Kakao Entertainment sets up content ecosystem with M&As

Kakao Entertainment Corp., a unit of South Korea’s top mobile messenger app operator, has established its own content ecosystem including creation, production and distribution with active mergers and acquisitions.

Kakao Entertainment, a merged entity of KakaoPage and Kakao M, logged sales of 1.2 trillion won ($1 billion) last year with help from 47 affiliates, near double the 629.8 billion won combined revenue of the two units before their merger in 2020, according to filings with South Korea’s financial regulator.

The strong performance helped Kakao Entertainment become the third-largest player in the country, following CJ ENM Co. and Hybe Co. The entertainment unit of Kakao Corp. aims to rank No. 2 with the planned completion soon of a controlling stake purchase in SM Entertainment Co.

Kakao Entertainment was just a minor player in 2015, with few significant businesses save for Podotree, a webtoon and web novel platform, which generated tens of millions of dollars in sales.

AMPLE CASH

But it took just six years for Kakao Entertainment to become an industry giant as it utilized its ample capital to acquire movie and drama productions such as Moonlight Film Co.'s Nameless Gangster: Rules of the Time; talent agencies including Management Soop Corp. behind Gong Yoo; and music labels such as Starship Entertainment behind the group Ive.

Kakao Entertainment secured not only their intellectual property but also star directors and writers with the acquisitions.

The company is expanding its presence in the content industry. Drama series produced by its affiliates such as Business Proposal, Military Prosecutor Doberman, as well as Forecasting Love and Weather swept local rating charts. Among them, Business Proposal ranked No. 4 on Netflix’s top TV shows as of April 13, according to streaming analytics company FlixPatrol, becoming the company’s super IP, mega-hit content at home and abroad.

Business Proposal was exemplary content produced with the company’s vertically integrated system from story discovery to production. The series is based on a webtoon and a web novel from Kakao Page, while Kakao Entertainment planned to transform these into a TV drama series to be produced by affiliate Kross Pictures Inc.

GOING GLOBAL WITH SM ENTERTAINMENT

Kakao Entertainment has been in talks to buy an 18.72% stake in SM Entertainment from its founder and top shareholder Lee Soo-man. SM Entertainment, the K-pop pioneer behind the legendary Girls’ Generation, reported sales of 701.5 billion won last year.

The acquisition is expected to not only raise Kakao Entertainment’s sales to more than 2 trillion won but also enhance its overall content power for the global market.

Kakao Entertainment’s other future growth engines include Kakao TV, a streaming service founded in 2020. Kakao TV is an advertising-based video on demand service, similar to YouTube, not a subscription video on demand (SVOD) service like Netflix.

Kakao TV’s accumulated views reached 1.6 billion with about 80 original content productions. Its users more than doubled to a monthly average of 7 million over the last six months from 3.4 million per month on average in 2021.

“We will focus on planning and producing super IP for overseas markets to become a global studio,” said Jang Sejung, head of content business at Kakao Entertainment.

Write to Hee-Kyung Kim at hkkim@hankyung.com
Jongwoo Cheon edited this article.