Ador's CEO Min Hee-jin and HYBE's Chairman Bang Si-hyuk / Courtesy of Ador, HYBE

HYBE, a titan in the K-pop industry, is engulfed in a high-stakes internal conflict with its subsidiary, Ador, signaling potential upheaval in its label diversification strategy.

The dispute surfaced Monday when HYBE initiated an audit of Ador over allegations that the subsidiary's CEO Min Hee-jin was attempting to wrest management control by selling a portion of HYBE's stake to favored investors.

In response, Min accused HYBE of unfairly targeting her after she raised concerns about ILLIT, a new girl group under HYBE's Belift Lab, copying the concept of Ador's artist, NewJeans.

Min released an official statement Monday saying, that HYBE's call for her dismissal came after she raised issues regarding HYBE's actions.

"The cultural achievements made by Ador and its artist NewJeans are being most severely infringed upon by HYBE," Min said. "How could a legitimate protest be misconstrued as an attempt to take over management control?"

Min said, "HYBE Chairman Bang Si-hyuk produced ILLIT's debut album, and ILLIT has copied NewJeans in every aspect of entertainment activities, including hair, makeup, costumes, choreography, photography, videos and appearances."

She also alleged that HYBE and its label, Belift Lab, have been dismissive of the accusations, dragging their feet on providing concrete answers and misrepresenting legitimate protests as an attempt to usurp management rights.

Ador's girl group NewJeans / Courtesy of Ador

Multi-label strategy

The escalating strife threatens the multi-label strategy that has been a key driver of HYBE's growth. The rapid growth of HYBE's multi-label structure seems to have exposed limitations in the system, according to industry experts.

"In a multi-label system where labels are granted a degree of independent management, overlapping activities and concepts among artists are likely. HYBE's rapid expansion in recent years appears to have exacerbated unresolved conflicts between labels, revealing systemic flaws," said an anonymous official at a well-known K-pop agency.

The legal battle between HYBE and Min seems inevitable, with Min vowing to use all available means to prevent further infringement through copying. However, industry insiders suggest that Min is unlikely to prevail in the management dispute due to the significant gap in shareholdings.

HYBE currently holds an 80 percent stake in Ador, and Min 18 percent.

Belift Lab's girl group ILLIT / Courtesy of Source Music

Ador was established by HYBE in 2021 under the leadership of Bang with an initial capital investment of 16.1 billion won ($11.7 million), in collaboration with Min, who had overseen branding for prominent SM Entertainment artists like Girls' Generation, SHINee, EXO, and f(x).

Last year, NewJeans contributed significantly to HYBE's growth, recording 110 billion won in sales and 34 billion won in operating profit.

Conflicts between HYBE and Ador have been rumored since the debut of NewJeans. Reports suggest discord over Min's independent management style and HYBE's lack of respect for her leadership.

NewJeans gained international popularity, reaching number one on the U.S. Billboard album chart within a year of their debut, and is considered one of the girl groups with the highest growth potential.

Hana Securities estimates Ador's corporate value could reach 2 trillion won by 2025-2026. "By no later than their fifth year, they are expected to approach the seventh-year revenue of BLACKPINK," said Lee Ki-hoon, a researcher at Hana Securities.

This article from the Hankook Ilbo, sister publication of The Korea Times, was translated by generative AI and edited by staff of the The Korea Times.