Profit Distribution of THE contract

I haven't posted for so long, but it doesn't mean I haven't been thinking of them, all 5 of them and of course the lawsuit. In fact, they have been on my mind, and day in day out, my left and right brain continues battling with each other.

I believe I have mentioned in earlier post, that this blog is going to be my personal diary, an avenue for me to output all the thoughts I have regarding this whole Dong Bang Shin Ki saga. I have also mentioned that I am not here to prove who is right, who is wrong, who is saint and who is devil. To this day, it is still the same. I will be looking at the contract and discussing it. Everything is purely my opinion.

If you actually read my blog and is interested to continue reading this post regarding the contract, I suggest you first go google a copy of the contract in another window, have it open side by side while you read my blog. I am not in the mood to go copy, paste & credit the contract into my blog. Why? Because I do not know which blog to copy it from. It shouldn't matter actually, because the contracts are the same, regardless of whether I take it from a JaeChunSu-biased site or a Homin-biased site. But because I want to remain open and objective, I do not want to copy from either source.

I'll only be talking about the profits distribution, which is in Section 9 & Section 10 of the contract.
So, here goes (The items in each section are not numbered, I just numbered it for clarity and ease of referencing, writing & reading):

Section 9 [Distribution of Profits - Albums]
9.1. 
Category: Domestic Album & Packaged products (including Licensed Albums sold overseas)
Sales volume & profit distribution:
50001 to 100k = 2% of Sales
100k to 200k = 3% of Sales
Over 200k = 5% of Sales
Distribution of profits: If you are an individual artiste, you get the whole 2, 3 or 5%, if you are a group, divide equally per number of members. This will be applicable for all profit distribution, so I will not repeat it from here onward.
My opinion:
I don't really know how many copies they sold, for each of the album they released. But I do know their best selling album was Mirotic, which exceeded 500k copies sold. There are 3 versions of the Mirotic album. Version A (CD+Photobook), Version B (CD+DVD) & Version C (CD+Photobook). For ease of calculation, let's say each version sold 167k, and total is 501k copies sold. Now, how much does each album cost? Not sure, but I tried googling and someone said they paid ~$12 for version A and ~$26 for version B. I'll assume version C cost the same as version A, since its similarly a CD + Photobook combo.
I have no idea how they calculate the sales, I mean, which version goes into which bracket? 5% of a $26 album is different from 5% of a $12 album. So, for my convenience, I will just average it out and assume a Mirotic album cost ~$16.70 (Yes, I added up all 3 and did an average). Also, for calculation, lets just assume it was 500k copies sold.
So, all of that would total to $8.35mil sales. And here's the breakdown per the 9.1:
0-50k album - 0
50001 to 100k = 2% [ $16.7k ]
100k to 200k   = 3% [ $50.1k ]
over 200k        = 5% [ $250.5k ]
Total of above is $317.3k and that gives $63.46k per member.
That sounds kind of meager to me, considering they are "Asia's stars". However, there are some sites [which have claimed allegiance to worship only one side and bash the other side] that claims that artists don't make money from album sales. They make money from endorsement, concerts, merchandise etc. I do agree to a certain extent, because many people just don't bother buying albums anymore, with all the free downloads and piracy going on. That could probably explain why the idols' albums always comes with photobooks. The photobooks serve as motivation for fans to purchase albums. However, when you are "Asia's stars" and you manage to sell more than 500k of your albums in this piracy age, and then you get $63.46k, now that's sad. And I forgot to mention, you sacrifice you personal time, your privacy, your identity, among many other things, plus work your ass off, and then you get $63.46k.
And that was talking about their best album, Mirotic. What about previous albums which didn't sell as much. I am using album sales figures from wikipedia, so I cannot guarantee its accuracy. Their 3rd Korean album "O"-Jung.Ban.Hap sold about 350k. Assuming again each copy cost $12, total album sales would be $4.2mil, after calculation, their cut should be $138k, each member gets $27.6k... T_T
And I did this calculation with the assumption that the "over 200k album sales get 5%" have already been implemented. If it was not, then their cut would be $102k, each member get $20.4k.
I have no further comments actually. So, let's move on

9.2
Category: Digital Wired/Wireless Downloads (Album, Songs) Except for free downloads Online, only when there's income from advertisement
Profit Distribution: 10% of Net Profit

9.3
Category: Online and wired/wireless Internet, MP3, Digital files etc
Profit Distribution: 10% of Net Profit

9.4 
Category: Overseas Revenue
9.4.a 
Category: Performance Loyalty (Albums made overseas)
Profit Distribution: 70% of Net Profit
9.4.b
Category: Loyalty (Limited to the songs, lyrics, written by the Artists)
Profit Distribution: 70% of Net Profit
9.4.c

Category: Master Loyalty *The whole amount of Master Loyalty is considered to be SM's revenue
Profit Distribution: Not Applicable

