What Happened to SM Entertainment?

SM Entertainment, founded in 1995 by Lee Soo-man, has long been a pillar of the K-pop industry, responsible for global acts like TVXQ, Super Junior, Girls' Generation, EXO, NCT, and aespa. However, the company faced a period of significant internal turmoil and a high-stakes corporate battle for control in late 2022 and early 2023. This began with SM's announcement in October 2022 to terminate its production contract with Lee Soo-man's private company, Like Planning, citing a need to move away from a one-man production system.

In February 2023, SM Entertainment unveiled its 'SM 3.0' strategy, aiming for a multi-production center system and independent music labels to diversify its operations and enhance artist-centric production. This move coincided with South Korean tech giant Kakao acquiring a 9.05% stake in SM, positioning itself as the second-largest shareholder. The situation escalated when HYBE Corporation, the agency behind BTS, made a tender offer to acquire a majority stake in SM after purchasing a 14.8% stake from Lee Soo-man, who was estranged from the company's current management. This sparked a bidding war, with SM's executives openly supporting Kakao's 'friendly' offer over HYBE's 'hostile' takeover attempt.

Kakao ultimately emerged victorious in March 2023, successfully acquiring a 35% stake through its tender offer, bringing its total ownership with subsidiary Kakao Entertainment to 39.87%, making it the largest shareholder. HYBE subsequently withdrew its bid, citing potential damage to shareholder value from the escalating competition. Following the acquisition, Jang Cheol-hyuk was appointed as the new CEO of SM Entertainment. However, the acquisition was not without controversy, as allegations of stock price manipulation by Kakao during the bidding war led to raids on SM's offices in April 2023 and the arrest of Kakao's Chief Investment Officer, Bae Jae-hyun, in October 2023. In May 2024, the Korean Fair Trade Commission conditionally approved Kakao's takeover, imposing requirements on its music streaming service, Melon, to prevent anti-competitive practices.

Under the new leadership of co-CEOs Jang Cheol-hyuk and Tak Young-jun, SM Entertainment has continued to evolve its strategy. In January 2026, the company unveiled 'SM NEXT 3.0,' an evolution of its multi-production system into a 'multi-creative' system, emphasizing artist-centered innovation and global partnerships. This strategy includes leveraging AI in music production and A&R, and expanding fan protection services. The company reported robust financial performance, with annual revenue exceeding ₩1 trillion (approximately $696.7 million USD) in 2025 and record-high consolidated fourth-quarter results for 2025, driven by global tours, merchandise, and subsidiary improvements. For the second quarter of 2026, SM Entertainment announced consolidated revenue of 349.6 billion won and an operating profit of 52.9 billion won, marking increases of 15.4% and 11.0% respectively compared to the same period last year.

As of August 2026, SM Entertainment is actively pursuing global expansion, notably through a joint venture with Tencent Music Entertainment Group (TME) in China, named STE. Launched on August 27, 2026, STE aims to discover, foster, and manage new local Chinese idol groups and support SM's existing Chinese-speaking artists. The company also announced a packed schedule of artist comebacks and global tours for the latter half of 2026, including a new Girls' Generation unit (Girls' Generation-HRS), NCT 127, and an EXO unit, alongside the confirmed debut of a new boy group in 2026.