CJ ENM drops split-off plan; to set up new film studio

CJ ENM Co., South Korea’s entertainment giant, has dropped a plan to carve out its content production business into a new unit in the face of opposition from shareholders and increased regulatory scrutiny.

Instead, the CJ Group arm will set up a new entertainment studio focused mainly on films and animation, the company said on Thursday.

CJ ENM, the producer of the Oscar-winning film Parasite, is now said to be tapping domestic and overseas production companies for acquisitions so as to bolster the new studio's original content, according to industry sources.

The new studio will produce a wide range of genres for over-the-top (OTT) streaming services, webtoons and web novels, separately from CJ ENM's in-house content business, which produces TV shows, drama series, films and animation.

“Our board of directors decided to withdraw our split-off plan to protect our shareholders’ rights, in light of their concerns about a split-off and the changing regulatory environment,” CJ ENM said in a regulatory filing.

Last month, it shelved the split-off plan, announced immediately after its $775.3 million acquisition of Endeavor Content Parent, LLC., a Hollywood studio behind another Oscar-winning film La La Land, in November 2021.

CJ will inject capital into the new studio, but it gave no details about the financing plan.

Regulators warned against the listed companies' practice of carving out a profitable business into a new entity and taking the spun-off unit public, which would undermine shareholders' value in the parent company.  

CJ'S FOURTH STUDIO

In addition to running 16 cable TV channels, the entertainment powerhouse already has three independent entertainment studios: Kosdaq-listed drama production unit Studio Dragon Corp.; global content studio Endeavor Content; and OTT streaming platform TVing.

The fourth studio will likely bring CJ ENM a step closer to its vision of becoming a multi-genre studio, modeled after the Walt Disney Company.

Walt Disney is known for its multifaceted film divisions, including Walt Disney Pictures, Walt Disney Animation Studios, Pixar, Marvel Studios and 20th Century Studios. 

In June 2021, CJ ENM announced a plan to spend 5 trillion won ($4.1 billion) to produce original content over the next five years to become Asia's Marvel Studios.

CJ ENM, led by CJ Group Vice Chairman Miky Lee, has been aggressively pursuing acquisitions, aiming to capitalize on the global success of K-content ranging from TV series and movies to pop music groups.

Apart from M&As, CJ ENM has been strengthening business ties with content providers, including online portal Naver Corp. and telecom operator KT Corp.

Late last year, it walked out of talks with SM Entertainment Co. to buy a controlling stake in the music label widely credited as the pioneer of K-pop, according to sources familiar with the matter.

Shares in CJ ENM were steady at 132,600 won around midday on Friday.

Write to Jun-Ho Cha at chacha@hankyung.com
Yeonhee Kim edited this article.