Back in June, Melon was suspected of embezzling ~$15 million in royalties, and now the three former executives of Loen Entertainment who are supposedly involved back when they were in charge of Melon were indicted on charges.
The three former executives are suspected of creating a ghost music label called LS Music, through which they embezzled royalties of 4.1 billion won (approximately $3.4 million). They operated LS Music from January to December 2009, during which they fabricated the data to make it look like Melon users downloaded songs that LS Music held copyrights for. The prosecution revealed that LS Music registered tracks that were no longer protected with copyrights as their own, sending them as a “gift” to users, and adding them to the list of users’ downloaded songs. Furthermore, in order to cover up the crime, they are said to have deleted the data related to LS Music and increased control over access to information about the sales of LS Music. They are also accused of stealing 14.1 billion won (approximately $11.7 million) by taking advantage of Melon’s changed royalty distribution system in 2010 for three years. Melon’s royalty distribution system allowed copyright holders to get paid by a ratio of the total number of Melon users. In April 2010, Melon made a change to the system to exclude users who were making regular payments without actually using the service from the total number of its users. However, they are said to have withheld this information from copyright holders, thus embezzling royalties that come from non-users. When copyright holders made inquiries about the royalty distribution system, they even lied by sharing a manual that stated they include non-users in the stated total number of their users.
That’s some ‘Office Space‘ white collar crime.
The former CEO of Loen commented that he knew, he just liked the money.
Regarding the accusations, former Loen Entertainment CEO “Shin” said, “I was aware that they established a ghost label to falsely calculate the royalty distribution, but I did not stop it for the sake of the company’s sales.” When asked about embezzling royalties from Melon’s changed distribution system, Shin said, “I did not think there would be a problem since we notified [copyright holders] about the change in the calculation system.” The prosecution said, “This is the first time that an unfair royalty distribution system of online music service was revealed. A system needs to be created that ensures transparent royalty distribution.”
Yeah … I mean any “conspiracy” that involves companies doing things like this that benefit them financially is less of a conspiracy and more of a likely educated guess.