TS Entertainment releases their second official statement regarding B.A.P's lawsuit

Following the first official statement regarding B.A.P's lawsuit to nullify their contract, TS Entertainment has released a more detailed statement while remaining their stance that they're not at fault in the issue.

The official statement was posted on B.A.P's official Facebook on December 5th:

"Hello, this is TS Entertainment.

First, we bow our heads in apology for unintentionally worrying those who have been watching over out label with love.

After TS Entertainment was founded in 2008, we have put out artists such as Untouchable, SECRET, and B.A.P for the past 7 years, and we will soon be launching a rookie band. As K-Pop becomes a flow of worldly culture, we put our goals in increasing our label artists’ capacities, introduce them to the world, and grow together with them.

B.A.P was our label’s first ambitious boy group, and our investment and preparation for them was big enough not to be lagging when compared to any other label. Thankfully, the six B.A.P members that stuck together through talent and effort also worked hard, and B.A.P members distinguished themselves as a K-Pop artist who could even have 2 world tours.

While we were running hard together, around October, the members told us through their management team leader that they wanted to rest. We respected their intentions and cancelled all schedules including their South American tour and their Japan tour, and gave them a long rest. During this, the members went back and forth between the dorms, their homes, and overseas to recharge, and continuously kept in contact with the label. And recently, we confirmed with them that they wanted to restart their promotions starting with the award shows in January, and we were planning their schedules for next year, and we were abruptly told of the news of their lawsuit through a media company’s article on November 27th.

Our company was in great shock when the news article on the lawsuit came out on the 27th because even up until the afternoon on November 26th, when the complaint was filed, the label employees and the members contacted each other and made every day talk. Immediately, the label tried to contact the members through the management team leader, but we could not get in contact with them. Afterward, we tried to contact their parents, and the parents who we were able to get into contact with confirmed the filing of the complaint, and requested that we “talk to the lawyer.” To this, we decided that the company would only be able to understand the details of the situation after we received the complaint, and had been waiting to receive it.

However, even before the label received the complaint, we were put to question because of the continuous, one-sided points that a small number of media sites reported. Because B.A.P hit the break-even point in 2014 and had been facing imminent high profit, the situation looked even more serious. Finally, we were tipped off by credible sources that there are a de facto power behind the media reports to make the relationship between B.A.P and our label worse to recruit B.A.P with advantageous conditions for the new label.

To this, the label will thoroughly grasp the identity of the de facto power and take strong action. As soon as we are able to confirm it, we will demand strict responsibility of those who have violated business ethics and depreciating K-Pop.

In fact, our company didn’t receive the complaint formally. It turned out that the law firm representing the plaintiff didn’t pay the right amount of the fee in filing the complaint and so the court sent “the correction order” to the lawyer. Even though our company didn’t receive the complaint, we were able to acquire the copy of the complaint by asking the court. And hereby we’d like to make our official statement in those points raised by some press. 

Point 1) 10 billion KRW in sales for 3 years, for 17.8 million per member

TS->Reached the break-even point in about 2 years. During the second half of 2014, the predicted total profit is 285 million KRW. If the schedules were carried out as expected, the predicted total profit in the 2nd half of 2014 was 600 million KRW. 

Our investment in B.A.P started during their trainee years, and the large costs were used starting in the second half of 2011, with leader Bang Yong Guk’s solo single ‘I Remember’ and BANG&ZELO’s unit ‘Never Give Up’ album production costs. As you can see from the above chart, even until 2013, costs were bigger than profits. This is because instead of immediate profit, the B.A.P members worked for their own dream and the company’s goal in “taking over the world through music.” Thanks to these bold investments, B.A.P was able to mark their place as the next-generation K-pop artist, and they reached the break-even point in about 2 years since debut in early 2014, and were able to make results that the industry had to pay close attention to. 

As you can see from the chart, after they reached the break-even point, B.A.P’s costs and profits margin keep largely widening, and B.A.P should have been able to create exponential profit. As you can see immediately from the second half of 2014 (July-December), if they went through with the schedules such as the South American tour, the Japanese tour, and the Chinese events, they were predicted to bring in a total of 600 million KRW in net-profits. However, because these were sadly cancelled, we predict their total net-profits for the second half of 2014 would be 285 million KRW.

Also, depending on their activities in 2015, we were predicting 1.8 billion KRW for their net-profits, which is 15 times the amount of their 1st profit distribution.

Point 2) Profit ratio 1 (B.A.P): 9 (TS) ?

