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SM 3.0 is the latest business strategy and development plan of the South Korean entertainment company SM Entertainment. Announced in February 2023, it would focus on integrating various aspects of the company's operations, including music production, content creation, and global distribution, into a cohesive system. The plan would aim to expand the company's market presence and enhance its offerings to provide a more comprehensive experience for fans. The implementation of SM 3.0 would involve the development of an intellectual property (IP), business, overseas, and investment system, as well as a multi-production center and label system. These systems were designed to support the company's efforts to optimize its operations and increase its competitiveness in the entertainment industry, particularly in terms of producing content and expanding its market reach.

History

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With the "success" of H.O.T., who debuted in 1996, SM Entertainment became a "pioneer" in the genre of K-pop, led by the company's founder Lee Soo-man, and considered SM 1.0 until 2010, when artists such as H.O.T., BoA, TVXQ, Super Junior, Girls' Generation, and Shinee debuted.[1] Until 2022, Lee made a significant contribution to SM as an executive producer through a contract with the company and created Exo, Red Velvet, NCT, and Aespa, with the company having several people with producing capabilities was described as SM 2.0.[2] Throughout that particular generation, the system was under the governance of the company's general manager Kim Young-min.[3] Additionally, Tak Young-jun stated that during the SM 1.0 and 2.0 systems, SM produced intellectual property (IP) of its artists under the sole leadership of the company's chief producer Lee.[4] By February 3, 2023, it was announced that it would be the first year of SM 3.0.[5]

Development

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"… the talented successors will manage the business very well with ease, as the line-up of SM artists for concerts and activities in the global market is now fully prepared and the production system, built over 25 years, is being well managed. As a major shareholder, I humbly accede to the request of minority shareholders to retire… hope the board members of SM Entertainment will establish a strategy for the next 50 years to become a global entertainment company"

—Lee Soo-man, Founder of SM Entertainment, on succession and advancement of SM legacy.[6]

On September 2022, Lee Soo-man stepped down from the company and only became a major shareholder of SM Entertainment because of the sentiments expressed by the minority shareholders for him to retire.[7] On February 3, 2023, SM announced the SM 3.0: IP Strategy - Multi 'Production Center/Label' System through its official YouTube channel and homepage.[8] The "strategic" vision of SM 3.0 was considered a "practical" plan for SM, which had declared to enhance shareholder value and improve governance after it terminated the production contract with Lee and commenced a reorganization of the members of the board of directors.[9] SM 3.0 would be promoted based on the intellectual property (IP), business, overseas, and investment system, which would be the future growth engine of the company.[10] The four strategies are detailed as follows:[11]

  1. Production of "high-quality" IP, which is SM's entertainment business core;
  2. Business monetization through IP;
  3. Expansion of IP beyond the local market and internationally;
  4. Based on the financial performance monetized through IP, investing in new businesses such as global music publishing business, label acquisition, fandom economy business, and the metaverse.

SM also introduced a multi-production center or label system for producing "new, mega" IP crucial for SM 3.0 and will be promoted around the establishment of a multi-production center, multi-label, and music publishing subsidiary.[12] This system in SM 3.0 would maintain the existing accumulated IP production and operation know-how, expand production capabilities, and entrust business decision-making authority to each director through "subjective" artist management to improve IP production quality, being a system that can accelerate the speed and advance the SM standard.[13] Lee Sung-soo stated that SM's existing system had limitations in IP production and operation required by the market and fans and pointed out the meaning of introducing a multi-production center and multi-label. Lee added that by "dispersing and systematizing" multiple production centers and labels, the company could secure its business sustainability in a "competitive" way.[14] The system would produce several entities by way of their respective IPs, and through this, [it would purposely]:[15]

  • Secure business sustainability through capacity distribution and systematization;
  • Strengthen IP creation by guaranteeing independent decision-making;
  • Expand music diversity through respect for autonomy;
  • Establish a foundation for "long-term" mutual growth between artists and companies.

