Accusations Against HYBE Labels for Inflating Gaming Revenue by 4 Billion Won Through ADOR Sales

On October 21, a report from the Korean news outlet DealSite revealed allegations that HYBE Labels may have inflated the revenue figures of its latest gaming business unit, HYBE IM, by utilizing funds from its subsidiary, ADOR, totaling around 4 billion won (approximately $2.9 million). This has raised eyebrows among industry insiders.

The speculation surfaced after reports indicated that on October 17, there was an internal transaction between HYBE IM and ADOR. In September, as the third quarter drew to a close, the two entities engaged in a financial exchange amounting to 4.2 billion won. Of this, 4.1 billion won was accounted for by ADOR, while HYBE IM claimed the remaining 900 million.

The rationale provided for this financial activity was that both companies are linked through gaming royalties. Nevertheless, doubts began to emerge within the industry. Analysts conjectured that HYBE might be inflating its revenue by capitalizing on the success of NewJeans, an artist under ADOR.

What particularly caught the attention of insiders was the nature of this financial transaction. Normally, when HYBE’s artists feature in a game, the subsidiary would record the copyright royalties for various purposes. However, it appears that the funds flowed in the reverse direction in this instance. In August 2023, HYBE IM rolled out updates to its game, Rhythm Hive, which included content featuring NewJeans.

This situation raised questions because ADOR, as the parent company of NewJeans, should ideally claim the revenue generated from the use of its intellectual property in games. Instead, it appears as if ADOR is paying HYBE IM, sparking further speculation about the ethical implications of these transactions.

Comments from Market Insiders as HYBE Faces Accusations of Revenue Inflation Through NewJeans’ Earnings

In light of these internet speculations, DealSite shared insights from a market insider regarding HYBE Labels’ predicament. This insider suggested that the company seems to be pursuing revenue through ambiguous transactions, not only with ADOR but also involving its other subsidiary, HYBE IM.

The insider further warned that the continued reliance on such vague financial dealings could negatively influence the compensation artists receive under the label. They stated,

“HYBE is aiming to generate hundreds of millions of won in quarterly sales through ADOR, while the still-developing HYBE IM is recognizing revenue through unclear transaction practices. If this trend persists, it may lead to a decrease in the payments deserved by the artists.”

In response to these allegations and the accompanying media scrutiny, a spokesperson for HYBE Labels commented:

“We cannot disclose specific details regarding internal transaction disclosures.”

HYBE Labels has not confirmed or denied the assertions about the transactions involving its subsidiaries and has not provided clarity on the validity of these transactions or the intentions behind what is perceived as revenue inflation.

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