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 Summary and Interpretation of Information Regarding TVXQ Exclusive Contract Agreement

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PostSubject: Summary and Interpretation of Information Regarding TVXQ Exclusive Contract Agreement   Sat Oct 31, 2009 1:50 am

The Court has granted the injunction filed by the members of TVXQ against SM Entertainment.The Court found that the Contract between SM and the Members was unconscionable and against public policy. Following this victory, the Members are proceeding with the main suit to ask for the rightful shares of all income generated from their activities.

The following is a summary of the outrageous terms of the Contract that relates to the distribution of income. The clear conclusion is that the TVXQ members have received next to nothing for their six years of work, and that virtually all money we spend to buy SM products stay with SM. Please read the below to see the extent of the injustice.

Please keep in mind that SM’s contract with TVXQ has been amended five times and therefore the applicable terms have varied over time. Accounting for all the resulting complexities, the truth adds up to the following:

————-

I. TVXQ has received $0 for their album sales prior to July 2008, and only a negligible amount after that date.

Prior to the fifth and final round of amendments on July 1, 2008, the Contract read that for any album or single with sales not exceeding 500,000 copies, SM would be entitled to 100% of the profits, leaving the members with nothing. From the time of TVXQ’s debut in late 2003 and until TVXQ’s release of their 4th Korean album “Mirotic” in September 2008, no Korean album had sold more than 500,000 copies. Therefore, prior to July 2008 TVXQ has had absolutely zero income from their album sales.

On July 1,2008, SM amended the Contract to give each Member 1% of total sales for each album that sells over 200,000 copies. For any albums that sell fewer copies, the members are to receive 0.6% to 0%. SM has not honored even these outrageous terms, as it has not paid TVXQ a single cent since February 2009.

In sum, SM has kept 100% of all sales that TVXQ has generated with the sales of their albums and singles prior to July 2008, and has kept 95% or more of the sales after that date.

————-

II. TVXQ has received $0 for the sales of concert DVDs and albums featuring recordings from such concerts.

Under the Contract, the Members are not entitled to receive any share of the profits generated from sales of concert DVDs and “live” albums.

————-


III. TVXQ has received $0 for their appearances on TV programs.

Under the Contract, Members are not entitled to receive any share of the profits made through their TV appearances if the appearance is of a temporary nature. As all programs on which TVXQ appeared have featured the Members as “guests”and therefore by nature have been temporary, SM has kept all profits that TVXQ has generated from these TV appearances.

————-

IV. For all other possible sources of revenue, SM subtracts from the total revenue all expenses, including salaries of other staff, stage preparation expenses, rent, travel expenses, food expenses, and the like, then gives TVXQ only a fraction of the remaining amount.

As for all other sources of income, the Contract states that TVXQ is entitled to varying percentages of the “net income.” The Contract defines “net income” to be the amount remaining after the applicable “operating costs”. The “operating costs” are defined to include such expenses that are traditionally expected to be covered by the employer, including but not limited to 1) salaries of the staff (manager, clothing coordinators, makeup artists, dance crew, and the like), 2) performing stage preparation costs, 3) living expenses, including rent and water/electricity bills, 4) travel expenses, including plane ticket costs, 5) meal expenses, and the like.

Even after all these “operating costs” are deducted from the net income, the Members are only entitled to a small percentage of the remainder while SM keeps the rest.

————-

In conclusion, please realize that SM has kept virtually all of the profits that our Members have generated over the past six years. Our Members have received, literally, next to nothing.

Following thevictory of the granting of the preliminary injunction, the Members now prepare for a suit to claim their rightful share of the profits that they themselves generated. Please help them win the lawsuit by boycotting all SM-made products and merchandises (this excludes all Avex-made products, which includes Japanese albums and singles released in Japan).

Please remember that every cent you spend on SM will be used to fuel SM’s efforts against our Members in the main suit. We as fans support TVXQ in their rightful fight for their rights.




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