Accordingly, SM divided SM artists into "five plus one" (5+1) production centers, where five of the centers would guarantee "independent" decision-making by arranging artist-only production and "essential" functions and show off "improved" IP creation by respecting "creative" autonomy.[16] Additionally, a virtual artist or IP production center would be dedicated to the production and operation management of virtual artists, such as Naevis, to continue its "leading" position in the future entertainment industry represented by the metaverse.[17] The production centers would grow into an in-house label, supporting label independence for artists with "established" musical or business originality, providing independence and opportunities for growth simultaneously, and a reward structure based on performance.[18] SM would also establish a 100% invested music publishing subsidiary to ensure that "high-quality" music would be "evenly" delivered to each production center and label and build an extensive music pool.[19][20] By signing contracts with composers, lyricists, and international music publishing companies, it planned to grow into another new source of revenue for SM by fostering it as a "unique, global" music publishing company.[21]

In the multi-production center, a separate music selection council called the Artists and Repertoire (A&R) Committee would be created to help produce "quality" music that would fulfill SM's standards.[22] The committee is a consultative body composed of A&R managers from each production center and professionals from organizations under the A&R Headquarters. It would maintain the SM music standard through the joint intelligence of music experts. An IP Committee would also be established separately from the production center to discuss management with its main agenda for concept planning of new artists, which is the phase before being assigned to the production center or label independence for mature artists. The consultative body would consist of production center leaders, a chief financial officer (CFO), and a consulting group composed of "specialized" external organizations, prioritizing IP planning and operation and understanding the market and fans rather than a few company executives and employees.[23]

External videos
video icon SM 3.0: Producing Strategy - Multi 'Production Center/Label' System

SM announced it would launch three new groups and a virtual solo artist in 2023, with plans to debut a new girl group in the first quarter, a virtual artist in the second quarter, NCT Tokyo in the third quarter, and a new boy group in the fourth quarter.[24] Lee Sung-soo, Tak Young-jun, and inside director Park Joon-young will each lead the debut project.[25] The company is also anticipated to release more than 40 albums, a 30% increase compared to 2022, and record sales of more than 18 million copies.[26] Furthermore, the company would expand its musical spectrum and strengthen its musical influence by acquiring labels of various genres that SM does not focus on, such as ballad, R&B, and hip-hop.[27] SM also predicted that it would be possible for more than two groups to debut in a year instead of just one group debuting every three-point-five years.[28]

Reception

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Criticisms and internal strife

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On February 6, 2023, it was reported that singer and actor Kim Min-jong, who worked for SM Entertainment for 17 years, sent an email to all SM employees on February 5 criticizing the company's announcement of SM 3.0, with the primary goal of ending Lee Soo-man's production.[29] In the entire email, he appealed that the executives, staff, and artists were "shocked" by the announcement of the two co-CEOs and that the statement was not the result of communicating with Lee but an "arbitrary" decision.[30] Kim claimed that contrary to what was announced, Lee Sung-soo and Tak Young-jun, who remarked that they were for Lee Soo-man and the SM family," cut off all contact with the Lee Soo-man and made "one-sided" announcements and farewells without any discussions with the insiders.[31] It was believed that Kim must have felt "betrayed" by the two representatives who had been with Lee for a long time and insisted that Lee's senses were needed for SM and had Lee's life to the company's founding and development should be treated with respect.[32][33] Following Kim's email, he faced a backlash after criticizing SM's co-CEO over Lee's resignation, and employees at SM expressed their sentiments in favor of the company's production reorganization plan anonymously.[34]

Stock price increase

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The public, industry, and market reactions to SM 3.0 are favorable as it incorporates modifications to improve the efficiency of SM's organizations, including multi-production centers and label systems.[35] With the transition to this new system, expectations were "high" that the organization's "efficient" response to changes in the global music environment would generate results.[36] This system was one of the governance improvement plans agreed upon between SM and Align Partners.[37] SM stock price surpassed 90,000 won for the first time since its listing on the Korea Exchange and is expected to rise "continuously".[38] The improvements in governance structure, "shareholder-friendly" moves, earnings growth based on new growth strategies expectations, and an end with Like Planning contract drove stock prices up.[37]

