Aspiring K-pop idols, known as "trainees," sign contracts with management agencies when the trainee is as young as 12 or 13 years old. It may take ten years for an agency to groom the trainee and for them to debut on stage, according to the former head of the Korea Entertainment Law Society. Both trainees and K-pop idols who have debuted typically live in dormitories, where their management agencies control their diets, their love lives, and their behaviour. Under most contracts, trainees and K-pop idols are required to pay back their management agencies for the cost of singing and dancing lessons, their wardrobes and living costs, among other things. As a result, K-pop idols may not make large profits.
Many K-pop groups often take years to break even, and thus do not receive their share of any profits made from their songs until their trainee debt is paid off. The notable exception to this are groups from the "Big 3" companies - SM Entertainment, YG Entertainment, and JYP Entertainment. Trainees under these three companies get paid as soon as they debut and generally do not face trainee debt at all, unless they leave before completion of their contracts.
In 2008, three members of the boy band TVXQ took their management agency SM Entertainment to court, claiming that the agency's 13-year-contract was too long, too restrictive, and gave them almost none of the profits from their success. The following year, in 2009, South Korea's Fair Trade Commission (KFTC) created a rule that limited entertainment contracts to seven years. In 2017, the KFTC again put restrictions on entertainment contracts. Among other things, the 2017 reforms reduced the financial penalties for K-pop trainees that break their contracts early and made it more difficult for companies to force K-pop idols to renew their contracts.
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