It has been reported that SM Entertainment (SME) has lost a monstrous sum of 4 billion won (approx. US $3.7 million) in the last 4 years, which coincides with the company’s expansion into the karaoke business.

In 2006, SM Bravo, a company that specialised in karaoke machines, was incorporated as a subsidiary by SM Entertainment in order for SME to expand their operations into the karaoke industry. Additionally, SM Amusement, a different company affiliated with the karaoke industry, was added to the list of subsidiaries when SM Entertainment incorporated it in 2008.

At the time of this expansion, SM Entertainment had announced that they would revolutionize the karaoke industry with their expertise in the Korean and Asian music market, as well as their influential network-ability in Asia.

However, after four years into this expansion, there remains only two karaoke establishments that are operating somewhat effectively. Additionally, the value and worth of the subsidiary company’s are failing to increase despite continued investments.

To summarise the total loss made my SM Entertainment:
SM Bravo has invested a total of 6 billion won, but by end of August 2010 it was reported that only 3.4 billion won was what remained of the account, resulting to a loss of 2.4 billion won.
SM Amusement has invested a total of 1.4 billion won, but as per bi-annual report, the investment has gone down the drain with the total resulting to impaired/eroded capital.

As a result of the loss, SM Bravo will be undergoing a merge with SM Amusement, with an SME representative stating, “A remodelling of the karaoke business was necessary and hence we are in the process of merging the subsidiaries together. Once they have merged we will come up with a brand new business plan.”

Meanwhile, netizens have voiced their opinions, “Don’t they know what happens when you start carrying too many eggs in one basket?”, “So that’s where all the hard earned cash from their artists go to”, “What a waste of sweat and tears from SNSD, Suju, Shinee, F(x)”, and my personal favourite comment – “This is a classic example of a parent running down their business and making their kids earn the money for them. And when the kids hand over their hard earned cash the parents then spend it on useless things instead of paying off their debt. Once the kids start telling them to stop the nonsense, the parents then tell them not to bite off the hand that feeds them when it’s obvious that the kids are feeding themselves with their own hands.”

Source: EDaily
Credit: Allkpop
Shared by: sharingyoochun.net + dtl

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