References

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  1. ^ Choi, Ha-na (February 3, 2023). SM, 레이블 체계 도입 "2023년 신인 3팀 데뷔 예정" [공식입장 전문] [SM, Introduces Label System, "Three rookie teams are scheduled to debut in 2023" [Official Position Full Text]]. TV Daily (in Korean). Archived from the original on February 4, 2023. Retrieved February 5, 2023.
  2. ^ Cho, Hye-jin (February 3, 2023). SM, 올해 3개 신인 그룹 데뷔→레이블 체계 도입 [전문] [SM, To Debut 3 Rookie Groups this Year → Introduces a Label System [Specialized]]. Xports News (in Korean). Archived from the original on February 5, 2023. Retrieved February 5, 2023.
  3. ^ Ryu, Jung-hyun (February 3, 2023). SM, 멀티 제작센터·레이블 체계 도입…"SM 3.0시대 열 것" [SM, Introduces Multi-production Center and Label system…"SM 3.0 will open"]. SBS Biz (in Korean). Archived from the original on February 5, 2023. Retrieved February 5, 2023.
  4. ^ "SM to introduce multi-production system to increase business capabilities". The Korea Times. February 3, 2023. Archived from the original on February 3, 2023. Retrieved February 5, 2023.
  5. ^ Lee, Mi-young (February 3, 2023). SM엔터 "올해 신인그룹 3팀+버추얼 솔로 아티스트 데뷔" [SM Entertainment "Three rookie groups + virtual solo artist debuts this year"]. JoyNews24 (in Korean). Archived from the original on February 5, 2023. Retrieved February 5, 2023.
  6. ^ Lee, Hyun-ji (September 16, 2022). SM-이수만 프로듀서 개인 회사의 결별, 이유는? [SM-PD Lee Soo-man Divide Private Company, Why?]. Sisa Journal (in Korean). Archived from the original on September 18, 2022. Retrieved February 5, 2023.
  7. ^ Heo, Ji-eun (February 3, 2023). 에스엠, 'SM 3.0 선포'…"IR 채널 확대·주주 소통 늘릴 것" [SM, 'SM 3.0 Declaration'…"We will expand IR channels and increase shareholder communication"]. Economist (in Korean). Archived from the original on February 5, 2023. Retrieved February 5, 2023.
  8. ^ Yoon, Sun-kyo (February 3, 2023). '이수만 프로듀싱 종료' SM, 멀티 제작센터·레이블 구성...새 IP 발굴 ['Lee Soo-man's Production is Over' SM, Multi Production Center and Label Composition...Discover New IP]. Single List (in Korean). Archived from the original on February 5, 2023. Retrieved February 5, 2023.
  9. ^ Park, Dong-sun (February 3, 2023). SM, "5+1 제작센터&멀티레이블, 팬·주주 중심 3.0 열 것"연내 그룹 3+버추얼 1 데뷔 [SM, "5+1 production center & multi-label, fans and shareholders will open 3.0"…3 Groups + 1 Virtual to Debut within the Year]. Electronic Times (in Korean). Archived from the original on February 5, 2023. Retrieved February 5, 2023.
  10. ^ Kwon, So-hyun (February 3, 2023). 3.0 시대 연 SM엔터…멀티 제작·레이블 체계 도입 [SM Entertainment in 3.0 Era…Introduction of a Multi-production and Label System]. Edaily (in Korean). Archived from the original on February 5, 2023. Retrieved February 5, 2023.
  11. ^ Kim, Soo-young (February 3, 2023). SM, 이수만 가고 3.0 시대 연다…"올해 신인 3팀·버추얼 아티스트 데뷔" [SM, Opens 3.0 Era with Lee Soo-man…"Three rookie teams and virtual artists to debut this year"]. The Korea Economic Daily (in Korean). Archived from the original on February 3, 2023. Retrieved February 5, 2023.
