists. If the artists break their contract to go to another agency before ultimately turning a profit, the agency is left holding the bag, the executive told the paper. Bunnies, the official fan club of NewJeans/NJZ, criticized this statement, saying the group is seeking creative autonomy and a better deal.

NewJeans announced in February it wanted to go by a new name — NJZ — and member Pham Ngoc Han, who goes by Hanni, told CNN she hoped the new name would help the group turn “this rough period into something more exciting.” ADOR requested Billboard refer to the group as NewJeans, saying, “The Korean court … confirm[ed] ADOR’s status as the legitimate exclusive management agency of the NewJeans members and prevent the Artists from entering into advertising contracts independently without ADOR’s approval.”

The five women in the group — who perform as Minjin, Danielle, Haerin, Hyein and Hanni — formed NewJeans/NJZ in 2022, and they now range in age from 18 to 21. Several have said they are concerned the legal battle with ADOR would define their careers.

“We’ve known from the start that this journey wasn’t going to be easy and even though we accept the court’s ruling and this whole process, we had to speak up to protect the values that we believe in,” the members said at the end of their hour-long headlining performance in Hong Kong on Sunday, adding it’s a decision they “don’t regret at all.”