My Opinion:
At one glance, 9.2 to 9.4 looks good, what with 10% and 70%. But again, there are many things we do not know:
Sales [How much does it cost the buyer/ customer to download a song online? ]
- Cost [How much does it cost SM to make this transaction happen. And most importantly, the amount written in the account book, for purpose of calculating profits; is that the real amount or a blown up amount?]
= Profit [ Its 10% of this amount that will be shared by the 5 members ]
Moving on to 9.4, well, pardon me, but I really am not familiar with all these loyalty thingy. And what counts as performance loyalty? Definitely not concerts or variety show appearances (they do perform on shows like Music Bank, Music Japan etc). Just saying, maybe there isn't any job that fits into this Performance loyalty category (or even if there is, SM will fit it into another category?). So now 10% of something that will never materialize is basically worthless. Just my thoughts.
Then comes the Loyalty of lyrics and songs, which they get to claim 70% of net profit, but then there is the Master Loyalty. Not sure what Master Loyalty is, but it sounds like something that encompasses everything. In that case, wouldn't it include even the songs and lyrics? For those who work in MNC, if for example you come up with an idea that is worthy to be patented, your company will pay for the patent filling and own all rights to it. Your name will be on the patent, no doubt about that. Your company will probably also give you some incentive for coming up with the idea. So, I have nothing to argue about SM owning the Master Loyalty, I guess that is just how things work. But I am really curious about the songs & lyrics loyalty. Is it another, "70% of something that will never materialize" again? I am not judging SM. I really do not know and these are just my opinions. And they are all questions. I am not proclaiming them to be facts, just some questions to provoke one's thoughts.



Section 10 [Distribution of Profits - TV, Events, Commercials, Copyright etc]
10.1. 
Category: Overseas Revenue
10.1.a
Category: CF, Events & Miscellaneous Activities
Profit Distribution: 70% of Net Profit
10.1.b
Category: Up front payment and/or down payments from various contracts
Profit Distribution: 10% of amount received by SM
My opinion:
Again, 70% looks good. But its Net Profit and we do not know how big a figure SM puts down as production cost. Let's say SM put Cost as 90%, that means profit is only 10%. And 70% of that is actually 7%. Pathetic isn't it. Again, I am not judging. I can't say SM manipulated the accounts, but neither can anyone else say SM didn't. Unless you have personal access to their account books PLUS you went through each and every expense and cross check every single invoice & receipt and verify its authenticity. Honestly, if everything is so simple, so clear cut black & white, there will be no graft in this world.
Moving on to the up front payment and/or down payment portion. How on earth did it come up to 10% of what SM receives? Suppose if the payment was for an event, which automatically renders DBSK 70% of net profit, base on 10.1.a, would this "10% of amount SM receives" correlates? I feel this clause a little on the dodgy side. WHY? Because depending on how much the down payment is, and what the down payment was for, that 10% could reduce the actual amount the group deserves to get. And this clause seems redundant, as SM does not pay them every day, nor every month. They do it every six month. So I don't see the need for a clause that takes care of down payment or advance payment. Because by the time SM payout to DBSK, they would probably have received the final payment. If SM pays them daily, weekly or even monthly, then yes, there needs to be a clause to handle advance payment so that the amount can be calculated and distributed to the group accordingly. So yes, dodgy is the word I could come up with.



10.2 
Category: Commercials (Guarantees, Appearances Fees Included), TV, Radio, Cable, Satellite, Magazines, Concerts, Events etc
10.2.a
Category: Regular appearances
Profit Distribution: 65% of Net Profit
10.2.b
Category: Promotional/ temporary guest appearances
Profit Distribution: Used for cost of promotion
My opinion:
Wow, 65%. Yawn. Ermm, regular appearances. I guess that means if they become a part of the MC crew of that program, and appear for a whole season of it. With their schedule, its not possible. So yea. IT IS "65% of something that will never materialize". As for 10.2.b, basically, all the variety shows we watch, with the 5 boys in it, like X-man, Lineup, Star King, Happy Together, Family Outing and what not, they are paid, but, money goes to SM. Some argue that the amount received for these appearances are not much. But if you multiply that small amount by the large amount of appearances they make, then it is a significant sum. And I do not see why they should be deprived of it. And writing it off as "cost of promotion" is low. Because, SM does not pay for everything. Production costs are split between the 5 boys and SM. Basically, everyone who is on SM's payroll, are also on DBSK's payroll, because the pays contribute towards their paycheck. Food & lodging are also not covered by SM. So why, when there is money coming in, it goes entirely to SM? At best, it should be a 50-50 split, since the boys also bear production/promotion and whatever not costs.

10.3 
Category: Revenues from Internet Business (Mobile & any revenues from Internet)
Profit Distribution: 10% of Net Profit
My opinion:
Refer to my opinion for Clause 9.2 to 9.4

10.4
Category: Photo Books using actual pictures of the Singers(Digital/Online income is considered Internet Business Revenue) - Photo Books are limited only for the products planned and produced for sales of the actual photos.
Profit Distribution: 60% of Net Profit

My opinion:
Refer to my opinion for Clause 9.2 to 9.4



10.5 
Category: Revenues from Internet Business (Mobile & any revenues from Internet)
Profit Distribution: 10% of Net Profit
Character products & Licensed products utilizing Photos (except for the picture books mentioned above), Brand, Brand Name, Intellectual properties - Accessories, Clothes, Shoes, Stationary, Toys etc.

My opinion:
Refer to my opinion for Clause 9.2 to 9.4. I believe this category brings in a lot of money. But the bigger question is, how much did SM put down as production costs?

Lastly, I'll leave you with a link to download the original Korean version of the contract:
http://seoul.scourt.go.kr/dcboard/DcNewsViewAction.work?seqnum=6353&gubun=44

and of course, I'll let you ponder upon all I have written. You can agree or disagree, and while doing either of that, you can chose to be quiet or loud. I do not mind.