  12. ^ Kwon, Su-bin (February 3, 2023). SM "올해 신인 3팀+버추얼 아티스트 선보일 것" [SM, "Three rookie teams + virtual artist will be introduced this year"]. NewsCulture (in Korean). Archived from the original on February 5, 2023. Retrieved February 5, 2023.
  13. ^ Kwak, Hyun-soo (February 3, 2023). SM 3.0 시대 선언 "올해 3개 신인 그룹·1명의 버추얼 아티스트 데뷔" [SM 3.0 Declaration of the Era "Three rookie groups and one virtual artist to debut this year"]. YTN Star (in Korean). Archived from the original on February 3, 2023. Retrieved February 5, 2023.
  14. ^ Lee, Mi-young (February 3, 2023). SM, '3.0' 시대 연다…"레이블 체계 도입, 음악 커버리지 확대" [SM Opens '3.0' Era…"Introduction of the label system and expansion of music coverage"]. JoyNews24 (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.
  15. ^ Lee, Eun-young (February 3, 2023). 이수만과 결별한 SM, 멀티 제작 체계 도입 [SM, Which Broke Up with Lee Soo-man, Introduces a Multi-production Dystem]. Chosun Biz (in Korean). Archived from the original on February 5, 2023. Retrieved February 5, 2023.
  16. ^ Oh, Yoon-joo (February 3, 2023). SM, 레이블 체계 도입+신인 그룹 3팀 데뷔…3.0시대 연다 [전문] [SM, Introduces a Label System + To Debut 3 Teams of Rookie Groups…3.0 Generation Opens [Specialty]]. MyDaily (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.
  17. ^ Ko, Seung-hee (February 3, 2023). 이수만 손 떼고, 멀티 제작센터·레이블 도입…'SM 3.0' 시대 연다 [Without Lee Soo-man's Hand, Multi-Production Center and Label Introduction…The Era of 'SM 3.0' Will Open]. Herald Economy (in Korean). Archived from the original on February 3, 2023. Retrieved February 6, 2023.
  18. ^ Park, Dong-je (February 3, 2023). SM, "멀티 제작센터·레이블 체계 도입..SM 3.0시대 열어나갈 것" [SM, "Introduction of multi-production center and label system..We will open up the SM 3.0 era"]. BreakNews (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.
  19. ^ Lim, Ga-eul (February 3, 2023). SM엔터테인먼트, "올해 3개 신인 그룹 데뷔" ... 이수만 프로듀서 계약 종료 [SM Entertainment, "3 rookie groups to debut this year" ... Producer Lee Soo-man's Contract Terminated]. SportsW (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.
  20. ^ Lee, Ji-eun (February 3, 2023). SM, '제작센터·레이블 체계' 도입…독립 프로세스 강화 [SM, Introduces 'Production Center and Label System'…Strengthen Independent Processes]. Newspim (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.
  21. ^ Hwang, Hye-jin (February 3, 2023). SM 측 "이수만 총괄 프로듀서 계약 종료, 주주로서 응원 감사"[공식] [SM said, "Lee Soo-man's general producer contract has ended, thank you for your support as a shareholder" [Official]]. Newsen (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.
  22. ^ Lee, Tae-soo (February 3, 2023). SM, 제작센터·레이블 도입…이수만 손 떼고 "주주로서 응원" [SM, Introduces Production Center and Label…Lee Soo-man Took His Hands Off and Said, "Cheering as a shareholder"]. Yonhap News Agency (in Korean). Archived from the original on February 3, 2023. Retrieved February 6, 2023.
  23. ^ Im, Si-ryung (February 3, 2023). SM, 레이블 체계 도입 "올해 신인 3팀·버추얼 아티스트 데뷔" [공식] [SM, Introduces Label System "3 rookie teams and virtual artists debut this year" [Official]]. Sports Today (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.
