SM C&C Faces Challenges Amid Controversies Surrounding YouTuber KwakTube

SM Entertainment's subsidiary, SM C&C, is currently on the market for sale. However, the recent controversies surrounding YouTuber KwakTube (real name Kwak Jun-bin), who was recruited two months ago, have emerged as a significant risk. While general YouTubers might not anticipate potential controversies, the management company, which holds responsibility, faces criticism for failing to conduct proper risk assessments. SM C&C attempted to expand its domain into the creator space with KwakTube, but this effort seems to have faltered within just two months. The value of the management division, one of SM C&C's four business segments, has been compromised, potentially affecting the sale price.

On the 16th, KwakTube faced criticism for defending Lee Na-eun, who was accused of being a bully. KwakTube had previously garnered public sympathy by repeatedly sharing his experiences as a victim of school violence. However, when he produced a video showing him traveling to Europe with Lee Na-eun, criticism ensued. Despite issuing two apologies, public opinion continued to worsen. Additionally, various allegations, including theft, surfaced online against Kwak Jun-bin, prompting the agency to take a firm stance.

This controversy was deemed predictable, given that Lee Na-eun had previously attempted comebacks through broadcasts with other celebrities. A recent example in May involved broadcaster Dex, who faced backlash for flaunting his friendship with Lee Na-eun. Even if Kwak Jun-bin had proposed the European trip to Lee Na-eun, the agency should have identified and mitigated the risks. Considering the sensitive timing, just two months post-contract and amid the company's sale, the oversight is even more perplexing.

Unlike mainstream celebrities, YouTubers often lack a robust fanbase. Even YouTubers with millions of subscribers can face downfall due to a single controversy. KwakTube's value as a creator has been significantly damaged, making recovery difficult. SM C&C had expressed excitement about recruiting Kwak Jun-bin, describing him as a trendy and hot creator in line with changing times. However, the company has revealed its inability to keep up with these changing times in terms of management capabilities.

SM C&C is in a position where it must be sold, primarily due to Kakao becoming the largest shareholder of SM. SM C&C also handles advertising agency business, but current regulations prohibit owning both an advertising agency and a media rep company simultaneously. Since Kakao, SM's largest shareholder, holds a 10% stake in media rep company SBS M&C, a conflict of interest has arisen.

As of last year, the advertising agency business accounted for over 60% of SM C&C's total revenue, while management contributed around 20%. However, the synergy of advertising agency business as an SM subsidiary differs significantly from that as an independent entity. Therefore, the success of the management business, the second-largest revenue segment, is crucial for the overall corporate value. If the KwakTube controversy extends beyond affecting some revenue to raising doubts about the management business's expertise, the potential damage to corporate value could be more significant than anticipated.

Reporter Lee So-jung, TenAsia forusojung@tenasia.co.kr