TS-> Their average profit ratio during the contract period is predicted to be 4 (B.A.P) : 6 (TS)

Before we explain the “profit ratio,” let us explain how our label calculates profits. In accordance with the contract, the label calculates profits every 6 months. Firstly, we deduct all the investment fees that we used for B.A.P from all the sales related to B.A.P. And then we divide the leftover profits according to the sales type, and then again with the artists’ profit ratio. The reason why we do not deduct each cost per type but from the total first is because there are a lot of costs that cannot be deducted from a specific category, such as their dorms, their transportation, their food, their tuition, their lessons, their culture activities, their workouts, their massages, their hospital costs, their T-money, etc.

The reason why the album/song/MD (1:9) profit ratio is lower than the performance/advertisement/event (5:5) profit ratio is because the latter uses low costs compared to the artist fee and the costs that come from outsourcing is counted as a joint cost. But in the former case, we sometimes do outsource, but the personnel costs in using specialty staff in the label (contents planning/design/production, video, MD planning/production/sales, fan marketing, etc) is not counted as joint costs, but because the label has to pay it ourselves after dividing costs with the artists.

The profit ratio calculated in the first half of 2014 was measured low because it was mostly on album promotions through albums and songs to secure the popularity in the beginning stages of their debut. After this, through everyone’s effort, B.A.P was able to successfully finish 2 world tours and have confidently placed themselves as a remarkable K-pop artist, and so their profit creation composition and average profit ratio is also changing. This is as the members and the label aimed for, and it was faithfully devoted to the goal of reflecting the artists’ level of contribution in the success in the profit composition. We were predicting an average profit ratio of 4 (B.A.P) : 6 (TS) as their concerts, events, and advertisements would be the main activities from now on.

Point 3) Slave contract? 

TS -> The same contract as set by the Fair Trade Commission + Details

The “slave contract” as said through one media outlet is all based on the standard contract set by the Fair Trade Commission, and included details that materialized the contract.

Also on the contract period, if you see the contract period as specified by the Fair Trade Commission’s standard contract, it is based on 7 years. However, in cases where it is “necessary because of signing and fulfilling contracts with a foreign management company for long-term overseas promotions,” or “when the contract needs to be maintained for longer for other proper reasons”, it can be extended through “agreement in written.”

B.A.P’s exclusive contract period is set for “7 years based on when the album (solo album, digital album put out as a group, full-length album) was first released.” The members signed the exclusive contracts in March, June, and September of 2011 individually. Because leader Bang Yong Guk and member Zelo were active as solo and unit before B.A.P, all of the members’ contract termination date is different.

Point 4) Problem of trust

TS -> Problem of communication

In July, even after the profit distribution, the B.A.P members carried out schedules without saying anything. However, because they acted emotionally unexpectedly such as suddenly disappearing in mid-September, plans to carry out promised schedules such as variety shows fell apart. However, the label apologized multiple times to the broadcast stations and their employees and asked for them to be excused, and worked hard to protect the members.

Also, the label paid attention and tried to find a fundamental solution by talking through the management team leader and executive staff to the emotional situations that the B.A.P members had been through. When the members responded that they wanted to rest, on October 23rd, we agreed to minimize official promotions and canceled the South American and Japanese tours, and took actions so they could rest abundantly until the end of the year. 

Even after this, the B.A.P members had continuous communication with the label employees, lived in the dorm, went together to hospitals, and ate together, like nothing had changed, so we had believed that they would prepare for their next promotions while resting and waited. As we have said before, we were told that they wanted to restart promotions in January, and were planning schedules for next year, and suddenly received this news.

The label’s official response to the points will end here, and the label will provide the court with detailed, transparent material for all the problems the complaint brings up to bring clear light to all the facts and truths. What is certain is that TS Entertainment did nothing illegal, and we have never treated B.A.P unfairly or forcefully.

TS Entertainment’s company motto is “honest, diligence, modesty.” Perhaps our intention to make an environment where the members could make a warm home away from home as well as one their talents were well-matched instead of focusing on immediate profit was wrongly relayed. If we were not able to figure out the members’ hurt emotions, this is also a mistake from trial and error because our label’s employees are not experienced enough.

Lastly, TS Entertainment hopes B.A.P members can tell us frankly what they want and look again at the dreams that we aimed for together early in their debut. However, if the members continue to block conversation even with continuous attempts for communication and want to take matters to court, the label will respect their decisions and find a clear solution in court.

Once again, we bow our heads sincerely for worrying many people, and will work hard to do our best in finding a solution for this situation."