  24. ^ Cho, Eun-bin (February 3, 2023). SM, 올해 걸·보이그룹+버추얼 솔로 가수 공개 '4대 핵심 성장 전략' 발표 [SM, To Unveil Girl and Boy Groups + Virtual Solo Singer this Year, Announcement of '4 Key Growth Strategies']. KStarNews (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.
  25. ^ Kim, No-eul (February 3, 2023). 이수만 없는 SM, 3.0시대 연다 "신인 3팀 데뷔·레이블 체계 도입" [SM Opens 3.0 Era without Lee Soo-man, "Introducing the debut and label system of three rookie teams"]. StarNews (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.
  26. ^ Lee, Jae-hoon (February 3, 2023). '이수만 프로듀싱 종료' SM, 멀티 제작센터·레이블 도입 ['Lee Soo-man's Production Ends' SM, Introduces Multi-production Center and Label]. Newsis (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.
  27. ^ Lee, Sang-gyu (February 3, 2023). SM, 멀티 제작센터·레이블 체계 도입 통해 SM 3.0시대 열어나갈 것 [SM, Will Open the Era of SM 3.0 by Introducing a Multi-production Center and Label System]. Maeil Business Newspaper (in Korean). Archived from the original on February 4, 2023. Retrieved February 6, 2023.
  28. ^ Hwang, Ji-young (February 3, 2023). "SM 3.0 열겠다"…이수만 없는 미래 청사진 공개한 SM엔터 ["SM 3.0 will Open"…SM Entertainment Revealed its Blueprint for the Future without Lee Soo-man]. JoongAng Ilbo (in Korean). Archived from the original on February 4, 2023. Retrieved February 6, 2023.
  29. ^ Lee, Tae-soo (February 6, 2023). SM, 이수만 퇴진에 내분…"일방적 발표 반대"vs"체질 개선 필요" [SM, Internal Strife Over Lee Soo-man's Resignation…"No unilateral announcement" vs "Need to improve constitution"]. Yonhap News Agency (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.
  30. ^ Jang, Jin-ri (February 6, 2023). 이수만 없는 SM…김민종 "예우 필요" 전체메일→직원들 "멋있게 떠나달라" 성토 [SM without Lee Soo-man…Kim Min-jong "Needs courtesy" Full Email → Employees "Please leave in a cool way" Complaints]. SPOTV News (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.
  31. ^ Kim, Hyun-kyung (February 6, 2023). 이수만 퇴진 두고 SM 내분일방적 발표 vs 개편 필요 [SM's Internal Division Announcement vs Reorganization Needed Over Lee Soo-man's Resignation]. The Korea Economic Daily TV (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.
  32. ^ Woo, Bin (February 6, 2023). 'SM 이사' 김민종, 이수만 퇴진에 이메일로 맹비난…SM 직원 김민종 의견에 반발 ['SM Director' Kim Min-jong, Blasted Lee Soo-man's Resignation by Email…SM Employees Protest Against Kim Min-jong's Opinion]. TenAsia (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.
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  35. ^ Lee, Jae-hoon (February 6, 2023). "이수만, 손뼉 칠 때 떠나달라"…김민종 SM직원에 전사메일 '역풍' ["Lee Soo-man, please leave when you clap your hands"…Company-wide Email to SM employees, Kim Min-jong 'Backwind']. Newsis (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.
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  38. ^ Park, Gun (February 6, 2023). "이수만 꼭 필요" 김민종에 SM 직원 "정신 차려야"…내분 터졌다 ["Lee Soo-man is necessary" Kim Min-jong said, "SM needs to get a hold of itself"…Internal Strife Broke Out]. JoongAng Ilbo (in Korean). Archived from the original on February 6, 2023. Retrieved February 6, 2023.

Further reading

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